A dusting attack is a relatively new type of malicious crypto activity. Unfortunately, it has been gaining momentum for the past 12 months. So, what is it?
Before we examine the specific aspects, we need to define ‘Bitcoin dust.’ Within the crypto universe, Bitcoin dust refers to a microscopic amount of Bitcoin held within a wallet or address. Officially, the monetary value of Bitcoin dust is lower than the minimum limit of a valid transaction.
The value is so tiny that it is even lower than the amount of the Bitcoin network fee. Therefore, it’s basically impossible to process a BTC transaction. For all practical purposes, Bitcoin dust is worthless. It becomes nothing more than a nuisance inside a person’s wallet or address until more Bitcoin is added and takes it over the useful threshold.
How Bitcoin Dust is Used in a Dusting Attack
Bitcoin dust is needed to initiate a dusting attack. Contrary to popular belief, a dusting attack is not a type of monetary theft. Many people believe that it involves the theft of Bitcoin. This is not true.
Instead, a dusting attack is a theft of identity. The perpetrator is attempting to steal your identity, not your Bitcoin.
Misconception the Bitcoin is Anonymous
In the early days of Bitcoin, one of the common misconceptions was that all transactions were completely anonymous. There was a belief that the Bitcoin blockchain network provided users with the ability to conduct private BTC transactions without the fear of being identified. Today, we know this isn’t true.
Admittedly, it is difficult to find the identity behind each address or transaction. However, it’s not impossible because all transactions are visible to the public. The public visibility of all transactions is the reason why dusting attacks can be perpetrated.
The best way to avoid a dusting attack is to only initiate peer-to-peer transactions because these types of transactions completely eliminate the need for a middleman. Dusting attacks are most prevalent when crypto users transact funds between a personal wallet and an exchange account.
These days, the vast majority of crypto trading exchanges require KYC verification, which results in the collection of personal information. Consequently, users are vulnerable to compromising their anonymity whenever they transfer crypto funds between their personal wallets and exchange account. This is the target for a dusting attack.
What a Dusting Attack Does
Now that we have established the fact that Bitcoin transactions are not anonymous, let’s describe a typical dusting attack. The goal of the hacker is to capture the identity of a BTC user. In order to accomplish this objective, the hacker (or scammer) will send out tiny amounts of Bitcoin to the personal wallet of the potential victim.
The next step is to track the activity of the wallet. By tracking the activity, the hacker can identify wallet owners through collective analysis.
At this point, you’re probably thinking that most wallet owners would recognize the tiny amounts of BTC added to their accounts and become suspicious of the transaction. Unfortunately, scammers have discovered that the vast majority of wallet owners typically don’t monitor their account activity on a regular basis.
In fact, Bitcoin dust is so tiny and insignificant, that these transactions often remain unrecognized for long periods of time. Of course, this is precisely what the hackers are trying to accomplish.
The ultimate objective of the scammers is to link addresses to the wallet owners. Upon successful identification, the scammers could use this knowledge against their targets in a phishing attack or some type of cyber extortion
As Bitcoin activity has increased during the past several months, dusting attacks have been on the rise. The crypto community can do its part to mitigate these attacks by remaining vigilant and verifying each transaction in the owner’s wallet.
Several wallet companies are attempting to prevent dusting attacks by implementing real-time alerts and notifying wallet owners of suspicious activity. This is definitely a step in the right direction.
Brief Summary of Dusting Attacks
- A dusting attack is a relatively new type of malicious crypto activity.
- It has been gaining momentum over the past 12 months.
- Bitcoin dust refers to a microscopic amount of Bitcoin held within a wallet or address.
- Bitcoin dust is needed in order to initiate a dusting attack.
- Contrary to popular belief, a dusting attack is not a type of monetary theft – it is a theft of identity.
- The best way to avoid a dusting attack is to only initiate peer-to-peer transactions.
- Hackers send out tiny amounts of Bitcoin to the personal wallet of a potential victim.
- The next step is to track the identity of the wallet.
- The final step involves the hacker identifying wallet owners through collective analysis.
- The majority of wallet owners typically don’t monitor their accounts for BTC dust.
- The ultimate objective of the scammers is to link addresses to the wallet owners.
- Hackers could use this knowledge against their targets in some type of cyber extortion.
- Wallet owners can mitigate these attacks by verifying each transaction.
