The Danger of Random Crypto Drops: How Dusting Attacks Work and the Best Ways to Avoid Them

Nobody will be upset at receiving a random sum of crypto, but unfortunately, these sudden drops tend not to be goodwill gestures or surprise donations.

Instead, bits of ‘dust’ being transferred to a person’s wallet are often connected to one of crypto’s most common scams: the dusting attack

Considering that every investor has a high chance of being targeted by a dusting attack, knowing how to avoid them and the best way to react if you become a target is essential for maintaining your financial privacy and safety throughout your crypto journey.

Table of Contents

• Explaining Dusting Attacks
  • Are all Dusting Attacks Scams?
• How do Criminals Perform Dusting Attacks?
  • Dust Transfer
  • Movement Tracking
  • De-Anonymizing the Victim
  • Approaching the Target
• UTXO Blockchain Vulnerability
• Have Dusting Attacks Slowed Down?
• How to Avoid Dusting Attacks
  • Privacy Coins
• Signs of a Dust Attack
  • On the Flipside
  • Why This Matters
  • FAQs

Explaining Dusting Attacks

A dust attack begins when a scammer sends a tiny amount of crypto to numerous cryptocurrency wallets simultaneously

After they’ve been transferred, the sender will monitor how the dust is moved and exchanged by watching the blockchain’s ledger. Remember that a blockchain won’t reveal sensitive information for its wallet owners but will still record all their transactions

As a result, these malicious actors’ end goal is to connect the dots and try to reveal their victims’ identities. Then, they will proceed to scam them more personally to steal their crypto

In a way, the dust is the seed planted into a person’s wallet, which eventually grows into a tree of personal information that the scammer can use for their own selfish gains

Are all Dusting Attacks Scams?

Though dusting attacks have become a common technique used by scammers, they aren’t only restricted to these kinds of individuals

For example, tax and law enforcement can use this method to try to reveal the identity of large criminal networks. Additionally, analytical companies can use dust as part of their research on trading behavior, while developers can use it to ensure transactions are running smoothly on a newly optimized network as a stress test

The difference is that these individuals aren’t using dust to deanonymize someone and steal their funds, which is the central aim of scammers.

How do Criminals Perform Dusting Attacks?

We’ve already covered the basics of how a dusting attack operates, but the truth is, it’s a fairly complex strategy that can take a lot of time and patience. Let’s uncover how this attack works on a deeper level

Dust Transfer

The scammer will first line up a list of wallets to which they intend to send the dust, usually ranging in the hundreds or thousands

Very often, they will try to disguise the dust as a reward or incentive, sometimes even portraying them as part of an ICO (Initial Coin Offering) which are used to help generate support for a project

If the dust is left on its own, it won’t have any effect, but as soon as the person connects it to their primary wallet and mixes it with their funds, the scammers can track their movements after the ‘dust transaction’ takes place

Movement Tracking

When a person makes a payment that combines the dust with their own tokens, a new transaction is created, which can then be recorded and traced on the blockchain.

The scammers aim to analyze all the wallet addresses that received dust and then deduce which ones belong to the same wallet through the blockchain ledger, which keeps track of every transaction on the network

Remember that they’re able to track these movements to deduce which wallets belong to the same person. This isn’t a fault of blockchain security; it’s due to the dust itself, which essentially acts as a tracking device. Using the dust without realizing it, the victim places a target on their back for the scammer to follow

De-Anonymizing the Victim

This is the most difficult part for the person behind the attack, as after connecting all the dust to a single address, they need to reveal the person behind it

There are a few ways they can do this. One is by seeking out any mention of the same transactions on social media. Another is by seeing if the person has made their public address visible online to collect tips

They will approach the victim personally once they have figured out who’s making the transactions

Approaching the Target

Phishing scam emails, cyber extortion threats, ransomware attacks, or even attempts at blackmail are all ways that scammers will force a person to hand over their sum of cryptocurrency after being de-anonymized.

This is the final stage of the attack, during which the scammer inevitably tries to dry out the person’s wallet so that they can take it for themselves

UTXO Blockchain Vulnerability

Though no public blockchain is immune to crypto dusting attacks, some are more susceptible because they have a UTXO in place.

