Bitcoin transactions are not anonymous but users can still add a layer of privacy by using different addresses and other techniques to confuse blockchain surveillance. However, a de-anonymization method known as a dust attack is on the rise. If the microtransactions that characterize a dust attack go unnoticed, they can potentially be used to identify cryptocurrency users.
Peppering Crypto Networks With Dust to Deanonymize Users
Cryptocurrencies like bitcoin cash (BCH) and bitcoin core (BTC) are not private by default. In fact, both digital ledgers are completely transparent for the entire world to see and this means bitcoin users have to add their own degrees of privacy to give themselves a better form of anonymity. Privacy techniques used by bitcoiners include shuffling coins, using Tor or a VPN, and completely avoiding address re-use. Despite taking these measures, however, there’s a way in which people can be identified by blockchain analysis known as a dust attack, an invasive act that could easily go unnoticed.
In the world of bitcoin, the term ‘dust’ is used to describe a very small fraction of bitcoin, often times referred to as satoshis. In order to track further transactions, large quantities of dust are peppered across the network targeting a large swathe of addresses. The attacker hopes that the tiny amount of funds mixes together with an unspent transaction output (UTXO) so that when it is spent as an input in a new transaction it can be tracked.
Some users might not even notice the small fraction of dust they received and could spend the tainted coins at a later date. Of course, some users religiously check their transaction log every time their wallets receive bitcoin but they might not do anything about it and still spend the dust.