Dust attack was created as a method to analyze blockchain transactions and de-anonymize users.
Dust attacks are carried out every day in the crypto space by cybercriminals to reveal the identity of a person or company.
For example, in the latter half of 2019, nearly 300,000 litecoin (LTC) addresses were victims of dust attacks out of which 50 addresses belonged to users on Binance.
Although dusting attacks were initially performed on Bitcoins, they are also happening with many other cryptocurrencies that are running on top of a public and traceable blockchain.
Dust Attack and How To Be Safe
After getting hold of an individual’s identity, attackers can do a lot of things including blackmail, selling the stolen identity or initiating some kind of social engineering, and so on.
Bitcoin has been the first scripted cryptocurrency to come under this form of attack because of its popularity but many other coins also have suffered from dusting attacks in recent years.
Since bitcoin is open and decentralized, anyone can join the network and set up a wallet without providing any personal information and this is what makes Bitcoin somewhat anonymous but not completely anonymous.
Although it is not always easy to find the identity behind each address as all Bitcoin transactions are publicly recorded on the blockchain and open for anyone to see. Therefore bitcoin is not considered anonymous but a pseudonymous cryptocurrency and as such, it is susceptible to such dust attacks.
What is Dust?
The term dust refers to a tiny amount of coins an amount that is so small that most users don’t even notice. Just think of dust as the tiny amounts of cryptocurrency that often remain as a change in your wallet after a transaction.
Each cryptocurrency has its own dust limit which is the minimum amount required for any transaction to take place on the network.
Take Bitcoin as an example.
The smallest unit of BTC is one Satoshi and one Bitcoin is equivalent to 100 million Satoshi so we may use the term dust to describe an amount between 1 Satoshi to a few thousand Satoshis.
Currently, the dust limit for Bitcoin for almost all transactions is approximately 500-1000 Satoshis. Any amount below the dust limit cannot be propagated over the network. Also, the amounts up until 3000 and sometimes even 5000 Satoshi’s are generally considered to be dust for the Bitcoin network nodes.
Since the dust limit is typically a function of transaction fees, so the amounts that are not transactional today might become transactional in the near future with the help of decreasing fees.
Small amounts of a cryptocurrency that remains in the exchange wallet after trading or withdrawing are also called dust but that is not the same type of dust as what is referred to in relation to dust attack. The latter is spread on the blockchain network as a malicious attack while the former is an innocent result of regular trading activities.
Also see: 7 Real Ways to Buy Monero Anonymously
Dust Attack: Step-by-Step Process Summary
Step 1:
The first step of a dusting attack consists of sending dust transactions to a large number of targets.
Step 2:
The attackers then track down those funds and perform a combined analysis in an attempt to identify which addresses belong to the same wallet.
Step 3:
Their main goal is to eventually link the dusted wallets to their respective companies or individual users.
Final Step:
Finally, the attackers use this knowledge against their targets either through elaborate phishing attacks or cyber extortion threats and reap benefits in any way suitable.
How Does a Dusting Attack Work?
Since each cryptocurrency wallet contains multiple addresses, scammers know that users might not notice insignificant amounts of additional Bitcoins coming into their wallets even if they do take notice some people might still ignore these tiny amounts as they are of no tangible value.
So scammers go ahead and send many of these tiny amounts of crypto through a process known as dusting to as many addresses as possible.
Then the attackers track down those funds and perform a combined analysis in an attempt to identify which addresses belong to the same wallet.
Their goal is to eventually link the dusted wallets to their respective companies or individual users. If the wallets are successfully de-anonymized, the attackers may use this knowledge against their targets either through elaborate phishing attacks or cyber extortion threats.
What is UTXO?
UTXO can be simply defined as each individual transaction that has been received by a particular address in your wallet but hasn’t been spent yet. Every wallet address has at least one UTXO from the first transaction it received and if more transactions are received on that same address, then each transaction is called a UTXO.
Just think of UTXO as the banknote with a certain identification/value and think of the wallet address being a compartment in your wallet that contains those banknotes. When the wallet constructs a new outgoing transaction, it will combine several UTXOs from various wallet addresses to get as close to the transaction amount as possible, the exceeding amount will then be transferred to a new change address.
For example, a wallet that has an address that has one UTXO of 100 Bitcoin alongside other addresses that have smaller amounts, the 100 Bitcoin UTXO address will normally never be combined in a transaction with the other addresses.
However, if the attacker places a tiny amount of dust and an additional UTXO is added to the 100 Bitcoin address. Then it is possible that when the user makes a transaction with his other addresses, the dust UTXO of the 100 Bitcoin address might also be added to the transaction. In that case, the attacker knows that those addresses, and especially the 100 Bitcoin addresses belong to the same wallet of the same person or entity.
How User’s Identity is Revealed?
Bitcoin and other public blockchains have bug explorers that are freely available for anyone to view all transactions i.e. both past and present transactions. Scammers usually take advantage of these explorers to analyze transactions in addresses they’ve dusted by using blockchain analysis software.