A UTXO is an unspent transaction output that can be considered a piggy bank of change. If blockchain technology supports it, you can send some crypto assets left over to a UTXO any time you make a transaction

Most people will have multiple UTXOs, and since they only store small amounts, scammers can send dust to numerous UTXOs at once. Once the funds are collected into a single wallet, the attacker can easily track where and when they are being spent

Blockchains that contain UTXO functionality include Bitcoin (BTC), Litecoin (LTC), and Bitcoin Cash (BCH), to name a few of the most popular examples.

Have Dusting Attacks Slowed Down?

Unfortunately, although these attacks are still very common, some subtle changes in the industry over the years have helped dissuade people from participating in them

For example, network charges and transaction fees are always increasing, and considering the attacker only spends tiny amounts of cryptocurrency, they could pay more than they would like. If they don’t successfully scam a person, they will lose a lot of money, causing them to question whether the immoral act is really worth it

Moreover, most blockchains will now require users to send a minimum amount of crypto to be eligible for a transaction, forcing the attacker to spend more than needed and ramping up the total price even further

While these issues may be irritating to everyday cryptocurrency users, they have also made dusting attacks more expensive than they’re worth for some people

How to Avoid Dusting Attacks

Unfortunately, this hasn’t been enough to prevent dusting attacks altogether. Thankfully, an attack can be handled quite easily and safely, so long as you keep these precautions in mind.

• Ignore the Dust: An easy recommendation, but one that can negate an attack altogether, is simply not adding the incoming dust to your wallet. If you leave the dust as it is and don’t mix it with your primary set of funds, you won’t be willingly handing over any personal information
• Freeze UTXOs: If you find out that you have UTXOs storing spare change, you may have the option to freeze it by clicking a “Do not spend” option to keep the dust locked away once it arrives
• Use Hierarchial-Deterministic Wallets: HD wallets will generate a new public and private key pair for each transaction, meaning there’s no way to link to one public address since it’s constantly changing
• Check for Advanced Wallet Features: Some advanced wallets offer additional features like coin control and stealth addresses, which can help hide a person’s identity from onlookers

Privacy Coins

Privacy coins are another way to avoid dusting attacks, but they’re important to discuss in depth since they can be used in both ways

To be clear, privacy coins are specifically designed to grant wallet holders heightened privacy and anonymity, keeping them hidden in transactions. Monero (XMR) and Zcash (ZEC) are the most popular examples of privacy coins

While privacy coins can, therefore, act as a deterrent to scammers, it’s important to mention that the attackers themselves can also use them since it would be impossible for the recipient to trace back to the point of origin

The best way to navigate this is to first research the different types of privacy coins, and if you see a tiny amount coming your way, ignore it completely

Signs of a Dust Attack

If you’re a little worried that you may already be caught in the web of a dusting attack, a few signs can indicate whether this is true

• Inaccurate Crypto Balance: Some crypto wallets will automatically merge incoming crypto with the primary funds, making tracking difficult. If you start noticing that your funds subtly increase without you buying anything, it can be worth checking your transaction history to see if you’ve accidentally incorporated some dust into your balance
• Influx of Spam Texts and Emails: When a scammer reaches the final stage of a dust attack, they won’t go down without a fight. They will usually send an abundance of emails, sometimes from different addresses. These tend to be very aggressive and out of the blue, so if these seem suspicious, it’s better to be safe and avoid them

If you suspect that you’ve been caught in the web of a dusting attack, you should contact your wallet provider immediately to see if you can shift your funds to a new address

They will ensure that your funds can no longer be tracked, even though you may still receive suspicious emails and messages, which should still be fully ignored

On the Flipside

• Dusting attacks are generally easier to manage than other scams like cryptojacks or Ponzi schemes since all you need to do is ignore the dust entirely after it’s been sent.
• Therefore, while it’s still a prominent issue, many scammers are looking to other, more cost-efficient ways to expose people’s digital assets.

Why This Matters

Airdrops have become so commonplace in crypto that hackers can now use them for malicious activities, as they do with dust attacks.

Therefore, it’s more crucial nowadays to know how to identify and defend against such attacks, especially since most people will receive dust at least a few times throughout their journey because they are large-scale attacks

FAQs

Does Ethereum Use UTXOs? No, Ethereum (ETH) uses a standard account model rather than a UTXO, which makes it slightly more resistant to dust attacks. However, Ethereum users can still be targeted by receiving small amounts of cryptocurrency

Are All Blockchains Public? The majority of popular crypto blockchains are public and open-source, though there are private blockchains that companies and business hierarchies mostly use.

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