Welcome to the dynamic world of cryptocurrencies, where every day brings new and innovative methods for scams. In this evolving situation, staying informed is your best defense against fraudulent tactics.
One of these threats is the ‘address poisoning attack,’ a technique that most users are unaware of. This fraud can put you in constant danger of losing your digital assets without the possibility to recover them. But don’t worry, today you will understand how this scam works and how to avoid it. So, let’s get started!
About Address Poisoning Attack
You might think that this type of attack can’t happen, but address poisoning is one of the new forms of fraud that has appeared in the world of cryptocurrencies, and many users have lost everything they own with just one click.
The attack principle is simple and complex at the same time, as this type of fraud initially involves sending a few cents of dollars in any cryptocurrency (Polygon, ETH, or else) directly to your blockchain address. Sometimes, they can also send you non-fungible tokens (NFTs).
The hacker’s goal is to ensure your address is similar to theirs. After that, he enters a state of calm and patience, waiting to confuse your cryptocurrency address with the scammer’s address when you want to make a transaction.
How the Scam Works
Now that we understand the principle of address poisoning attacks, we will explain their major methods and types.
One of the worst address poisoning scams that can happen to a crypto user is falling for a fake contract scheme. This occurs when a hacker makes a fake smart contract and uses it to send transactions to the victim’s address. Usually, these hackers send transactions with no value to their victims.
When the victim gets such a transaction, he might not notice it much because the address looks similar and begins with the same characters. He may think it is his address and intentionally copy it from the transaction history (instead of using the actual address) when trying to send cryptocurrencies from one crypto wallet to another.
As you can see, this trick seems simple, but it can be fatal. Without realizing it, the victim can send all his cryptocurrency belongings to the hacker’s address.
Also, sometimes, scammers make several fake smart contracts for the same target. Plus, they focus on popular cryptocurrencies, especially stable coins (such as USDT, USDC, or BUSD), thinking the victim will use one of these fake addresses in daily transactions. Overall, this technique is like fishing, based on who will eat the bait and ignore the verification process first.
The second method of address poisoning attack in crypto is known as breadcrumbing. Beginners may sometimes mistakenly confuse it with the phishing technique. The latter is a malicious attempt based on luck to deceive users into stealing their funds. In contrast, breadcrumbing is an elaborate crypto scam with a legitimate aspect.
This happens when a scammer (or a group of them) manipulates others and sells them dreams by promising big ROIs and a bright future. Once people invest in the project, the scammer sends interest to the victims’ addresses, making the scheme appear more credible.
However, the scammer is only waiting for their victims to deposit larger amounts into this delusional project. Why? Because he already knows that it’s easier to convince investors of a project if you start paying them interest on their initial small deposits. Finally, after gathering the targeted amount from the victims, the scammer disappears without a trace, leaving investors with significant losses.
Other Types of Address Poisoning Attacks
After we have explained the principle of these attacks and the techniques used, it’s time to discuss their different types: Transaction Interception, Sybil Attacks, Address Reuse Exploitation, Phishing, and Spoofing.
- Transaction Interception:This happens when attackers intercept transactions and modify the crypto destination. Hackers generally use malicious programs and software to access the victim’s device and change the transaction details.
- Sybil Attacks: People may mix transaction interception and Sybil attacks, but they’re different. A Sybil attack is when hackers manipulate a crypto network. They influence the network’s security and consensus. Their primary aim is not immediate theft of funds contrary to the transaction interception type.
- Address Reuse Exploitation: Hackers have an immense amount of patience. They watch the blockchain history daily and search for people using the same crypto address multiple times. Once you become their target, they can steal all your money.
- Phishing Through Fraudulent Platforms:This is when scammers create fake crypto exchange platforms to steal your information. These websites have one sole purpose: stealing your secret phrases and keys. Once they do that, they can gain full access to your wallet.
- Address Spoofing: Spoofing is when a hacker creates an address that resembles the real one, hoping the victim will send his money to the fake crypto address. Generally, the fake address looks so much like the target one, which tricks people into sending money to the hacker’s address instead of where it’s supposed to go. This trick is often used in calls to action for charitable donations.
How to Protect Yourself
Experts acknowledge the difficulties in predicting address poisoning attacks and propose five steps to enhance your security.
- Firstly they recommend using notification tools to keep track of transactions associated with your address, which can help you promptly detect any activity.
- Secondly it is advisable to maintain a list of trusted wallets that you frequently utilize to avoid money transfers to destinations.
- Thirdly when interacting with your wallet or engaging in cryptocurrency transactions it is crucial to connect with sources and refrain from clicking on potentially malicious links that could contain harmful software.
- Additionally they suggest considering the adoption of a hardware wallet, for storing your private keys offline.
- Lastly it is vital to check transactions before initiating any fund transfers in order to ensure the safe and secure management of your financial assets.
As you may have noticed, address poisoning scams are dangerous and should not be taken lightly. Therefore, we must be more careful and vigilant, especially in the means we use for payment, whether cryptocurrencies or NFTs.
How can decentralized finance (DeFi) users protect themselves from address poisoning attacks?
DeFi users can enhance their security by using HD wallets, which provide multisignature support and safeguard against unauthorized access to their assets.
Why is it important to stay vigilant against an address poisoning attack?
Remaining vigilant is crucial because it can cause disruption and result in the loss of valuable assets without the possibility of recovery.