Decoding Multisig Scams: How to Protect Yourself

  blockchainreporter.net 2 h

Recently, multisig scams have experienced a significant rise. The scammers in these scams exploit the victims by letting them access their wallets to trick the targets into sending their funds for recompensing transaction fees. In these scams, many of the victims unknowingly share their keys or seed phrases and lose their funds. However, to comprehend the concept of a multisig scam, one needs to understand what a multi-signature (multisig) wallet is.

What Is a Multisig Wallet

A multisig wallet serves as a wallet that needs multiple private keys for the validation of a transfer. This assimilates to a 2-factor authentication where 2 or more signatures are needed to approve a transaction. A user can specify diverse requirements for a multisig wallet, such as the requirement of 2 out of 3 keys and so on. This is just like using several keys for a vault, preventing the opening of the lock without the others.

People commonly use multisig wallets in their business collaborations, mutual ventures, and decentralized autonomous organizations (DAOs). They can additionally work in securing family funds. These wallets enhance the security and prevent the scams.

What Is a Multisig Scam?

In multisig scams, the scammers make their targets believe that they have complete access to their crypto wallet. However, in reality, they do not have full access. As a part of a multisig scam, the exploiter sends a message to the target by providing a wallet address that contains some funds. In addition to this, the scammer also shares the recovery phrase and private key, giving partial access to the wallet. By doing this, the scammer pretends to be a newbie wanting to know about the workings of the wallet. For the help, the scammer also promises a reward.

Nonetheless, while redeeming the reward the victim faces difficulty. On this, the scammer tricks the victim into sending funds saying that the transaction requires that amount as a fee for completion. The victims realize the scam when they are still unable to withdraw the funds after paying the fee. Hence, these scammers capitalize on their victims’ greed or goodwill. In some cases, the targets keep endeavoring to get the reward and the scammer keeps demanding funds in terms of fees. Once the target stops sending funds, the scammer just focuses on the other victim.

Working on a Multisig Scam

Multisig scams have several types and they commonly target the Tron network because of the working of its multisig wallets. In more comprehensive multisig scams, the scammer tricks the victims into changing the mechanism of their wallet into a multisig and making the scammer a co-owner. Following getting control over the wallet, the scammer can efficiently take away funds. There are some cases where the scammers steal the funds directly. The respective scams resemble impersonation fraud or phishing scams where the exploiters pretend to be a part of a reliable consumer support team.

On the other hand, the most common type of multisig scam does not necessitate consumers to provide their private keys or seed phrases. Rather, it just tricks victims into sending funds as a transaction fee to the exploiter while they try to obtain funds from the multisig wallet. For instance, a scammer presents a wallet that includes a great amount of other crypto assets but a negligible amount of $TRX (the native token of Tron). Hence, to withdraw funds, the victim will require enough $TRX to redeem funds from the Tron-based multisig wallet. Nevertheless, after sending the funds, they come to know about the scam as they cannot redeem funds without the signature of the scammer.

Recommendations to Prevent Multisig Scams

To prevent multisig scams as well as other such fraud, the users should not share their personal information with anyone. They should also avoid the use of private keys and seed phrases by strangers. Additionally, they need to stay vigilant about the phishing websites and emails. First of all, the users should keep in mind that none of the legitimate crypto exchanges, wallet providers, or entities ask for seed phrases or private keys. Hence, the users should keep them in a safe location without sharing with anyone.

Additionally, they should also stay up to date about the others who can access their wallet. On spotting unauthorized signatories, they need to instantly remove them. The users should also discard permissions in the case of DeFi apps that they no longer utilize. Moreover, the users should just utilize the wallet apps and software provided by official and trusted sources. Several fake crypto exchanges and wallets are out there in the market. Therefore, the users should verify the URLs and double-check the app’s authenticity before using them.

Two-factor authentication is another security measure. This enables an additional security layer, preventing unauthorized wallet access. Another preemptive measure is to utilize hardware wallets as they add up to the security. As a result of this, even if scammers compromise the multisig setup of a user, they would not be capable of shifting the funds without physical confirmation from the hardware wallet. Furthermore, the users should stay aware of the new techniques that the scammers use to be in a good position in response to such scams.

Conclusion

Multisig wallets offer additional security for crypto transfers however scammers have come up with new methods to trick the victims using this feature. Staying up-to-date can save users from phishing attempts, transaction fee tricks, and other such scams. Hence, users need to secure private keys, audit their wallet permissions, check for any suspicious links before funds transfer, and stay informed.

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