Blockchain and Crypto Assets Security: Preventing New Types of Fraud Techniques

Crypto Assets and Blockchain technology are reshaping the concept of financial freedom, but they also bring new security challenges. Fraudsters are no longer limited to exploiting technical vulnerabilities; instead, they cleverly turn the Blockchain smart contract protocols themselves into tools for attack. They use meticulously designed social engineering traps, combining the transparency and irreversibility of Blockchain, to transform users' trust into instruments for asset theft. From forging smart contracts to manipulating cross-chain transactions, these attacks are not only covert and hard to trace but also more deceptive due to their "legitimized" appearance.

1. How did the protocol become a tool for fraud?

Blockchain protocols are supposed to ensure security and trust, but fraudsters exploit their characteristics, combined with users' negligence, to create various covert attack methods. Here are some common tactics and their technical details:

(1) malicious smart contract authorization

Technical Principles: On blockchains like Ethereum, the ERC-20 token standard allows users to authorize third parties (usually smart contracts) to withdraw a specified amount of tokens from their wallets through the "Approve" function. This feature is widely used in decentralized finance (DeFi) protocols, where users need to authorize smart contracts to complete transactions, staking, or liquidity mining. However, scammers exploit this mechanism to design malicious contracts.

Operation method: Scammers create a decentralized application (DApp) disguised as a legitimate project, often promoted through phishing websites or social media. Users connect their wallets and are lured into clicking "Approve", which appears to authorize a small amount of tokens, but may actually grant unlimited access. Once the authorization is complete, the scammer's contract address gains permission to call the "TransferFrom" function at any time, extracting all corresponding tokens from the user's wallet.

(2) Signature Phishing

Technical Principles: Blockchain transactions require users to generate signatures using their private keys to prove the legitimacy of the transactions. Wallets usually pop up a signature request, and after user confirmation, the transaction is broadcasted to the network. Scammers exploit this process by forging signature requests to steal assets.

How it works: Users receive an email or message disguised as an official notification, such as "Your NFT airdrop is ready to be claimed, please verify your wallet." After clicking the link, users are directed to a malicious website that requests them to connect their wallet and sign a "verification transaction." This transaction may actually invoke the "Transfer" function, directly transferring ETH or tokens from the wallet to the scammer's address; or it could be a "SetApprovalForAll" operation, granting the scammer control over the user's NFT collection.

(3) Fake Tokens and "Dust Attacks"

Technical Principles: The openness of the Blockchain allows anyone to send tokens to any address, even if the recipient has not actively requested them. Scammers take advantage of this by sending small amounts of Crypto Assets to multiple wallet addresses to track the activity of the wallets and link them to the individuals or companies that own the wallets.

Operation mode: In most cases, the "dust" used in dusting attacks is distributed to users' wallets in the form of airdrops. These tokens may have enticing names or metadata that lure users to visit a certain website for more details. Users may attempt to cash out these tokens, while attackers can access the users' wallets through the contract addresses attached to the tokens. More subtly, dusting attacks can leverage social engineering to analyze users' subsequent transactions, targeting active wallet addresses for more precise scams.

2. Why are these scams difficult to detect?

The success of these scams is largely due to the fact that they are hidden within the legitimate mechanisms of Blockchain, making it difficult for ordinary users to discern their malicious nature. Here are a few key reasons:

1. Technical Complexity: Smart contract code and signature requests can be obscure and difficult for non-technical users to understand. For example, an "Approve" request may appear as complex hexadecimal data, making it difficult for users to intuitively determine its meaning.

2. On-chain legitimacy: All transactions are recorded on the Blockchain, appearing transparent, but victims often realize the consequences of authorization or signatures only after the fact, at which point the assets are irretrievable.

3. Social Engineering: Scammers exploit human weaknesses, such as greed, fear, or trust, to design enticing scam traps.

4. Intricate disguise: Phishing websites may use URLs that are similar to official domain names, and even enhance credibility with HTTPS certificates.

3. How to Protect Your Crypto Assets Wallet?

In the face of these scams that coexist with both technical and psychological warfare, protecting assets requires a multi-layered strategy. Here are detailed preventive measures:

Check and manage authorization permissions

• Regularly use professional tools to check the authorization records of the wallet.
• Revoke unnecessary authorizations, especially unlimited authorizations to unknown addresses.
• Before each authorization, ensure that the DApp comes from a trusted source.
• Check the "Allowance" value; if it is "unlimited," it should be revoked immediately.

Verify link and source

• Manually enter the official URL to avoid clicking links in social media or emails.
• Ensure the website uses the correct domain name and SSL certificate.
• Be cautious of misspelled or extra character domains.

Use cold wallets and multi-signature

• Store most assets in a hardware wallet and only connect to the network when necessary.
• For large assets, use multi-signature tools that require multiple key confirmations for transactions.

Handle signature requests with caution

• Carefully read the transaction details in the wallet pop-up each time you sign.
• Use the functionality of the blockchain explorer to parse the signature content, or consult a technical expert.
• Create a separate wallet for high-risk operations and store a small amount of assets.

Responding to Dust Attacks

• After receiving unknown tokens, do not interact with them. Mark them as "spam" or hide them.
• Confirm the source of the tokens through the Blockchain browser, and be highly vigilant if it is a bulk send.
• Avoid disclosing wallet addresses or use new addresses for sensitive operations.

Conclusion

Implementing the above security measures can significantly reduce the risk of becoming a victim of advanced fraud schemes. However, true security does not solely rely on technology. When hardware wallets establish a physical defense and multi-signature spreads the risk, the user's understanding of authorization logic and their prudent attitude towards on-chain behavior is the last bastion against attacks.

Every data analysis before signing, every permission review after authorization, is a maintenance of one's digital sovereignty. Regardless of how technology develops in the future, the core defense always lies in: internalizing security awareness as a habit, maintaining a balance between trust and verification. In the Blockchain world, every click and every transaction is permanently recorded and cannot be changed. Therefore, staying vigilant and cautious is crucial.