Understanding Phishing: Common Attack Types and How to Avoid Them
With the tremendous expansion of cryptocurrency over recent years, hackers have been presented with unlimited possibilities to take advantage and swindle your money by exploiting innocent victims through phishing attacks and illegal activities.
Crypto crime skyrocketed to unprecedented levels — Chainalysis, a blockchain data firm, reveals that scammers seized an astonishing $14 billion of digital assets in 2021 and $4.3 billion in 2022.
As cryptocurrencies continue to evolve, so do phishing tactics used by attackers. If you invest in cryptocurrency, it is vital to be aware of the different types of phishing attacks that may exist to protect themselves from potential damage.
Keep reading for more information about typical crypto phishing attacks and practical tips on detecting and dodging them.
What is phishing in cryptocurrency?
“Phishing is a malicious cryptocurrency scam that attempts to deceive victims into sharing their personal information or private keys.”
With the intention of stealing cryptocurrency funds, malicious actors disguise themselves as trustworthy entities to gain access and build a connection with their victims.
Once they have convinced them, these cybercriminals use the information that was shared with them to deplete any cryptocurrency assets held by their victim.
As cyber-attacks become increasingly advanced, phishing scams have unfortunately become rampant. These malicious activities often target wallets, cryptocurrency exchanges, and initial coin offerings — so crypto users must know how they work so that their funds remain secure.
By understanding the risks associated with these scams and taking measures to protect themselves from them, users can safeguard their investments against potential losses.
How does a phishing attack work?
A phishing attack is initiated by a malicious actor sending out emails, messages, or other communications that appear to be from a legitimate source.
The message will usually direct the victim to click on a link or open an attachment that contains malicious code designed to steal their personal information and private keys. In some cases, these scams use social engineering techniques, such as impersonating a trusted contact or company to convince further the recipient of the message that it is legitimate.
Phishing attempts use fear and urgency to manipulate victims into taking action. Messages are crafted in a way to make them appear legitimate, such as stressing the necessity of immediate login for account security or providing false promises of rewarding bounties or airdrops.
Some malicious actors even mislead account owners with false reports of “suspicious activity” to coax them into entering their login credentials on a fraudulent website.
The goal is for the victim to provide their confidential information or cryptocurrency funds directly to these cybercriminals, who will then use it for their own gain.
10 Types of Phishing Attacks
One of the most common cyber threats in cryptocurrency is phishing. This article will provide an overview of the 10 most common types of phishing attacks to help crypto users stay safe and secure their investments.
1. Spear Phishing
Spear phishing is an attack targeting a specific individual or group. Criminals use personalized messages to convince their victims to open malicious links or files, and these attacks can be difficult to detect as they are tailored to appear legitimate.
For example, an attacker might create a fraudulent email that looks like it came from a recognizable company or individual. Their goal is to deceive victims into revealing confidential data.
In more severe cases, they can manipulate recipients into clicking on malicious links that lead them to malware-infected sites.
Cryptocurrency spear-phishing attacks can be presented as texts or emails from reputable wallet providers. For instance, a crypto wallet provider may send an email or SMS asking users to update their seed phrase.
Once you click on the link to update your credentials, you hand over your details directly to the hacker. Spear phishing scams related to cryptocurrency may even include attractive promotions that lure people into participating — so it’s important not to fall, victim!
2. Malicious AirDrops
Malicious Airdrops are one of the most common crypto phishing attacks. Cybercriminals use automated messages to entice users into participating in fake ‘airdrops’ in which they offer free tokens or coins. Victims are tricked into providing personal information and sometimes even their private keys through malicious links that lead to phony websites.
When people visit the website, they are asked to link their wallets; however, hackers take advantage and steal their money instead of getting airdrop like expected. Cybercriminals may also use the promise of a reward to convince victims to participate in the fake airdrop.
These attacks are designed to steal users’ funds or confidential information and can be difficult to spot due to their automated nature. It is important for crypto holders to carefully verify any offers that look too good to be true.
