Binance’s team of security experts has developed a solution to combat the rising number of address poisoning scams, which aim to deceive investors into sending funds to a fraudulent address. In a report shared with Cointelegraph, it was revealed that the algorithm developed by the world’s largest cryptocurrency exchange has successfully detected millions of poisoned crypto addresses.
Address poisoning, also known as address spoofing, involves scammers sending a small amount of digital assets to a wallet that closely resembles the target’s address. The intention is to include this transaction in the wallet’s history, in the hope that the victim will mistakenly copy and send funds to the scammer’s address.
Binance’s algorithm detects spoofed addresses by first identifying suspicious transfers, such as those with negligible value or unknown tokens. It then matches these transfers with potential victim addresses and timestamps the malicious transactions to determine the likely point of poisoning.
To protect the wider crypto industry from such scams, the spoofed addresses are registered in the database of HashDit, a Web3 security firm and Binance’s security partner. This collaboration ensures that spoofed addresses can be flagged and prevented on HashDit’s user-facing products, web browser extensions, and MetaMask Snaps.
The need for a preventive algorithm became evident following a recent incident where an unknown trader lost $68 million to an address-poisoning scam. The trader inadvertently sent $68 million worth of Wrapped Bitcoin (wBTC) to a spoofed address in a single transaction on May 3. However, on May 13, the thief returned the stolen funds, possibly due to the increased attention from on-chain investigators who were able to trace potential IP addresses in Hong Kong. This suggests that the scammer was not a white hat hacker but a thief who became afraid of the public scrutiny.
Address poisoning scams may appear easy to avoid, but many traders only verify the first and last digits of a wallet’s 42 alphanumeric characters, as most protocols only display these digits. Additionally, scammers take advantage of vanity address generators to customize their addresses, making them appear less random and more similar to a given address, as noted by Binance.
In conclusion, Binance’s innovative algorithm offers a powerful tool to combat address poisoning scams and protect investors from falling victim to fraudulent activities in the crypto industry.