- Wallet companies are preventing dusting attacks by implementing real-time alerts.
Everything You Need to Know About Binance USD
Binance USD (BUSD) is a fiat-backed stablecoin designed to address issues of accessibility, flexibility, and speed on the blockchain. A cryptocurrency exchange leader, BUSD, is currently the second-largest stablecoin on the blockchain by market cap.
This flexible cryptocurrency is stable, regulated, and can be swapped on multiple blockchains. Investors can use BUSD on the Ethereum chain, Binance Chain, and Binance Smart Chains.
Binance USD (BUSD) was created to be a safe investment for cryptocurrency investors looking to invest in a low-volatility stake. This cryptocurrency is pegged at the value of the US Dollar. The New York State Department of Financial Services regulates Paxos, the creators of this currency.
USD is a fiat-backed stablecoin backed by Paxos instead of a government. As a result, Paxos holds the equivalent of the total amount of BUSD in US dollars in its financial reserves. BUSD is a stablecoin that keeps pace with the price of the United States dollar.
When the price of the dollar rises or falls, the price of BUSD fluctuates as well. Paxos issues monthly audits to verify collateralization.
1. BUSD is regulated
2. Fiat-backed stablecoin backed by a reserve
3. 1:1 ratio price fluctuates with US Dollar
4. Operates on multiple blockchains
Paxos and Binance created Binance USD.
Binance USD (BUSD) was launched in September 2019 as a partnership between Paxos and Binance.
They first issued BUSD on the Ethereum blockchain as ERC-20 tokens. Binance USD is one of only three cryptocurrency tokens currently approved by Wall Street regulators. The New York-based financial company Paxos issues BUSD tokens.
Paxos collateralize BUSD tokens by holding equivalent dollar amounts in regulated US bank accounts. Paxos is also responsible for creating and burning BUSD tokens.
Paxos and Binance designed BUSD to be a low-volatility investment for crypto traders seeking highly liquid investments. Investors can easily convert their BUSD investment into fiat-backed currency during times of volatility.
Cryptocurrency experts recommend taking security measures like using two-factor authorization (2FA) to manage online Binance USD accounts and wallets. Serious investors use Binance USD wallet software to store, protect, and manage investments. They do this by using public and private keys to store value.
We do not provide investment advice. Cryptocurrency traders looking to invest in Binance USD should do their research on the history and performance of BUSD and choose the best options that fit their investing style and budget.
It’s important for investors to consider how much they can afford to lose on investments with downturns before committing to any investment. The creators of Binance USD designed BUSD as a low-volatility asset for crypto traders seeking high liquidity. This stablecoin’s goal is to remain stable and as close to the value of one dollar as possible. While its performance appears stable, this can change at any time.
What are Candlesticks and How to Read Them
A candlestick is a type of price chart used in technical analysis to forecast the future price direction of stocks, commodities, and cryptocurrencies. Each candlestick is a graphical representation of a price movement for a specific period. Four different price points are displayed on each candlestick. They include open, high, low, and close.
Candlesticks are one of the oldest forms of technical analysis. According to historical records, candlestick charting can be traced back to Japanese rice merchants during the 18th century. Most financial historians agree that Munehisa Homma was responsible for popularizing candlestick charting.
Candlestick formations are based on a strict set of rules which are universally accepted among all traders and investors. Let’s review a few of the most basic candlestick formations and patterns.
A solid red candlestick is displayed if the opening price is above the closing price (Chart #7).
A hollow candlestick is displayed if the closing price is above the opening price (Chart #8).
Bullish Candlestick Patterns
Big White Candle – The market opens near the low and closes near the high (Chart #9).
Doji – The opening and closing price is virtually identical (Chart #10).
Hammer – A candlestick that consists of a small body near the daily high with a long lower tail (Chart #11).
Bearish Candlestick Patterns
Big Red Candle – The market opens near the high and closes near the low (Chart #12).
Inverted Hammer – A red or white candlestick within an upside-down hammer position (Chart #13).
Shooting Star – A red or white candlestick with a small body, a long upper shadow combined with little or no upper tail (Chart #14).
Brief Summary of Candlesticks
- A candlestick is a type of price chart used in technical analysis.
- Each candlestick represents price movement for a specific period of time.
- Four different price points are displayed on each candlestick.
- The price points include open, high, low, and close.
- Candlesticks are one of the oldest forms of technical analysis.