3. Whaling attack (CEO Fraud)
A whaling attack is a type of phishing scam that targets high-level managers and executives, such as CEOs and CFOs. This type of attack typically involves an email scam in which the attacker impersonates a senior executive to gain privileged access to sensitive information or funds.
This phishing attack is difficult to detect as the hacker will often use official company logos and signatures. Whaling attacks are usually more sophisticated than other types of phishing, including in terms of the language used, which can be extremely convincing.
Cryptocurrency whaling scams typically focus on manipulating an executive into transferring digital assets or confidential information for their own benefit. Executives must be vigilant and verify any requests for confidential information or financial transactions.
As seen in the case of Ubiquiti Networks, where they lost $47 million due to a payment request initiated by an illegitimate CEO, and Snapchat’s incident with their employee who shared confidential payroll data after being tricked by a fraudulent email — it is clear that cyber security risks are always looming.
4. Pharming attack
Pharming attack involves cybercriminals redirecting web traffic from legitimate websites to malicious ones, allowing them access to sensitive information such as passwords, usernames, and cryptocurrency wallets.
Criminals often take advantage of domain name server (DNS) poisoning to introduce malicious code into one’s URL, redirecting victims from their intended website to a fake site set up by the attacker. This DNS manipulation allows IP addresses to be morphed with malicious commands. Users are prompted to enter their login information when they visit the website, which is then sent directly to the hacker.
Pharming attacks are particularly dangerous because they can be very difficult to spot. A victim may enter the correct URL for their bank’s website but still land on a fake website that looks identical to the real one.
5. Fake Browser Extensions
A fake browser extension is a phishing attack commonly used on cryptocurrency exchanges and wallets. Attackers create malicious extensions for web browsers such as Chrome and Firefox, which look legitimate but can infiltrate users’ systems to steal data.
Fake browser extensions are usually spread via phishing emails or malicious websites. They can be a hassle to remove once they’re installed, and their main purpose is the theft of private information such as mnemonic phrases, Keystore files, or, even worse, your private keys!
These types of extensions are difficult to detect because they appear to be official add-ons that legitimate developers have created. As a result, many users are unaware of the malicious code running in their browsers, allowing the hacker to access sensitive data, such as passwords and credit card information.
Cryptocurrency holders must be cautious when downloading extensions or plugins for their web browsers. Users should research any add-ons before downloading them and should only use extensions from trusted sources.
6. Deceptive Phishing
Deceptive phishing or email phishing is one of the most common types of phishing attacks. It is a method used by hackers to gain access to personal information, such as passwords or financial details, through deceptive emails.
A hacker will create an email that appears to be from a legitimate company or service provider, such as a bank or cryptocurrency exchange. The message may contain a link or attachment which leads to a malicious website or file, prompting the victim to enter their login details, passwords, or other sensitive information.
Deceptive phishing is particularly dangerous because it can be difficult to identify. The emails are often disguised as legitimate messages from trusted contacts and may contain logos and text that appear to be genuine. Many users might not recognize the malicious intent behind the email, making them more likely to fall for the deception.
7. DNS Hijacking
DNS hijacking is another type of phishing attack that criminals use to gain access to cryptocurrency wallets and other online accounts.
It involves manipulating a DNS server so that requests for certain websites are redirected to malicious ones. The hacker can intercept the request, prompting the user to enter their password and login details. This allows attackers to steal passwords, credit card information, and other sensitive data.
DNS hijacking is a particularly dangerous attack because it’s hard to detect and can be used to execute malicious code or redirect users to phishing sites without their knowledge. The attack is then carried out by loading malware on people’s computers, taking control of routers, or interfering with DNS communications.
8. Ice phishing
Ice phishing is a malicious Web3 clickjacking attack designed to deceive users into signing or approving an attacker’s token. This deceptive method can be dangerously profitable for hackers, costing unsuspecting victims their tokens and other sensitive information.
