Smart Contracts Protocol: Hidden Dangers and Prevention Strategies

Cryptocurrency and blockchain technology are reshaping the concept of financial freedom, but this revolution has also brought new challenges. Fraudsters are no longer limited to exploiting technical vulnerabilities; they have transformed blockchain smart contracts protocols themselves into tools for attacks. They cleverly design social engineering traps, leveraging the transparency and irreversibility of blockchain to turn users' trust into a means of stealing assets. From meticulously constructed smart contracts to manipulating cross-chain transactions, these attacks are not only covert and difficult to trace but also more deceptive due to their "legitimate" appearance. This article will analyze actual cases to reveal how fraudsters turn protocols into vehicles for attack and provide a comprehensive solution from technical protection to behavioral prevention, helping you navigate safely in a decentralized world.

1. How do protocols become tools for fraud?

The original intention of blockchain protocols is to ensure security and trust, but fraudsters exploit their characteristics, combined with user negligence, to create various covert attack methods. Here are some techniques and their technical details:

(1) malicious smart contracts authorization

Technical principles: On certain blockchains, specific token standards allow users to authorize third parties (usually smart contracts) to withdraw a specified amount of tokens from their wallets through the "Approve" function. This feature is widely used in decentralized finance protocols, where users need to authorize smart contracts to complete transactions, stake, or participate in liquidity mining. However, scammers exploit this mechanism to design malicious contracts.

Operating method: Scammers create a decentralized application disguised as a legitimate project, often promoting it through phishing websites or social media. Users connect their wallets and are lured into clicking "Approve", which appears to authorize a small amount of tokens, but may actually grant unlimited access. Once the authorization is complete, the scammer's contract address gains permission to call the "TransferFrom" function at any time, allowing them to withdraw all corresponding tokens from the user's wallet.

Real case: In early 2023, a phishing website disguised as an upgrade of a well-known decentralized exchange caused hundreds of users to lose millions of dollars in stablecoins and native tokens. On-chain data shows that these transactions fully comply with token standards, and victims are even unable to recover their losses through legal means because the authorizations were voluntarily signed.

(2) signature phishing

Technical Principles: Blockchain transactions require users to generate signatures using their private keys to prove the legitimacy of the transaction. Wallets usually pop up a signature request, and after the user confirms, the transaction is broadcasted to the network. Fraudsters exploit this process to forge signature requests and steal assets.

Operating method: Users receive an email or social media message disguised as an official notification, such as "Your NFT airdrop is pending, please verify your wallet." After clicking the link, users are directed to a malicious website that requests them to connect their wallet and sign a "verification transaction." This transaction may actually call the "Transfer" function, directly transferring assets from the wallet to the scammer's address; or it could be a "SetApprovalForAll" operation, authorizing the scammer to control the user's NFT collection.

Real case: A well-known NFT project community has suffered a signature phishing attack, with multiple users losing NFTs worth millions of dollars due to signing fraudulent "airdrop claim" transactions. The attackers exploited a specific signature standard, forging seemingly safe requests.

(3) Fake tokens and "dust attacks"

Technical Principles: The openness of blockchain allows anyone to send tokens to any address, even if the recipient has not actively requested it. Scammers exploit this by sending small amounts of cryptocurrency to multiple wallet addresses to track the activity of the wallets and link them to the individuals or companies that own the wallets. The attack starts with sending dust, sending small amounts of cryptocurrency to different addresses, and then the attacker tries to figure out which belong to the same wallet. Subsequently, the attacker uses this information to launch phishing attacks or threats against the victims.

How it works: Typically, the "dust" used in dusting attacks is airdropped into users' wallets, and these tokens may have specific names or metadata, enticing users to visit a particular website for details. Users may want to cash out these tokens, and the attackers can access the users' wallets through the contract addresses attached to the tokens. More covertly, dusting attacks analyze users' subsequent transactions through social engineering, locking onto the users' active wallet addresses to carry out more targeted scams.

Real Cases: A "GAS token" dusting attack once occurred on a certain blockchain network, affecting thousands of wallets. Some users lost their native tokens and other tokens due to curiosity and interaction.

2. Why are these scams difficult to detect?

The success of these scams is largely due to their concealment within the legitimate mechanisms of blockchain, making it difficult for ordinary users to discern their malicious nature. Here are several key reasons:

• Technical Complexity: Smart contract code and signature requests can be obscure and difficult for non-technical users to understand. For example, an "Approve" request may be displayed as a string of hexadecimal data, making it hard for users to intuitively grasp its meaning.

• On-chain legitimacy: All transactions are recorded on the blockchain, appearing transparent, but victims often only realize the consequences of the authorization or signature afterwards, at which point the assets are irretrievable.

• Social Engineering: Fraudsters exploit human weaknesses such as greed ("claim large tokens for free"), fear ("account irregularity requires verification"), or trust (disguised as customer service).

• Ingeniously disguised: Phishing sites may use URLs similar to official domain names and even increase credibility through HTTPS certificates.

3. How to Protect Your Cryptocurrency Wallet?

In the face of these scams that coexist with technical and psychological warfare, protecting assets requires a multi-layered strategy. Here are detailed preventive measures:

• Check and manage authorization permissions

Tools: Use the authorization checker of a blockchain explorer or a dedicated revocation tool to check the authorization records of the wallet.

Action: Regularly revoke unnecessary authorizations, especially for unlimited authorizations to unknown addresses. Before each authorization, ensure that the decentralized application comes from a trusted source.

Technical details: Check the "Allowance" value, if it is "infinite" (like 2^256-1), it should be revoked immediately.

• Verify the link and source

Method: Manually enter the official URL, avoid clicking on links in social media or emails.

Check: Ensure the website uses the correct domain name and SSL certificate (green lock icon). Be wary of spelling mistakes or extra characters.

• Use cold wallets and multi-signature

Cold wallet: Store most assets in a hardware wallet and only connect to the network when necessary.

Multisignature: For large assets, use multisignature tools that require multiple keys to confirm transactions, reducing the risk of single point failure.

• Handle signature requests with caution

Steps: Carefully read the transaction details in the wallet pop-up each time you sign. Some wallets will display the "Data" field; if it contains unknown functions (such as "TransferFrom"), refuse to sign.

Tools: Use the decoding function of the blockchain explorer to analyze the signature content, or consult a technical expert.

Suggestion: Create a separate wallet for high-risk operations and store a small amount of assets.

• Responding to Dust Attacks

Strategy: Do not interact after receiving unknown tokens. Mark them as "spam" or hide them.

Check: Verify the token source through a blockchain explorer, and be highly vigilant if it is a bulk send.

Prevention: Avoid public wallet addresses or use new addresses for sensitive operations.

Conclusion

By implementing the above security measures, users can significantly reduce the risk of becoming victims of advanced fraud schemes, but true security is never a unilateral victory of technology. When hardware wallets build a physical defense and multi-signature disperses risk exposure, the user's understanding of authorization logic and prudence in on-chain behavior are the final bastions against attacks. Every data parsing before signing, every permission review after authorization, is an oath to one's own digital sovereignty.

In the future, regardless of how technology iterates, the core defense will always lie in: internalizing security awareness into muscle memory and establishing an eternal balance between trust and verification. After all, in the blockchain world where code is law, every click and every transaction is permanently recorded on the chain, unchangeable.