In this article we will talk about what a Dusting Attack is and how it works. Even if this explanation requires a certain depth around Bitcoin’s technology, my goal is to build the article in a way that even complete Bitcoin novices will hopefully be able to understand it. Because the more you know how it works, the better protected you are from any kind of possible attacks. As you know non of cryptocurrencies are hackproof, and Bitcoin is not an exception. Therefore, you need to beware of your security and stay safe against such attacks.
What Is a Dusting Attack?
In order to explain what a Dusting Attack is, we have to take a step back and clarify why the Dusting Attack is called what it is called. This scam owes its name to the attackers’ actions. They send their potential victims tiny amounts of coins onto the wallets. Tiny amounts of coins are also called dust.
Usually, such tiny amounts are remnants of an earlier larger amount that has already been transferred to another address. Almost only the dust that reminds us of what once was there. The attackers use such small amounts of coins to send them to foreign wallets. The amounts are so small that they are often ignored by the owners of the wallets. This is only Coin Dust. It is also said that foreign wallets are “dusted”, hence the name Dusting Attack.
But how can the attackers find out the identity of the owner by a simple transfer to the wallet?
How Does It Undermines Your Anonymity?
To answer the question, we need to go a bit deeper and see how a Bitcoin transaction works. Furthermore, I would like to explain with you to what extent Bitcoin is anonymous for the user.
Bitcoin is an open and decentralized network in which anyone can participate by setting up an address. It is not necessary to provide personal data in order to set up an address through which the owner can receive and send coins. Although the transactions can be viewed by everyone, in principle it is not possible to determine the identity of the respective actors. However, a single address alone is not a sufficient privacy feature, because if this address can ever be assigned to a specific person, all actions of this person can be tracked without any problems.
For this reason, there are wallets as a further privacy feature in the Bitcoin network.
What You Need to Know about Bitcoin Wallets
Bitcoin wallets can generate a variety of different addresses and manage hundreds of them simultaneously. More precisely, the wallet’s seed generates multiple private keys and addresses. A seed is a sequence of several different words. As a rule, a seed consists of either 12 or 24 words.
With the help of these words, deterministic wallets can derive a large number of private keys. So if you have used a Bitcoin wallet before, you will have noticed that each time you use it, a new address is generated to receive a transaction from someone. So if I want to send Bitcoin to your wallet, your wallet will generate an address for you to send Bitcoin to. After receipt of the transaction, this address will receive a UTXO.
How Does It Work?
To undermine the protection provided by the way your wallet works, the attacker sends a UTXO to one of your addresses. As explained above, these are usually very small amounts of bitcoin or satoshis, which are therefore also called dust and are often ignored by the recipient.
The background of this procedure is the functionality of your wallet. We now know that there are usually several UTXOs of different sizes on different addresses that are managed by your wallet. If you now want to send a certain amount, then your wallet combines the different UTXO with each other to raise the amount. It also uses different addresses where the corresponding UTXOs are stored.
At this point, remember the example of the bun at the bakers. If you want to generate a transaction, your wallet will raise the amount to be paid by combining different UTXOs from different addresses. So your wallet creates the transaction through multiple inputs from different addresses.
What the attacker is waiting for is for your wallet to use the UTXO he sent for the next transaction and combine it with UTXOs from other of your addresses. The fact that UTXOs from different addresses are used for the transaction shows the attacker that all addresses involved are controlled by you.
From this point on, the attacker will gradually be able to track all your addresses. The network of addresses managed by your wallet will be revealed, including automatically regenerated addresses in the future.
How Does the Attacker Get Your Identity Now?
The weak points in the system are, as so often, the central intersections. In our case, these are the crypto exchanges, where users have to register with their correct data in order to participate in trading there. By registering, a corresponding wallet is set up for the user, through which he trades on the exchange. At these crypto exchanges, a wallet is thus uniquely assigned to a specific identity.
It becomes critical for the anonymity of each user if he communicates with his personal, anonymous wallet from the exchange with the wallet to be clearly assigned to him, for example by sending coins to this wallet and receiving coins from this wallet. From this point on, the attacker can establish a direct connection between the previously anonymous wallet and the non-anonymised wallet. The pattern of transactions between these two wallets quickly reveals whether the owner is the same or not. It is precisely this circumstance that the attackers take advantage of by means of a dusting attack.
The attacker can use this knowledge to attack his victim in a targeted manner. This usually takes the form of phishing attacks or blackmail.
Many users attach great importance to their anonymity. Especially if they have larger sums of bitcoins. The attackers take advantage of this fact.
Dusting attacks are not a novelty but despite all that a current topic. These attacks are primarily carried out by Bitcoin. Attackers, however, also increasingly transfer this mesh to other cryptocurrencies running on a public and transparent blockchain.
How Can I Protect Myself Against a Dusting Attack?
The best protection against any form of attack is to know how it works. So if you’ve read this far and understood how Bitcoin transactions and Bitcoin wallets work, it’s already very valuable.
Unfortunately, very few people know about such things, so try to pass on this knowledge to your fellow human beings in order to give them a better understanding of the topic and at the same time better protection against attackers.
In addition, the Samurai Wallet, for example, has a “Do not spend” feature. This allows the user to mark unknown small deposits on his wallet in order to never use this UTXO for further transactions.
This feature is a reaction of the developers of the Samurai Wallet, who already noticed at the end of October 2018 that many users of their Wallet had become victims of such Dusting attacks.