The user interface of the smart contract fails to alert victims that their transaction has been altered, leaving them unaware and vulnerable. To exploit this vulnerability, the attacker simply modifies the sender’s address to their own and waits for authorization from the victim. Once accepted, they can make transactions on behalf of the rightful owner without permission; in other words, “spending” privileges have been granted to them. If the victim acts without caution, they will unknowingly transfer ownership of their tokens to the attacker.
9. SMS phishing attack
SMS phishing (or “smishing”) is a type of phishing attack that uses text messages (rather than using emails) to deceive users into revealing confidential information.
The attacker will typically send out a text message with a link to a malicious website, prompting the victim to enter their personal information, such as passwords or credit card numbers. The user might not even recognize the malicious intent behind the message, believing it to be from a legitimate source.
In some cases, attackers might use “short codes,” which require the user to enter a PIN or code to access the website. This is a common tactic used by
hackers as it can help them steal large amounts of sensitive data quickly and easily.
Smishing attacks can be difficult to identify, so users should always be wary of unexpected messages and never click on any links or provide personal information.
10. Phishing bots
Phishing bots are automated programs designed to launch phishing attacks on unsuspecting victims. The attackers create a botnet of computers that they control remotely to send out malicious emails and bombard users with pop-up messages containing links to malicious websites.
These bots can be difficult to detect, as they operate without direct human involvement. They can also be used to launch sophisticated attacks, such as credential stuffing, which involves using stolen credentials from one website to gain access to other websites.
In order to protect yourself from phishing bots, it is important to ensure that your computer’s antivirus and malware software are up-to-date and regularly scanning for malicious activity. Additionally, always be wary of any emails or pop-up messages that seem suspicious, and never provide any personal information unless you are certain it is legitimate.
How can individuals avoid phishing attacks?
To safeguard yourself against crypto phishing attacks, here are some simple steps to take:
- Exercise extreme caution with emails, particularly if they include links or attachments. If you have any doubts about an email’s authenticity, contact the sender to verify its legitimacy before engaging further.
- Ensure that your system, antivirus, and software are always up-to-date.
- To ensure your online security, create strong passwords and avoid using the same password for multiple accounts.
- Maximize your security by activating two-factor authentication when available.
- Exercise caution when it comes to clicking links or downloading attachments from untrusted sources.
- Do not disclose confidential data such as your wallet address or private keys to anyone.
- Be alert and wary of seemingly suspicious or too-good-to-be-true websites. If you have any doubts, conduct a quick online search to determine if others have flagged it as fake.
- Avoid downloading browser extensions from unknown sources — only use reputable sites.
- Stay informed about the latest phishing tactics and trends by following security news and resources. Following these guidelines, individuals can ensure that their crypto assets are kept secure from phishing attacks.
How can businesses avoid phishing attacks?
There are several ways that businesses can protect themselves from crypto phishing attacks, including:
- Make sure to monitor and revoke token allowances regularly.
- Utilizing social engineering tactics and running regular tests can help protect your business from malicious attacks.
- Regularly surveying all social media platforms to detect possible phishing attempts.
- Ensure that the smart contract has been thoroughly audited.
- Quickly recognizing and eliminating phishing domains and fake wallets.
- Train staff to identify malicious emails and social media messages.
- Develop a plan of action in case of an attack so that you can quickly respond and mitigate the damages caused by it.
In conclusion, phishing attacks are a growing problem in cryptocurrency and a serious threat to individuals and businesses alike. Cybercriminals constantly find new ways to target users through fake websites, malicious emails, and browser extensions.
To safeguard against these attacks, it is important for users to be aware of the different types of phishing attacks and to take steps to protect themselves from becoming a victim. With proper education on security best practices and proactive monitoring, individuals and businesses can ensure that their crypto assets remain secure.
Restoring trust in web3 security. Lossless incorporates a new layer of blockchain transaction security, protecting projects and their communities from malicious exploits and associated financial loss.
Lossless protocol implements an additional layer of blockchain transaction security for ERC-20 standard tokens, mitigating the financial impact of smart contract exploits and private key theft. Lossless protocol utilizes community-driven threat identification tools and a unique stake-based reporting system to identify suspicious transactions, providing real-time protection.
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