The cryptocurrency Bitcoin is a form of electronic cash, designed to be decentralized to work without a central bank or single administrator.
Without the need for intermediaries, and with all data stored inside blockchain cannot be altered, Bitcoin has received a a huge share of popularity among its users and beyond.
But with the many people using Bitcoin as a mean of investment or purchasing, the wallets the users own may store quite a lot of the digital coins. This attracts many people with malicious thoughts, as they think of ways to drain the wallet or seek the identity of the owner.
One of the ways, is by using a strategy called a 'dusting attack'.
This malicious activity involves hackers or scammers in trying to breach the privacy of Bitcoin and cryptocurrency users, by sending a tiny amount of coins to the targets' wallets.
Due to the nature of blockchain that makes transactions transparent, the malicious actors can track the wallets and their activities by combining analysis of several addresses. This way, the hackers/scammers can identify the person or company behind the wallets.
In cryptocurrency's term, "dust" refers to a tiny amount of coins or tokens.
In Bitcoin's case for example, the smallest unit of the cryptocurrency is called 'satoshi'. This is an equivalent of 0.00000001 BTC.
The amount hackers/scammers send can be so small. These malicious actors make use of the fact that most people don't pay that much attention to tiny amounts of cryptocurrencies they have in their wallets.
When initiating a dusting attack, the malicious actors may send only a couple of hundreds of satoshis to the targets' wallets.
Initiating A Dusting Attack
Bitcoin is open to anyone who wishes to use it, and decentralized without any governing entities.
What this means, anyone can create a wallet and join the network without having to provide any personal identifiable information. Although all Bitcoin transactions are public and visible, it is not always easy to find the identity behind each public address or transaction.
This fact makes Bitcoin anonymous, but not completely.
The goal of this 'dusting attacks' is to be able to link the dusted wallets and addresses to their respective owners using UTXO (Unspent Transaction Output). In this case, the UTXO is the very small amounts of Bitcoin or satoshis.
The strategy is with the fact that there are usually several UTXOs of different sizes on different addresses that are managed by users' wallet. If users want to send a certain amount, then their wallet combines the different UTXOs with each other to raise the needed amount.
At the same time, the wallet also uses different addresses where the corresponding UTXOs are stored.
In short, when users want to pay something using Bitcoin, their wallet creates the transaction through multiple inputs from different addresses.
What the attackers is waiting here, is for the users' wallet to use the UTXO the attackers sent. When that UTXO is combined with other UTXOs from users' other addresses, the transaction can reveal the attackers the addresses that are controlled by the users.
The attackers can then create a directory to record all addresses that are managed by the users' wallet. If successful, the attackers can track all activities of the users on the blockchain with ease.
Revealing The Owner
Based on the fact that cryptocurrencies need central intersections, in this case, there are cryptoexchanges involved. This is where users have to register with their correct data in order to participate in trading at the exchange.
By registering, a corresponding wallet is set up for that user, through which the user trades on the exchange. At these cryptoexchanges, a wallet is uniquely assigned to a specific identity.
The attackers can use the information gathered through their dusting attack to pick up the users real identity. After that, they can use the information against their targets, either by elaborated phishing attacks or cyber-extortion threats.
Dusting attacks were initially performed with Bitcoin, but they are also happening with other cryptocurrencies .
Dusting attacks rely on a combined analysis of multiple addresses. The best and easiest way to prevent dusting attack, is to not move the fund. This way, the attackers shouldn't be able to make the necessary connections to de-anonymize the wallets.
Bitcoin uses blockchain technology to make it nearly impossible to hack or disrupt. But for those who own a wallet to store a huge sum of cryptocurrency, the concern is that hackers are going after these people's money and identity.
Privacy and security are getting more and more valuable, especially because they deal with things that no people want to expose.
Dusting attack is just one of the several ways hackers and scammers can do to compromise users. Other security threats that are part of the cryptocurrency space, include: cryptojacking, ransomware, and phishing.
For safekeeping cryptocurrency from hackers and any other malicious actors, it's wise to keep them in a 'cold storage', which means putting it offline inside a local storage medium, and encrypting it with whatever possible.
Other cold storage options include: a paper wallet, on a bearer item such as a physical Bitcoin, or using an offline Bitcoin hardware wallet. But using either of these three options require careful safekeeping as anyone can physically hold them.