A sizable number of cryptocurrency users pay little attention to the small amount of cryptocurrency that occasionally drops in their wallets. Even some experienced investors do not easily notice this minute addition.

This negligence has been exploited both by criminals and law enforcement agents through ‘Dusting Attacks’.

In this article, we will explain what a Dusting Attack is, how it happens, and those who perform the attack and highlight ways to reduce any adverse effects.

What Is Dust?

In cryptocurrency, ‘Dust’ refers to the small number of cryptocurrencies that are left when a user transfers cryptocurrency out of the wallet, that is the non-transferable small amount of cryptocurrency left after transactions.

This is usually smaller than the transaction ‘Gas’ fee and ca not be transferred.

Source: Exodus

What Is a Dusting Attack?

In the crypto space, a dusting attack is an avenue used by third parties to determine the identity of the individual behind a crypto wallet.

Therefore, a dusting attack is an attack on the crypto wallet in which a small amount of cryptocurrency is transferred to several wallets by either online hackers or law enforcement agents to reveal the identity of the actual owner of the wallet. This limits the security of the wallet and further exposes the privacy of the user.

This means that as soon as a tiny amount of crypto is deposited in the wallet, if not quickly detected and converted, it might lead to Phishing scams or the owner’s identity would be revealed.

Most often, this cryptocurrency comes in the form of an Airdrop, as it will please the user to happily want to cash out such a token, the attacker will then have access to the wallet through the contract address accompanying the token.

Most crypto traders or investors hardly pay attention to the small number of coins left in their wallets or transferred into their wallets. This will surely give room for Dusting Attacks, because the tiny amount deposited is unnoticeable and can’t be traded, through this, a third party will have an edge over the wallet owner, as such uncovering their identity.

You could be wondering how this attack happens. The next section will discuss how the dusting attack occurs.

How Does a Dusting Attack Occur?

Source: ox-currencies

Dusting attacks happen when a third-party (attacker or hacker) sends small amounts of cryptocurrency to bitcoin or crypto wallets.

This attack does not in any way attempt to steal the funds therein, rather a dusting attack is deployed to track wallet addresses with the hope of revealing the actual ownership and exposing the details of the wallets.

The attacker wants the dust sent into the wallet to be added to other funds in the wallet so that while the user is sending such funds, the attacker will find out exchanges or transactions going on in the wallet through social engineering.

Who Can Perform Dusting Attacks?

It is important to note that not all dusting attacks are considered ‘attacks’ in the real sense. So some attacks can be carried out by the arm of the government fighting online crime or by blockchain analytics firms. They include:

• Hackers: These are groups of cyber criminals who are eager to keep track of people’s cryptocurrencies, for physical extortion or higher criminal activities like Phishing;

• Blockchain Startups: These groups use dust instead of mailshots to advertise their products to crypto users:

• Government agencies: State authorities use dusting attacks to closely monitor the transfer of cryptocurrencies from large criminal networks, smugglers, cybercriminals, money launderers, and many others;

• Developers: Blockchain developers use this method to fast check throughout the network by sending massive amounts of dust; that is they are used as a way to spam a blockchain network by sending huge batches of worthless transactions that clog or slow down the network;

• Blockchain Analytics firms: They carry out dusting attacks to study crypto dust after a malicious attack.

Having learned those who can perform dusting attacks, let us now look at how the negative effects of these attacks could be avoided.

How to avoid a Dusting Attack?

Extra security is highly required to properly secure your digital currencies and how this attack can be averted depends on the following:

• Some prominent crypto exchanges, such as Gate.io, Binance, FTX, and Gemini offer the option for the dust to be converted into a native token once a day - this process aids in preventing attacks.

• Users can make use of Hierarchical Deterministic (HD) wallets to get rid of dusting attacks. HD wallets are wallets that automatically create a new address for each transaction made, thereby making it difficult for attackers to trace any transactions you made using the wallet.

• Another method is for users to top up the dust to a reasonable point, where it can be converted into a whole token, then it can be converted to a coin and transferred into your bank account.

• Make use of virtual private networks (VPN for short) to further hide your identity and improve security.

• Encrypting your wallets and storing your private keys inside an encrypted folder fully protects your wallets from dusting attacks and other malicious attacks like Ransomware, Phishing Scams, etc.

  Conclusion

Holding cryptocurrencies in wallets - Custodial or Non-Custodial wallets - calls for more security as the activities of third parties are on the increase and dusting attack is one of the ways crypto wallets are exposed and user transactions are tracked to spot which transactions are interconnected.

This is done by sending a small amount of cryptocurrency to users’ wallets to reveal or un-anonymize the identity of the user or company behind the cryptocurrency wallet. Criminals attempt to unmask the wallet addresses for nefarious purposes, such as in Phishing Scams; while law enforcement agencies seek to uncover users who used digital assets for illegal reasons.