What Is a Crypto Dusting Attack & How Does It Work?

The world of cryptocurrencies is packed with technologies, jargon, and buzzwords that can confuse even the most seasoned investors and enthusiasts. Knowing some terms, like smart contracts, can help you better grasp the inner workings of blockchain. On the other hand, understanding crypto dusting attacks can help you better protect yourself.

But what exactly is crypto dust and a dusting attack? What kind of dust can there be in the world of digital assets?

That’s what we’re going to uncover with this article. We’re going to explain precisely what crypto dusting attacks are, how to recognize them, and what to do to protect yourself. Without further ado, let’s get started!

What Is Crypto Dust?

Crypto dust refers to very smallamounts of cryptocurrency left in a wallet. These quantities are often too small to be used since it’s either impossible to send them due to blockchain constraints or unprofitable due to fees being higher in value than crypto itself.

You can think of crypto dust as having a couple of cents in a traditional bank account. While the assets are still there, you can’t really do anything meaningful with them.

There are several ways one can end up with crypto dust in their wallet. A lot of crypto holders can end up with trace amounts of coins or tokensafter performing transactions. Other ways include receiving small rewards or airdrops. One wallet can have dust from many different currencies.

That is possible due to the fact that most crypto coins and tokens can be broken down into fractions of themselves. 1 Bitcoin can be broken down into 100,000,000 Satoshis. That’s how a user can have 1.123456789 Bitcoin. Should they send 1.12345678 of their BTC, they’d leave 0.000000009 in their wallet. That’s worth a fraction of a penny and is considered crypto dust.

Understanding crypto dust is important, as even trace amounts of it can accumulate over time to represent a considerable sum. Moreover, it can be used for potentially harmful attacks.

What Is a Crypto Dusting Attack?

A crypto dusting attack involves sending trace amounts of crypto to a large number of wallets. A single attack can impact thousands, or even hundreds of thousands, of cryptocurrency wallets.

It’s not uncommon for users to remain oblivious to crypto dusting attacks. Many crypto owners don’t track incoming transactions across all of their wallets on a daily basis. As a result, minuscule incoming transfers will likely go unnoticed.

Crypto dusting attacks utilize the basic mechanics of the blockchain to target the users’ privacy. On the one hand, blockchain is designed to protect the identities of participants by only recording their public addresses and not private information.

However, since all data is permanently stored on the blockchain, once an address is connected to the user’s real identity, anyone can track their activity from that point forward.

Simply put, “victims” of a crypto dusting attack aren’t at immediate risk of a loss of funds. The attackers can’t directly steal their cryptocurrencies or manipulate their wallets. The point is to lift the veil of anonymity and compromise the crypto holder’s privacy. That makes them exposed to other methods of attacking and leaves them vulnerable to further threats.

How Does Crypto Dusting Attack Work?

At its core, a crypto dusting attack works by sending seemingly insignificant amounts of cryptocurrency to many wallets. Here’s a step-by-step process:

1. Dust distribution. The first step involves sending traces of crypto to multiple wallets. This “dusting” is no different than a regular transaction performed and recorded on the blockchain. The amounts are minimal to lower the cost of the attack and not to alert the recipient.
2. Dust monitoring. Once the attacker distributes the dust, they continue the process by monitoring the amounts and the wallets. Many users unknowingly use received crypto dust in their future transactions as it bundles and merges with their existing assets.
3. De-anonymization. It’s not uncommon for crypto enthusiasts to transfer their funds to centralized platforms, such as cryptocurrency exchanges. Many of these exchanges require users to perform Know Your Customer (KYC) procedures, which reveal sensitive private information. Attackers can connect this private information to a dusted wallet.

After they’ve found out private details about the victims of crypto dusting attacks, attackers can use this information in different ways—for phishing attacks, online scams, and even real-world theft.

Who Can Perform Crypto Dusting Attacks & Why?

Crypto dusting attacks can be performed by individuals and entities with various degrees of knowledge and equipment. Also, the purpose of an attack doesn’t always have to be malicious.

