Researchers at Stony Brook University have uncovered a new type of crypto-fraud called “typosquatting,” which exploits human error to steal funds from unsuspecting users’ digital wallets. This scam involves fraudsters setting up deceptive Blockchain Naming System (BNS) domain names to redirect crypto payments to their own wallets.
The study, currently in an arXiv preprint, emphasizes the significance of the human factor in the world of cryptocurrencies. Blockchain is the backbone of most cryptocurrencies, providing a decentralized digital ledger technology that records transactions securely across a network of computers. Each transaction is grouped into a block, forming a chain.
BNS simplifies interactions on blockchain networks by replacing long, complex wallet addresses with easily recognizable, human-readable names, similar to DNS. In the era of digital currencies, scams are becoming increasingly common. According to recent reports, billions of dollars are lost annually to user fraud.
The decentralized and relatively anonymous nature of blockchain technology, while offering robust security for legitimate transactions, also opens opportunities for malicious actors to exploit vulnerabilities. Common scams include phishing attacks, fake investment platforms, and typosquatting. To determine the prevalence of typosquatting, the researchers analyzed over 5 million BNS domain names across three blockchains (Ethereum, Polygon, and Cardano), finding that around 25,000 domains were identified, comprising approximately 37% of the legal names.
These scams often target well-known figures in the crypto community. One worrying scenario outlined in the study involves charitable donations, where neither party is aware of the fraud. The study’s conclusion emphasizes the importance of acting cautiously when handling money and using wallets.
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