The attacker then tries to track the dusted addresses to see with which other addresses might be merged through one single transaction. All this works because of different wallet companies and their so-called UTXOs of different wallet addresses. Because of UTXOs, your wallets can be merged in a single transaction that helps an attacker to identify which addresses belong to the same owner.
The second step is then to try to link that information to other sources to break down the privacy of the user such as stolen KYC information which users often need to provide to exchanges or web wallet providers.
Then the third step is to launch phishing attacks to extract passwords or private keys from the user or make extortion attempts.
Who Uses Dust Attacks?
Suppose you are the attacker and you have successfully obtained sensitive information of a bitcoin user. So how are you going to extort that individual? Only you know that, right? P.S- Don’t do any such thing.
Anyways, other entities that might utilize dust attacks can be spammers who use tiny dust transactions to send advertising messages.
Although these spammers may not be out there to de-anonymize you but other entities like government agencies can monitor the same dust or use their own dust to de-anonymize users.
Furthermore, dust can be used by criminals to launder money a portion of their illegally obtained money in cryptocurrency. They might spread their funds as dust to large numbers of random addresses to frustrate chain analysis tools used by law enforcement agencies to follow dirty money.
Who Can Be Attacked By Dust Attack?
Anyone.
It does not matter if you’re new to cryptocurrency or a seasoned user, everyone is susceptible to dust attacks. However, such attacks are more likely to be executed successfully on newcomers who are less informed about the crypto space.
Because of bitcoin’s immense popularity, Bitcoiners are the main target of dusting attacks.
How To Be Safe From Dust Attacks?
It is fairly impossible to prevent your addresses from being dusted but at least there are ways to control the damage it can do.
There are different methods that can be used to avoid losing your privacy as a result of a dusting attack.
In most cases, it also depends on a particular cryptocurrency you’re using especially as each blockchain has a unique design.
Method 1:
The first and best way of protecting yourself and mitigating the dusting attacks is by simply not moving the dust funds you receive. If these funds are not moved, the attackers are not able to make the connections they need to do make because these attacks rely on a combined analysis of multiple addresses.
Generate a new address for each new incoming transaction and by doing so, you will prevent a lot of your transaction history from being compiled and attached to one address which would then all be compromised if a dusting attack succeeds on your wallet.
Ideally, a brand-new Bitcoin address should be created for every new receiving transaction in order to preserve the user’s privacy.
Method 2:
The second thing you can do is using an off-chain layer for transactions. If you use bitcoin then a good option to stay clear from dusting attacks would be to use the Lightning Network.
The reason is that the Lightning network is not on a blockchain and therefore has an inherently different design and provides more privacy.
Dusting attacks are not possible on the Lightning Network however keep in mind that using the Lightning Network is not very beginner-friendly and your private keys are essentially kept in a hot wallet.
Since the funds are kept in a hot wallet, so you shouldn’t keep too large amounts tied up in lightning channels and only store funds that you can comfortably keep on the Lightning Network and use frequently.
Method 3:
The third method is to use VPNs. VPNs are used to protect online privacy and increase individual security. A reliable VPN would keep scammers confused as they won’t be able to figure out your precise location and your real IP address will also remain hidden from everyone.
Method 4:
Swap between different cryptocurrencies will render dust attacks useless. You can exchange the Bitcoin which has dust to another cryptocurrency and the dust would disappear leaving your transactions untraceable.
For example, if you received dust in one of your Bitcoin addresses you could simply use an exchange like ChangeNOW to exchange the bitcoins to another cryptocurrency instantly because attackers can only trace you in that specific cryptocurrency and not in a new one.
Exchange your cryptocurrencies from their official website or use the widget below to swap instantly.
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Also, keep in mind that the fee for doing this will end up being higher than the dust was in the first place.
Method 5:
Use the wallets with the “Do Not Spend” feature. Some wallets have begun integrating the do not spend features in reaction to the increasing number of dusting attacks. The wallet’s software will actively work to exclude dust from entering into any new outgoing transactions of your wallets.
The “Do not spend” feature serves as a warning to users not to use the dust as they could be exposed to scammers who are out to obtain personal information.
Other wallets may have a feature of giving a label to dust attacks so you can manually exclude dust from transactions by recognizing them from the label that you gave them.
If an address in your wallet has received dust, you should import that wallet with your seed phrase into wallet software that does have a UTXO selection functionality so that you can safely move your funds and generate newly separated wallets without touching the dust.
Final Words:
The true scope and size of actual dust attacks are not very well known but dusting attacks most definitely exist and addresses receiving dust is not uncommon. So whether dust is maliciously spread or not, any dust may impose a risk of compromising your privacy and security of your coins so in any case, users must be vigilant all time so that they can identify any unexpected additional amounts of cryptocurrency that is sent to their wallet addresses this way they can take the appropriate steps to avoid being tracked and consequently prevent themselves from losing their personal information to scammers.
Take your privacy and security seriously even when a dust attack seems harmless.
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