New Threats in the Blockchain World: The Combination of Protocol Vulnerabilities and Social Engineering

Cryptocurrency and blockchain technology are redefining financial freedom, but they also bring new security challenges. Scammers are no longer just exploiting technical vulnerabilities; instead, they are transforming the blockchain smart contract protocol itself into a tool for attacks. Through meticulously designed social engineering traps, they leverage the transparency and irreversibility of the blockchain to turn user trust into a tool for asset theft. From forging smart contracts to manipulating cross-chain transactions, these attacks are not only covert and difficult to trace, but also more deceptive due to their "legitimized" appearance.

1. How are protocols transformed into tools for fraud?

The original intention of blockchain protocols is to ensure security and trust, but scammers take advantage of its features, combined with user negligence, to create various covert attack methods.

(1) Malicious Smart Contract Authorization

Technical Principles: The ERC-20 token standard allows users to authorize third parties to withdraw a specified amount of tokens from their wallets through the "Approve" function. This feature is widely used in DeFi protocols but is also exploited by scammers.

Operation method: Fraudsters create DApps disguised as legitimate projects to induce users to grant authorization. On the surface, it appears to be authorizing a small amount of tokens, but in reality, it could be an unlimited amount. Once authorization is complete, fraudsters can withdraw all corresponding tokens from the user's wallet at any time.

Case: At the beginning of 2023, a phishing website disguised as "a certain DEX upgrade" caused hundreds of users to lose millions of dollars in USDT and ETH. These transactions fully complied with the ERC-20 standard, making it difficult for victims to recover their losses through legal means.

(2) Signature Phishing

Technical Principles: Blockchain transactions require users to generate signatures using their private keys. Fraudsters exploit this process to forge signature requests and steal assets.

How it works: Users receive messages disguised as official notifications, leading them to a malicious website to sign "verify transaction". This transaction may directly transfer the user's assets or authorize scammers to control the user's NFT collection.

Example: A well-known NFT project community suffered a signature phishing attack, resulting in multiple users losing NFTs worth millions of dollars due to signing a forged "airdrop claim" transaction.

(3) Fake tokens and "dusting attack"

Technical Principles: The openness of the Blockchain allows anyone to send tokens to any address. Scammers take advantage of this by sending small amounts of cryptocurrency to track wallet activity.

Operation method: Scammers send small amounts of tokens to multiple addresses, which may have enticing names. When users try to cash out, attackers may gain access to their wallets or conduct more precise scams.

Case: There was a "GAS token" dusting attack on the Ethereum network, affecting thousands of wallets. Some users lost ETH and other tokens due to curiosity and interaction.

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. The main reasons include:

1. Technical Complexity: The code of smart contracts and signature requests are difficult for non-technical users to understand.

2. On-chain legality: All transactions are recorded on the Blockchain, seemingly transparent, but victims often realize the problem only after the fact.

3. Social engineering: Scammers exploit human weaknesses, such as greed, fear, or trust.

4. Sophisticated Disguise: Phishing websites may use URLs that are similar to official domain names, and even enhance credibility through HTTPS certificates.

3. How to Protect Your Cryptocurrency Wallet?

In the face of these scams that coexist with technical and psychological warfare, protecting assets requires a multi-layered strategy:

1. Check and manage authorization permissions

   • Regularly review the authorization records of the wallet using the authorization inspection tool.
   • Revoke unnecessary authorizations, especially unlimited authorizations for unknown addresses.

2. Verify the link and source

   • Manually enter the official URL to avoid clicking on links in social media or emails.
   • Ensure the website uses the correct domain name and SSL certificate.

3. Use cold wallets and multi-signatures

   • Store most of the assets in a hardware wallet.
   • Use multi-signature tools for large assets, requiring multiple keys to confirm the transaction.

4. Handle signature requests with caution

   • Carefully read the transaction details in the wallet pop-up.
   • Use the functionality of the Blockchain explorer to parse the signature content.

5. Responding to Dust Attacks

   • Do not interact after receiving unknown tokens.
   • Confirm the token source through the blockchain explorer.
   • Avoid publicly sharing wallet addresses or use a new address for sensitive operations.

Conclusion

By implementing the above security measures, users can significantly reduce the risk of becoming victims of advanced fraud schemes. However, true security does not solely rely on technical means. Users' understanding of authorization logic and their prudent attitude towards on-chain behavior is the last line of defense against attacks.

In the world of Blockchain, every signature and every transaction is permanently recorded and cannot be changed. Therefore, internalizing security awareness into daily habits and maintaining a balance between trust and verification is crucial for the protection of digital assets. As technology continues to evolve, users' vigilance and knowledge reserves also need to keep pace, so they can navigate safely in this digital financial world full of opportunities and risks.