Ethereum’s record activity or a mass attack is making headlines, but the numbers may not tell the full story. The network recently recorded millions of new addresses and a daily transaction high of nearly 2.9 million. Andrey Sergeenkov, for example, cautions researchers that many of the increases in growth today may actually relate to large-scale address poisoning and “dusting” attacks as opposed to true growth or adoption. Therefore, the question has to be asked: Is Ethereum experiencing record levels of activity, or does it have an overall mass, coordinated attack against it?
Surge in addresses and transactions
The Ethereum network has experienced a historic jump in activity. Retention activity has nearly doubled to 8 million addresses per month, while 2.7 million new addresses were created in just one week following January 12, which is 170% above normal levels. Dramatic improvement in transaction fees from the December Fusaka upgrade costs more than 60% less than previously. Many users will find this benefit very appealing due to its lower cost. Lower fees also introduced the opportunity for large-scale dusting attacks to occur, which increases the volume of activity and obfuscates the true demand for Ethereum as a whole.
How address poisoning works
“Address Poisoning” is also referred to as “dusting,” where malicious actors send a tiny amount of Ethereum (ETH) to many randomly generated wallets, which are very visually similar to real wallets. Ultimately, the user, who has copied and pasted this address without knowledge of its origins, can inadvertently send their funds to the attacker. Dust distributor wallets have been observed sending transactions of less than $1 to thousands of addresses, with some addresses connecting to between 10,000 and 400,000 wallets. This method allows attackers to infiltrate transaction history and increase the perceived network activity.
Risks from inflated activity
Ethereum’s recent increase in traffic presents serious risks. Lower gas costs enable the growth of transactional spam and address poisoning, and artificially generate millions of micropayments that mislead analysts and traders about transaction volume. Sergeenkov estimates that 116 individuals have already lost more than $740,000 due to these types of attacks. The financial damage caused by these hacks will ultimately damage Ethereum’s reputation by eroding users’ confidence in Ethereum and complicating the assessment of true adoption trends. “You cannot build an infrastructure until you properly provide security for your end-users,” he concludes.
Market and ecosystem implications
The Ethereum ecosystem has undergone a significant increase in activity; this event serves a vital role as a stress test. This increase puts pressure on the infrastructure (exchange, wallet, and DeFi platform) for enhancing spam filtering and implementing protections against address-poisoning attacks. In addition, users will now need to implement better safety measures by confirming the validity of the destination address prior to sending funds, even if the address appears in the recipient’s transaction history. As such, while Ethereum is seeing a spike in adoption, that spike may be indicative of vulnerabilities within user behavior and the Ethereum network.
Conclusion
Ethereum’s recent surge in activity could actually represent a systematic onslaught rather than widespread adoption. The apparent increase would seem to be encouraging at first glance, but further analysis shows many of these transactions were actually driven by Dust Attacks due to the much lower fee associated with transacting through Ethereum. This demonstrates that both the ecosystem of users and Ethereum’s infrastructure need to adapt to this newly created situation and provide solutions to address both issues now and in the future. Those who recognize the security risks today will be better prepared for Ethereum’s future growth, while ignoring them could lead to significant losses.
