Litecoin has recently been targeted by malicious actors who have sought to break on-chain privacy through a dusting attack. As explained by Binance Vision, the education wing of the exchange, a dusting attack occurs when hackers send dust (an amount below the current average fee) to the personal account of a user and track it on-chain to try and figure out their identity, August 10, 2019.
Bitcoin is not a completely anonymous network; identity can still be established by skilled hackers who can make a connection between an address and individual or corporate identity.
There have been many incidents in the past that led to crypto enthusiasts being doxxed and blackmailed, including the likes of the legendary Hal Finney.
Scammers have realized that users don’t pay much attention to tiny amounts i.e ‘dust’ as it is negligible to their wallet balances. They begin a wide sweep of dusting attacks on multiple addresses and then perform a combined analysis to identify which ones belong to the same wallet provider or individual.
Once hackers can ascertain identity with significant accuracy, they can send out phishing links or personalized emails to induce them to further dox themselves.
Since dust attacks are reliant on a coherent analysis to establish identity, they aren’t effective if the dust is never moved from the address.
Security flaws will always exist as no single piece of technological infrastructure is perfect and impenetrable. The scope for these attacks are mostly fuelled by social dynamics rather than direct bugs in the code.
A lot of scams in the space only exist because of the complexity in custody and user security on the ground level. Getting to know the basics of how to store and move cryptocurrency can avert the possibility of losing funds to malicious actors.
The biggest threat to adoption is currently the lack of awareness of the best practices from a security perspective, making the number of individual users who are not susceptible to such risks incredibly low.
When you utilize the services of a bank or any third party custodian, you effectively delegate the role of security and risk mitigation to them. Cryptocurrency aims to rid us of the demerits that banking and fractional reserve bring to the table; at the same time, it also makes the role of each separate person drastically more important.