Following our podcast last week, we’ve delved deeper into the lesser-known yet prevalent risks associated with engaging with Web3 technology. From blind transactions to dusting attacks, this article delves into proactive measures and security protocols to navigate the evolving crypto landscape safely.
You might be well-versed in the art of purchasing, trading, and securely managing your cryptocurrency with a cold storage wallet. You navigate the digital landscape with caution, avoiding suspicious links, and possess the discernment to detect scammers lurking on social media platforms from afar. Perhaps you diligently keep abreast of the latest scams via crypto-Twitter.
Beyond the prevalent threat of phishing scams, which are among the most well-known in the crypto sphere, lie lesser-known hazards that lurk within the depths of Web3. These dangers have the potential to catch even the most seasoned crypto enthusiasts off guard.
Blind transactions
Smart contracts are contractual agreements stored digitally on a blockchain, which undergo automatic execution upon the fulfillment of predefined terms and conditions. These contracts serve to streamline the execution processes without the need for intermediaries or delays. Additionally, they facilitate workflow automation by initiating subsequent actions upon meeting specific predetermined conditions.
Blind transactions entail authorizing a smart contract transaction without having access to the complete contract data. Blind transactions, or blind signatures, are frequently employed in scenarios where the message creator and signer are distinct.
The user interface of numerous dApps offers only a limited glimpse into the inner workings of the smart contract. With just a few clicks in your Web3 wallet, you can effortlessly sell an asset at your desired price using your private key, all without delving into the intricacies of the entire code. Established platforms, such as Uniswap, have earned the trust of millions of users over time, leading many to rely on their smart contracts implicitly during trading activities. Yet, these commonplace transactions are also susceptible to exploitation by crypto hackers.
How can I protect myself?
Avoid phishing websites
Let’s use NFTs as an example. It is projected that there will be over 16 million users of NFTs worldwide by 2028. Before diving into a new NFT collection’s website to mint, verify it’s the official product website. Check the project’s social media channels for the confirmed minting website address. Notably, this simple step helps ensure you’re interacting with the legitimate source and avoids any potential scams that would steal your assets via a malicious smart contract.
Consider buying an anti-malware software package to block phishing websites. Earlier today, I misspelled a website in my browser, but BitDefender had me automatically covered, blocking my access to the malicious website and providing a notification. It’s a good idea to obtain an anti-malware software package that will block any phishing websites you may encounter.
Notably, a new browser extension has arrived to specifically safeguard you while you trade online. ThreatSlayer is a browser extension designed to protect you from online threats like phishing and wallet-draining scams. The company continuously improves their detection methods to effectively block these dangers. To strengthen overall web security, ThreatSlayer anonymously collects data on malicious websites and scams, which is then shared with the cybersecurity community to improve firewalls, antivirus software, and web filters. In exchange for this valuable contribution, you’ll be rewarded with $ILOCK tokens.
It’s also important to note that phishing websites can mimic multiple Web3 platforms from DEXs, online wallets, NFT marketplaces, and more.
Disable blind transactions
Sonny, who previously worked at Consensus and is now the CMO at Brillion, made a great point in our podcast, stating that a trusted dApp today doesn’t guarantee safety tomorrow. Be cautious when connecting your wallet, even to familiar applications. While not all crypto wallets support blind transaction signing, you can disable and enable on wallets that support this feature.
Notably, after a 2023 exploit, Ledger wallet will be disabling all blind signing on dApps by June of 2024.
Moreover, hardware wallets are generally considered more secure than mobile or browser-based wallets because they store your private keys on the device itself, making them physically harder to steal. However, approval exploits can still drain your funds even with a hardware wallet. These exploits bypass the hardware security and target permissions you grant to dApps, allowing them to potentially steal your crypto without needing your private keys. The revoke.cash website can turn off these approvals — regularly revoking approvals minimizes the impact of potential exploits.
Dedicate one wallet for interacting with smart contracts
Separate your assets. Use your hardware wallet for secure storage (cold wallet) and dedicate a separate, less secure wallet for interacting with dApps. This way, you only move the specific assets you need to interact with a smart contract, minimizing the risk of losing your entire portfolio due to a single bad signature. The purpose of utilizing a hardware wallet is to have a secure, offline environment that won’t be susceptible to hacking.
Dusting
A dusting attack involves sending small amounts of cryptocurrency, known as dust, to numerous wallet addresses in order to trace and potentially de-anonymize them. These attacks are perpetrated by various entities, including criminals targeting individuals with large cryptocurrency holdings. There may also be government agencies seeking to connect individuals or groups to specific addresses or blockchain analytics firms conducting research or working with authorities.
How can I protect myself?
To safeguard your wallet against dusting attacks, there are a few proactive measures you can take. Firstly, simply ignore dust transactions as they pose no harm; leaving them untouched ensures that attackers receive no valuable information about you. Secondly, consider using hierarchical-deterministic (HD) wallets, which automatically generate new keys for each transaction, enhancing both privacy and security by making it harder for attackers to trace your activities. Another strategy is to isolate the dust by segregating it into a separate wallet to prevent it from becoming mixed up with other addresses and inadvertently revealing your identity to attackers.
Bottom Line
Blind transactions within smart contracts, while streamlining processes and facilitating automation, also harbor vulnerabilities that can be exploited by crypto hackers, underscoring the importance of cautious engagement even with established platforms. Additionally, dusting “attacks” can expose your anonymity, making you a target for scammers.
In conclusion, while navigating the intricacies of Web3 technology and engaging in cryptocurrency transactions, it’s crucial to remain vigilant against a myriad of potential risks. Beyond the well-known threat of phishing scams, which continue to prey on unsuspecting users, lies a realm of lesser-known hazards that demand attention and proactive measures.
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