What's a dusting attack?

The digital currency industry has revolutionized finance, but it also faces security risks such as hacks, scams, and fraud. While blockchain networks enhance security through decentralization, they're not entirely immune to evolving threats from bad actors.

One lesser-known attack is the dusting attack, which can compromise user privacy without immediate detection. Learn more about what dusting attacks are, how they work, how to identify them, and the steps you can take to protect your assets.

What's dust in crypto?

In crypto, dust refers to very small amounts of coins or tokens left over after trades or transfers. For example, one satoshi (0.00000001 BTC) is considered dust in Bitcoin. These amounts are usually too small to spend or even pay for fees.

How's crypto dust made?

An example of the scenario, you purchase a certain amount of BTC and then use it to make various transactions. Once all the transactions have been carried out, a small amount of crypto will remain in the wallet. The excess amount of crypto is of such little value it serves no purpose. You can't even use it to pay for transaction fees.

Alternatively, crypto dust can be transferred to you, which is a form of a malicious attack. This is a relatively new form of attack where hackers invade the privacy of crypto owners. They do it by sending a small amount of digital currency to multiple addresses. They then track these funds to reveal who the owner of the wallet is.

Is crypto dust harmful?

Crypto dust is not inherently harmful or a threat. It can appear naturally whilst carrying out transactions. The accumulation of crypto dust is a common occurrence; most of the time, it’s nothing to worry about.

Crypto exchanges help alleviate the issue associated with crypto dust by allowing users to swap their dust for governance tokens. This encourages users to make more transactions, which results in the exchange benefitting from the related fees. Meanwhile, users can get rid of the dust in their wallets.

While hackers might identify you as a crypto user by dusting attacks, they still can’t get your private key. It's therefore essential to use a secure wallet and keep the details on how to access it to yourself.

What's the dusting attack, and how does it work?

Dusting itself doesn’t steal coins. Instead, it’s a reconnaissance step: once attackers learn that a certain person controls significant crypto, they may launch phishing, extortion, or targeted scams.

How does the dust attack actually work?

For the dust attack to take place, the dust sent to your wallet needs to be transferred out of it by its owner. The attacker wants you to send this dust to your other wallets alongside other funds. That way, they can connect your wallets to your exchange account and uncover your identity. This only works with centralized exchanges, where you have to go through identity verification to open an account.

Once the attacker learns who you are, they can target you with phishing, extortion, and other crypto scams. In other words, the dust attack itself is not an attack. It's more like setting the stage for an attack — the first step in setting up a greater crypto scam.

How do I spot a dusting attack?

• Transaction clustering: If multiple addresses are used as inputs in the same transaction, they are assumed to belong to one wallet.

• Change detection: Algorithms can spot which outputs are likely “change,” further grouping addresses.

• Taint/flow tracking: Dust is followed to see where it’s co-spent.

• Off-chain anchors: Deposits to exchanges (with identity verification), public donation addresses, or leaks can tie a cluster to a real person.

How do I counter a dusting attack?

For most cryptocurrency users, being a victim of a dusting attack is unlikely. Hackers tend to target wallets that own a substantial amount of crypto.

Even so, everyone should take steps to protect themselves from such an attack. While unlikely, there's always a possibility of an attack occurring. Therefore, the best method of countering dusting attacks is to eliminate the dust in your wallet.

How do I get rid of dust?

• Don’t spend suspicious dust. Spending it links your wallets together.

• Use separate wallets for exchange deposits (identity verification) and for private holdings.

• Monitor transactions. Unexpected tiny deposits should be treated as suspicious.

• Don’t interact with unknown tokens. Malicious airdrops can be tied to smart-contract scams.

• Use privacy tools carefully. hierarchical deterministic wallets or privacy-focused wallets can help, but they have trade-offs.

Can a VPN help?

A VPN hides your IP from local observers, but it doesn’t stop on-chain analysis. Wallet hygiene (avoiding address reuse, using HD wallets) is more effective.

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