With that in mind, here are some of the key actors that perform crypto dusting attacks:

• Crypto hackers and cybercriminals. Malicious individuals or organized groups who possess extensive knowledge of cryptocurrencies and blockchain can use their expertise for nefarious purposes. They are usually adept at using complex tools and software that can help them perform crypto dusting attacks successfully.
• Data analyst companies. There are businesses that can perform crypto dusting attacks to obtain valuable information about the space in general. These analysis and surveillance entities can use the obtained data to gain valuable insight into the cryptosphere or even sell it for profit.
• Government entities. Government entities and regulatory bodies sometimes use crypto dusting attacks to uncover anonymous and potentially harmful actors. That can help them put a stop to money laundering, tax evasion, terrorist threats, and other criminal activities.

As you can see, crypto dusting attacks have many different uses. Bad actors can use them to obtain private information on cryptocurrency holders before using other methods of stealing their funds.

For instance, using a dusting attack on a Ledger wallet might not directly steal crypto, but it can uncover the owner’s location. Afterward, a hacker can physically break into the owner’s home and steal their hardware wallet.

On the other hand, crypto dusting can be done for the purposes of competitor or market research. Ultimately, it’s also a method of uncovering criminals and putting a stop to their activities.

How to Recognize Crypto Dusting Attacks

Recognizing crypto dusting attacks revolves around monitoring one’s wallets and looking for specific signs. Still, that can be a challenging endeavor due to how subtle these signs can be. That’s one of the main reasons why crypto dusting attacks can be dangerous. Here’s what you should look for:

• Unexplained small transactions. A dusting attack involves ending minuscule amounts of cryptocurrencies. So, if you spot an incoming transaction of insignificant value, that can be a telltale sign of a dusting attack.
• Unusual transaction messages. Many blockchains allow senders to transmit messages with their transactions. These messages can contain phishing links, lead to corrupted websites, or contain malware. You should always exercise caution when interacting with these messages.
• Dust-tracking wallet features. Some creators of software wallets implemented real-time dust-tracking as a service to timely notify their users. For instance, users might get the “Do not spend” message with a crypto dusting transaction.
• Community-wide attack. If you’re a part of the crypto community (e.g., an online forum or Discord group), you should pay attention to other users reporting small incoming transactions. That might mean the whole group has been under attack.

Crypto Dusting Attack Example

There have been plenty of crypto dusting attacks in recent years involving many different cryptocurrencies. Attackers have been using BCH, ETH, XRP, DOGE, USDT, and many other coins and tokens to send their traces and identify the owners’ addresses.

One of the more prominent attacks involves TRON founder Justin Sun. Justin was the victim of a dusting attack during which he received 0.1 ETH from Tornado Cash.

Tornado Cash is a “cryptocurrency tumble.” Essentially, it’s a decentralized platform used to deposit and withdraw assets in an anonymous manner. Users submit assets from one address and withdraw them to another, which is known only to them. That way, they are severing the connection to the blockchain and making their funds untraceable.

The end result of this attack was Justin Sun getting blocked on Aave. That’s because, while Aave is a decentralized protocol for lending and borrowing, it got sanctioned by the U.S. Department of the Treasury, which sees Tornado Cash as a money laundering protocol.

How to Prevent a Crypto Dusting Attack

While crypto dusting attacks aren’t always malicious, it’s essential to know how to prevent them and what to do once you find yourself a victim. Here’s how to get rid of a dusting attack:

• Use multiple wallets. Having multiple wallets is generally considered a good practice in the cryptosphere. That way, even if one wallet gets compromised, the rest of your assets are kept safe and private.
• Use hierarchical-deterministic (HD) wallets. HD wallets create a new address with every transaction. As a result, they make it harder to connect the owner’s private information to the wallet. One of the most popular HD wallets is MetaMask.
• Use TOR or VPN. If you’re using a software wallet, accessing it via TOR or VPN hides your real-world private information from attackers. That way, even if an attacker has your wallet’s address, they might not be able to connect it to your name or physical address.
• Don’t use dust. It can be tempting to try to use dust or consolidate it into a single cryptocurrency to gain some monetary value from it. However, interacting with it only increases the chances of the attacker succeeding in their intentions.

Key Takeaways

As the crypto space continues to evolve and expand, so do the opportunities for bad actors to perform malicious activities. Crypto dusting attacks, while seemingly innocuous, can pose a real threat to those who don’t know how to spot or react to them.

Paradoxically, the very strengths of blockchain also turn out to be its biggest weak spots. As a result, it’s important for users to stay on guard and be aware of all these threats. Being vigilant and keeping yourself informed is the key to remaining ahead of the attacker.

Best of luck in the crypto space, and don’t let a lousy minority deter you from enjoying its wonders!