- Candlestick charting was first used by Japanese rice merchants during the 18th century.
- Munehisa Homma was responsible for popularizing candlestick charting.
- Candlestick formations are based on a strict set of rules.
- These rules are universally accepted among all traders and investors.
What Is an IEO?
An Initial Exchange Offering (IEO) is a type of token sale administered by a cryptocurrency exchange. The entire process is controlled and managed by the exchange on behalf of the crypto company. Both parties have a vested interest in the success of the IEO. Neither party receives a payout unless investors purchase the token through the participating exchange. Therefore, it’s not uncommon for the exchange and the token issuer to join forces to help with marketing, promotions, and advertising.
Before launching the IEO, the crypto exchange and token issuer sign an agreement outlining the payout structure. Typically, the token issuing company is required to pay a listing fee along with a percentage of tokens sold through the crypto exchange. The majority of IEO agreements stipulate that the new token must be listed on the exchange for a predetermined amount of time following the initial sale of the token.
Investors who participate in the IEO are required to open an account with the participating crypto exchange. Instead of sending money to the token issuer through a smart contract, the investor deposits funds into his/her crypto account. Funds are dispersed by the crypto exchange to the crypto company.
IEO Versus ICO
As you may recall from our ICO discussion, the first ICO was launched in 2013. However, the ICO explosion did not occur until 2017, followed by its peak in 2018. Without question, the chief complaint within the crypto community concerning ICOs was a large number of failures and outright scams. In fact, the failure rate approached 90% in 2018.
As we have discussed several times, the cryptocurrency community is incredibly innovative. This community is filled with some of the brightest minds in global finance. Not surprisingly, a small group of young men and women were quick to replace problematic ICOs with IEOs in early 2019. The first major crypto exchanges to join the IEO wave occurred in January 2019. IEO activity continues to flourish in 2020.
The main difference between IEO and ICO is the level of success. In a typical ICO, the crypto company received funding immediately upon issuance of the token. Investors had very little recourse once the tokens were dispersed. They were trapped in a vulnerable position. Sadly, many unscrupulous start-up firms basically disappeared upon receipt of the funds commonly known as a ‘rug pull’.
IEOs solve this problem by preventing the token issuer from receiving funds immediately upon the distribution of the tokens. As we discussed earlier, both parties work together to ensure the success of the project, which increases the likelihood of a rising token price.
Although IEOs have only been in existence for two years, the popularity of this new fund-raising method has increased substantially. The success rate of projects launched on IEO is much higher compared to ICOs. Most likely, this trend will continue.
IEO Regulatory Environment
As you may recall from our ICO discussion, crypto companies struggled to clear all of the regulatory hurdles to satisfy financial regulators. Unfortunately, IEO participants, are experiencing the same type of regulatory problems that plagued the ICO marketplace. This by and large means that regulators dissuade people from taking part in IEOs.
A positive to this is that IEOs are largely unregulated and don’t have to satisfy bureaucracy that can stifle innovative projects.
Financial regulators, particularly in the United States, claim that an initial exchange offering is similar to an initial coin offering, even though the token issuer is not directly involved in the sale of the token. An ongoing problem with regulation is whether or not any particular token counts as security and needs regulation, or whether they are utility tokens. Exchanges will typically avoid listing securities on an IEO as it means they have to submit to regulation.
To avoid the strict regulation requirements around securities, crypto exchanges may even opt not to offer tokens in countries like the United States where there is ambiguity about regulation. As long as the IEO is not soliciting in a particular country, registration is not required.
Due to the overwhelming success of IEOs, many of the world’s largest crypto exchanges are becoming heavily involved in IEOs by offering tokens on behalf of start-up companies. Most likely, this trend will continue.
Brief Summary of IEO
- An initial Exchange Offering is a token sale administered by a crypto exchange.
- The entire process is overseen by the crypto exchange.
- Neither party receives a payout unless investors purchase the token.
- The exchange and token issuer will often collaborate with marketing and advertising.
- Both parties sign an agreement outlining the payout structure of the IEO.
- The new token will be listed on the exchange for a predetermined time period.
- Participating IEO investors are required to open an account with the exchange.
- Investors pay for the token by depositing funds into their crypto account.
- IEOs have proven to be safer than ICOs.
- Many crypto exchanges are not participating in heavily regulated countries.
- IEOs have become very popular in the crypto universe.
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