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What is a Crypto Dust Attack and How Can You Prevent it?
General Wallet Use
Bitcoin dust is tiny amounts of BTC that accumulates in your wallet as crypto dust. You cannot spend Bitcoin dust for any transactions.
Sometimes, malicious actors carry out a crypto dusting attack to target Bitcoin wallet holders and. But a crypto dust attack can be prevented by using the right crypto wallet.
What is Dust in Crypto?
Crypto dust refers to small amounts of crypto like BTC that remains as residue in a crypto wallet. Sometimes crypto dust results from a transaction’s leftover or unspent balances. The balance is usually lesser in value that a transaction’s threshold value and thus cannot be used in another transaction.
What Are Crypto Dusting Attacks?
Bitcoin dusting attacks refer to the act of sending small amounts of crypto like BTC dust to particular or multiple wallet addresses. Attackers send Bitcoin dust to wallets to unmask or deanonymize a walletholder’s real identity.
Although a crypto dusting attack in itself is not harmful, hackers can combine it with off-chain scamming methods to steal crypto. The hackers track a victim’s wallet address and fund movements on the transparent ledger to execute such attacks.
You can identify a Bitcoin dusting attack if you suddenly notice small BTC amounts from unknown senders in your wallet’s transaction history. The safest way to deal with a dusting attack is not to interact with the Bitcoin dust to prevent privacy breaches.
How Does A Crypto Dust Attack Work?
A Bitcoin dusting attack becomes effective if the wallet owner combines BTC dust with other funds and uses them in transactions. Since hackers can trace blockchain transactions, they track them to discover additional details for carrying out phishing scams and cyber attacks.
Phishing Attacks
If a crypto user includes BTC dust in a transaction with an off-chain company, they may be susceptible to phishing attacks. The hackers can misuse the company’s KYC data to get hold of the user’s email ID and send malicious links.
For example, attackers can study on-chain transactional behavior and send phishing emails looking like authentic crypto exchanges or wallet providers. If users click on embedded malicious links to connect their wallets or verify account details, attackers can hack users’ funds.
Cyber Extortions
Sometimes fake NFT or DeFi companies airdrop scam tokens into users’ wallets and send requests for wallet connections to claim them. The fraudsters can also ask to interact with faulty smart contracts to get rewards.
Users have to conduct due diligence before interacting with any smart contract or connecting their web3 wallet on a webpage. It’s best to ignore any BTC dust and not interact with the originating address to prevent extortions.
The Expenses of Bitcoin Dusting Attacks
Bitcoin dusting attacks are rare because of the blockchain’s high transaction fees, making it economically unviable to execute these attacks. Since attackers have to pay high fees to send crypto dust for executing an attack, they refrain from such attacks.
Sometimes the transaction fees spent is often higher than the amount they intend to hack. There is no way to know beforehand how much BTC a crypto wallet has. If the attackers target wallets with negligible BTC holdings by spending high transaction fees, they won’t be able to recover their costs.
Who Can Execute Crypto Dust Attacks?
Bitcoin dusting attacks can be harmful or benign, depending on who is executing the attack. Individuals, groups, or institutions can carry out such attacks on users’ wallets.
Hackers: They target users with a malicious intention to invade privacy and combine dusting attacks with off-chain scams to steal assets.
Government agencies: They use dusting techniques to identify criminal activities through wallet interactions like tax evasion, money laundering, regulatory non-compliance, and terrorist attacks.
Blockchain analytics firms: They employ dusting attacks for research purposes and work in collaboration with web3 projects or law enforcement firms to understand on-chain exploits.
Developers: They conduct dusting for stress tests to check a software’s robustness like transaction throughput, scalability, and security to enhance performance.
How Can You Prevent Crypto Dusting Attacks?
You can protect yourself from Bitcoin dusting attacks if you don’t interact with the Bitcoin dust in your wallet.
Moreover, wallets like Leather provide an additional security and privacy layer through hierarchical deterministic (HD) key generation and marking dust as “Do Not Spend” to ensure you never have to worry about dusting attacks.
Secure Your Crypto Wallets
Some crypto wallets enable you to mark small dusts of Unspent Transaction Outputs (UTXOs) as “Do Not Spend” balances. If the Bitcoin dust remains in your wallet and you do not transact with them, attackers cannot track your wallet addresses. Consequently, hackers won’t be able to execute phishing scams or cyber-attacks.
Moreover, you can operate wallets with privacy-focussed tools like The Onion Router (Tor) or a Virtual Private Network (VPN). These tools enable anonymous web browsing services to provide better asset security and privacy for end-users.
You can sign up on Leather and mark crypto dust as “Do Not Spend” to protect yourself from dusting attacks. Additionally, you can access the Leather extension wallet through Tor or VPN for added security.
Use A Hierarchical Deterministic (HD) Wallet
A hierarchical deterministic (HD) wallet creates a new wallet address for each receiving transaction, which makes it tough for attackers to trace fund transfers. Thus, you can use an HD wallet to prevent attackers from hacking your assets through a Bitcoin dusting attack.
Bitcoin wallets like Leather use an HD key generation technique called Wallet Derivation Paths to create multiple public keys from a single master private key. Creating a new public key for each receiving transaction improves your privacy profile and reduces your exposure to risks related to dusting.
Leather further bolsters wallet account privacy through independent multiple account addresses that are publicly distinct from one another. Thus, it is difficult for an attacker to trace multiple accounts to the same wallet sharing a single Secret Key.