Dusting attacks are a common technique used by scammers to compromise the privacy of cryptocurrency holders. While not new, these attacks remain a reminder to stay vigilant and prioritise privacy when managing your Bitcoin. At Xapo Bank, we simplify security and protect your privacy by default, with no extra steps required.
What is a dusting attack?
A dusting attack involves sending tiny amounts of Bitcoin—known as "dust"—to wallet addresses. Attackers then track down these transactions on the blockchain and piece together clues about the identity of wallet holders. Attackers analyse these transactions to deanonymise users and link multiple wallet addresses under a single owner. The goal? To learn more about the wallet owner's identity and activity.
Scammers may use this information for phishing, extortion, or other malicious activities. They often target wallets that have received significant transactions in the past.
How do dust attacks work?
Dusting attacks exploit the transparent nature of blockchain technology. Every transaction is public, meaning attackers can monitor how "dust" is used over time. The risk increases if the dusted funds are unintentionally combined with larger balances in a subsequent transaction — known as an Unspent Transaction Output (UTXO). This allows attackers to track transaction history and potentially link it to an identity.
The primary threat of dusting is privacy erosion, not direct financial loss.
How Xapo Bank protects you against dusting attacks
At Xapo Bank, your privacy is woven into the foundations of our services. Here’s how we ensure these attacks pose little risk to your privacy:
- Segregation between deposits and withdrawals
When you receive Bitcoin through your Xapo Bank account, the deposit address is for inbound transactions only. For withdrawals, we use a separate pool of outbound addresses, ensuring no traceable link between them.
This unique system blocks attackers from tracking your activity by using UTXOs.
- Privacy by default
Forget about manually managing “dust” or marking transactions as “do not spend.” Xapo Bank’s approach ensures that all transactions stay private by default, with zero technical effort required from you.
We handle the complexities of blockchain tracking, so you don’t have to.
- New addresses, every time
You can generate a new Bitcoin deposit address for every transaction with just a tap. This simple feature makes tracking virtually impossible, letting you stay one step ahead of potential prying eyes.
On your Home Screen, select your BTC Account, press “Add Funds”, and before sharing your BTC address, click on “Generate new BTC address”. That’s it.
Learn more on how Xapo Bank Safeguards your Transactions here.
