A dusting attack refers to a malicious activity where hackers and fraudsters attempt to breach the privacy of Bitcoin and other cryptocurrency users by sending tiny amounts of coins to their personal wallets.
Definition of Dust
In cryptocurrency parlance, the term dust refers to a small amount of a given coin or token - an amount so small that people tend to overlook it. Taking Bitcoin as an example, the smallest unit of currency is 1 satoshi (0.00000001 BTC) and we can consider a few hundred satoshis as dust.
In other words, dust is such a small amount of crypto that it becomes unnecessary to send it because the transaction fee is usually higher than the value of the assets. On cryptocurrency exchanges, dust is also the name we give to small amounts of coins that are “stuck” and cannot be traded due to the minimum limit per transaction. On the Binance exchange, users have the option to convert dust to BNB in the Spot wallet interface.
Most people barely notice the dust in their wallets and rarely care about where it comes from. Until recently, it was perfectly normal to not worry about dust in your wallet, but with the advent of dusting attacks, that is no longer the case.
Dusting Attacks
The fraudsters recently discovered that Bitcoin users don’t pay much attention to the tiny amounts in their wallets, so they began the dusting process by sending a large number of satoshis to a large number of addresses. They then began tracking the balances and transactions of each wallet affected by the attack, thus having the chance to associate addresses and eventually determine which companies or individuals are behind each address.
In late October 2018, the developers of the Samourai wallet, which stores Bitcoins, announced that some of its users were subject to a dusting attack. The company released a tweet warning its customers and explaining how to prevent such cases. In order to protect users from this type of attack, the wallets began to notify in real time when a dusting attack is taking place and, in addition, they created a tool called Do Not Spend that allows users to identify these suspicious balances and avoid using them in future transactions.
If a dust balance is not moved, malicious actors cannot make the connections they need to deanonymize the owners of each affected address. The Samourai wallet already has the ability to report transactions below the 564 satoshis threshold, thus offering a reasonable level of protection.
The Pseudo-Anonymity of Bitcoin
Since Bitcoin is open and decentralized, anyone can create a wallet and join the network without having to hand over any personal information. While all Bitcoin transactions are public and visible, it is not easy to find the identity behind each address or transaction, and it is this aspect that makes Bitcoin somewhat anonymous, but not completely.
P2P (peer-to-peer) transactions, made between two parties (without the presence of intermediaries) are more likely to remain anonymous. It is worth remembering that Bitcoin users are supposed to use each address only once, in order to preserve their identities.
However, most cryptocurrency enthusiasts and traders use exchanges to trade their assets. This use can eventually lead to an association of addresses, with constant transactions between personal wallets and the exchange wallet, making it easier for hackers to identify the personal information of the owners of these wallets. Therefore, when trading cryptocurrencies, it is important to choose a reliable and secure exchange.
Therefore, it is important to keep in mind that, contrary to what many tend to believe, Bitcoin is not a completely anonymous cryptocurrency. In addition to dusting attacks, many companies, research labs, and government agencies are performing analysis on Blockchains as a way to end any possibility of anonymity on these networks.