If you deal with crypto and are a regular trader of digital currency, you are probably aware of the different types of crypto scams that occur with many users. However, there is a new scam on the block called address poisoning. If you are not sure what it is, it is important to familiarise yourself with it so you don’t fall into the trap of this scam yourself.
In basic terms, this is where a scammer will use a normal transaction to send very little crypto, if any at all, which will then poison the transaction history of the victory. Let’s take a look at address poisoning in further detail.
What Is Address Poisoning In Crypto?
Address poisoning is another type of scam used in the crypto world. A scammer will send a small amount of crypto over to the victim. Sometimes, it might be nothing at all. They use this method to alter their wallet with copy and paste.
The whole point of this scam is to get the victim to copy the fake wallet that the scammer created. This will then get them to send money to a copied wallet of the scammer. The reason why victims fall for this type of scam is that they are not double-checking transactions before they send money over.
Although this scam is considered harmless compared to other scams, it is becoming a common method for scammers and can lead you to lose money from your wallet.
How Does An Address Poisoning Scam Work?
Crypto wallets will usually consist of multiple accounts with cryptographically generated addresses. For those outside the blockchain, it would make it impossible to understand because of the long hexadecimal numbers that are attached to these addresses.
These numbers are hard to memorise simply because there are so many of them. The reason why many people fall for this scam is that they copy and paste the crypto addresses because it makes it easier for them as they struggle to memorise the number.
Scammers have been smart with this and understand the sheer number of crypto traders copying and pasting these numbers without checking before making any transactions. Below is a breakdown of how address poisoning works.
Step One – A scammer will use the software to monitor tokens which will often be stablecoins. They will use this to generate addresses which resemble a user’s personal wallet.
Step Two – A scammer will then make a small transaction with an account and then to the fake account that will resemble the victim’s account. Once they have done this, they have successfully contaminated the victim’s wallet.
Step Three – Due to the fake account resembling the user’s wallet address, the victim will then copy and paste the scammer’s address from their history and paste it somewhere else for the next time they need to copy their “personal” address.
When the user next makes a transaction, with the address they think is theirs, they will get money sent to the scammer’s account instead of theirs. The biggest problem with this is that the losses cannot be recovered because the transaction cannot be changed once verified.
How Do You Protect Yourself From Address Poisoning?
There is no simple method to protect yourself fully from address poisoning. Nevertheless, there are a few things that a user can do to ensure you don’t fall for this.
Method One – Consider using hardware wallets as a transaction cannot be completed unless they have verified addresses to who they are sending cryptocurrency.
Method Two – It is essential that users update their crypto wallet address book with commonly used addresses. It stops them from copying and pasting incorrect addresses, so the transactions go to the correct address.
Method Three – If you are making large transactions, you must do a test transaction. This is to ensure that it is going to the correct address. All that is required is to send a small number of crypto to an account before the larger transaction is completed. Yes, you will have to pay two transaction fees but the money lost here is nowhere near the amount you could lose if you make the transaction to the incorrect account. We advise you to do this with all of your large transactions just to be on the safe side.
Method Four – No matter the size of the transaction, you must double-check the address before you send it. You wouldn’t send money to a bank account after reading an account number or sort code once so why would you make a crypto payment like that?
Method Five – The best way to counteract a mistake like this and send money to an incorrect account is by avoiding copying the address over. Do a test transaction to the cryptographically generated addresses and then put this in an address book. Use this address book for all your common transactions to ensure you don’t make an incorrect transaction. If you copy and paste any addresses, we encourage you to check them at least once before the transaction is confirmed and sent.
There are many different types of cryptocurrency scams that you must be aware of, however, this is becoming increasingly popular. Scammers are taking advantage of lazy crypto users and receiving transactions from them that they know they will never be able to take back. Follow the five different methods we have previously discussed as there is no crypto recovery method for this scam.