Quote from: fillippone on August 13, 2019, 06:03:48 PM

A few days agor I read this news, that got my attention:

LITECOIN WALLETS HIT BY LARGE-SCALE DUSTING ATTACK, SO WHAT IS IT?

Here you can find a couple of paragraph:

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Reports are emerging that Litecoin wallets have been hit by a new kind of cyber-attack called dusting. It has not affected LTC markets but is something that crypto traders and holders should be aware of. Binance Academy offered an explanation.

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In short, a dusting attack is when scammers attempt to break the privacy of a cryptocurrency, Litecoin in this case, by sending tiny amounts of it to private wallets. The attackers then attempt to trace the transactional activity of these wallets in an attempt to discover the identity of the person that owns them.

The term dust refers to the tiny fractions of crypto coins that most users ignore. A couple of hundred satoshis may be referred to as dust as the sum is so tiny that most people would not even notice it. It is also prevalent on crypto exchanges as the remnants of transactions that remain in wallets and can no longer be user or transferred.

Dust therefore refers to those amounts of cryptocurrencies that cannot be transferred individually either or because their amount is less than the transaction fees of the blockchain, or because they are lower than the minimum transferable out of an exchange, thus remaining blocked in the portfolio of the account at a specific exchange.

Here you can find an video from Binance Academy that explains what a Dust Attack is:

What Is a Dusting Attack?

This technique is also used on Bitcoin, so try to be careful when you receive Satoshi without knowing where they are coming from.

Why is dust attack dangerous? What is the use of sending satoshi to trace transactions if the transactions are actually public?

Well the explanations can be multiple:

The attacker sends satoshi to a used address, with a positive balance. Curious mechanism, in reality the attacker does not get any advantage, given that the movements of the address could also be monitored previously. The only advantage could be to "accustom" the user to receive funds on an address, thus making it less prudent in the real dust attack.
The attacker sends satoshi to a used but empty address. The receiver then aggregates those satoshi to a new address by making a payment. At that point the old address and the new one are "linked" and the attacker can, with methods of chain analysis, try to trace your identity, having discovered, however, that you also have control of the old address.
The attacker sets up a bitcoin faucet (or a bitcoin fork - do you remember United Bitcoin?), where it is possible to get some satoshi upon registration with an email. At that point, if you combine those satoshi with your main address, well, the attacker has extra starting data to identify you (an email, even if fake, provides a lot of information, for example a connection IP).
Extremizing: an exchange that offers you $ 30 to register, after KYC, is practically performing a dust attack. Except that in that case, using the chain analysis company you just bought, you can perform a very efficient tracking of your UTXOs. Do you think this is an impossible scenario? it already happened.
Exaggerating 2: an exchange (the same as the previous point) offers you $ 80 in shitcoins by answering easy videos and questions, after KYC, is practically performing a dust attack. Except that in that case, using the chain analysis company you just bought, you can perform a very efficient tracking of your UTXOs. Do you think this is an impossible scenario? It is happening now.

So, what to do when you receive dust on your wallet?

Two cases:

Attacker sent you on a positive balance address: there's nothing much you can do about that. The address is public, the balance is public, having dust on such address is not something you can control. Spending this dust does not pose any additional threat than moving your coins on that address. You can consolidate those coins and keep with your usual life.
Attacker sent you on a zero balance address: this is a proper dust attack. The address is public, built it is not possible to link to your current address. Spending this together with your coins poses a privacy risks. The attacker doesn't know anything about your current address, if you spend the two UTXO together they are able to link them.
For this reason you have to use Coin Control feature: clearly mark that dust UTXO as "do not spend" (many wallet allow for this, Wasabi being one of those) to that attacker cannot track you down.

Another example is the exchange airdop made by our government friendly exchange:

Let's work an example out.
They give you some Stellar Lumens, provided you see some videos.
Of course you don't care about XLM's, so once you get them you sell them immediately for BTC.
Since you are an advanced BTC user, you know that "not your keys not your Bitcoin", so you get your BTC and witdraw them in your private wallet.
You froget it for a few weeks.
Two months later, taking advantage of the empty mempool, you decide to consolidate your addresses into one. You then put those few satoshi together with your 100 BTC you bought back in 2010.
Well, now the shrewd chain analytics company is able to understand that even the 100 BTC are yours.
The chain analytics company sells the information to the tax authorities, and you're screwed.
Or sell it to a criminal organization, and you're even more screwed.

How to defend yourself:
Two tips immediately come to mind:

Keep the "kyc" and "anonymous" addresses absolutely separate, many wallets allow different UTXOs to be marked with different labels: use this option!
If you really need to consolidate the addresses, before doing so, let them go through a coinjoin. However, having an anonymous set is not perfect, but at least you don't have an obvious link to your address.

As usual I will try to update this thread by completing it with better information and examples as they become available.
I look forward to your comments!

This is nice. There's another article you could maybe use to add to this information - https://medium.com/cobo-vault/everything-you-need-to-know-about-the-dusting-attack-f0151f5a8843