How will the development of decentralized payment systems affect carding methods?

[Student]

For educational purposes, I will provide a more in-depth and structured analysis of how the development of decentralized payment systems (DPS) impacts carding methods. I will break down the topic into key aspects, including technical, social, and regulatory factors, using examples, statistics, and forecasts. The answer will be detailed yet accessible, keeping in mind the educational purpose.

1. What are decentralized payment systems and carding?​

Decentralized payment systems (DPS) are blockchain-based or distributed ledger-based technologies that enable transactions without a central intermediary (bank or processing center). Examples include:

• Cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Monero (XMR).
• Stablecoins: USDT, USDC, pegged to fiat currencies for stability.
• DeFi protocols: Uniswap, Aave, Compound, which provide lending, exchange, and staking through smart contracts.
• P2P platforms: LocalBitcoins, Paxful for direct crypto-to-fiat exchange.

The main features of DPS are pseudonymity (or anonymity in some cases), transaction transparency (on public blockchains), immutability of records, and the absence of a single point of failure.

Carding is a type of cybercrime in which attackers steal bank card data (number, CVV, expiration date, and sometimes PIN) and use it for:

• Unauthorized purchases (for example, in online stores).
• Withdrawal of funds through fictitious accounts.
• Money laundering through complex schemes.

Traditional carding relies on vulnerabilities in centralized systems: data leaks, weak authentication, phishing, and skimming (for example, using ATM skimming devices). In 2023, global losses from carding amounted to approximately $32.3 billion, and by 2027, they are projected to reach $40.53 billion (according to Juniper Research).

2. How are DPS changing the carding landscape?​

The development of DPS creates both new opportunities for protection against carding and new challenges, leading to an evolution in cybercriminal methods. Let's consider this from two perspectives: protection and new vulnerabilities.

2.1. Positive Impact: How DPS Reduces the Effectiveness of Traditional Carding​

DPS have features that make traditional carding methods based on stealing card data more difficult.

1. Lack of centralized data storage:
   • In traditional systems, card data is stored on servers run by banks, retailers, or processing centers (Visa, Mastercard). Data breaches, such as the Equifax hack in 2017 (147 million accounts), give carders access to millions of cards.
   • In DPS, transaction data is distributed across blockchain nodes. To gain access to a wallet's private keys, an attack must be carried out on a specific user, not a central server. This requires individual attacks, which are less scalable and more expensive.
   • Example: In Bitcoin, a private key, stored locally by the user, is required to conduct a transaction. Without this key, a carder cannot use the wallet, even if they know its address.
2. Transparency and immutability of transactions:
   • Public blockchains (Bitcoin, Ethereum) record all transactions in an immutable ledger. This allows for the use of analysis tools (e.g., Chainalysis, Elliptic) to track suspicious transactions, such as money laundering.
   • Carders using DPS to withdraw funds risk detection unless they employ sophisticated anonymization schemes (discussed below). For example, in 2022, Chainalysis helped US law enforcement seize $3.6 billion in BTC stolen in the Bitfinex hack.
3. Smart contracts and automated protection:
   • DeFi protocols use smart contracts to automate transactions. They may require multi-factor authentication (MFA), biometrics, or wallet verification (such as MetaMask). This reduces the risk of "card-not-present" attacks, where carders use stolen credentials to make purchases without a physical card.
   • Example: In Aave, to receive a loan, a user confirms wallet ownership by signing a transaction. Without access to the private key, a carder cannot fake the transaction.
4. Reduced card dependency:
   • DPS don't use traditional cards at all. Payments are made through crypto wallets, where the address, not the card number, serves as the identifier. This makes traditional card theft (theft of card numbers) less relevant, as DPS bypasses banking systems.
5. User protection technologies:
   • Hardware wallets (Ledger, Trezor) store private keys offline, making them virtually invulnerable to remote hacking.
   • KYC (Know Your Customer) protocols on some DPS platforms (such as Binance for crypto-to-fiat withdrawals) require identification, making anonymous withdrawals more difficult.

As a result, traditional card fraud methods such as skimming or mass data theft are becoming less effective. It is estimated that the implementation of DPS could reduce the share of card fraud in overall cybercrime by 10-15% by 2030 if adoption increases.

2.2. Negative Impact: New Opportunities for Carders​

Despite these protective mechanisms, DPS is opening up new avenues for cybercriminals by adapting carding to the crypto ecosystem. Here are the key areas:

1. Pseudonymity and anonymity:
   • Most blockchains are pseudonymous: wallet addresses are not linked to real identities, making it easier to launder funds. Carders can convert stolen fiat money (via stolen cards) into cryptocurrency on P2P platforms or through poorly regulated exchanges.
   • Privacy coins (Monero, Zcash) and mixers (Tornado Cash before its sanctioning in 2022) allow the origin of funds to be concealed. For example, a carder could purchase BTC with a stolen card, run it through a mixer, and withdraw it to fiat currency through another jurisdiction.
   • Example: In 2021, hackers used Monero to launder funds obtained through ransomware, showing how DPS anonymity can be applied to carding.
2. DeFi and Smart Contract Vulnerabilities:
   • Despite their innovative nature, DeFi protocols often contain vulnerabilities in their smart contract code. In 2023, DeFi lost approximately $3.7 billion due to exploits (according to DeFiLlama). Carders can exploit these vulnerabilities to steal assets directly, without the need for card data.
   • Flash loan attacks: Attackers take out flash loans in DeFi, manipulate token prices, and withdraw funds without repaying the loan. This is a new type of "crypto carding," where digital assets are targeted instead of cards.
   • Example: The 2021 Poly Network hack ($611 million) showed how vulnerabilities in smart contracts can be exploited to steal funds.
3. Stealing private keys and seed phrases:
   • Instead of card numbers, carders are switching to stealing private keys or crypto wallet seed phrases. This is done through:
     • Phishing: Fake websites impersonating DeFi platforms or fake emails from exchanges.
     • Malware: Malicious programs that scan devices for seed phrases (for example, the RedLine Trojan).
     • Social engineering: Deceiving users to reveal keys (e.g. fake tech support).
   • Example: In 2022, a phishing attack on MetaMask users resulted in the theft of $650 million in assets through fake websites.
4. Integration with traditional systems:
   • Many DPSs are integrated with fiat gateways (for example, purchasing crypto with cards on Coinbase). Carders can use stolen cards to purchase cryptocurrency and then withdraw it through anonymous channels.
   • Fast payment systems (such as FedNow in the US or SEPA Instant in the EU) reduce the time it takes to detect fraud, giving carders a better chance of success.
   • Example: In 2023, carders used stolen cards to purchase USDT on exchanges with minimal verification, then transferred the funds to Monero for anonymity.
5. New money laundering schemes:
   • Carders adapt money laundering schemes to DPS using:
     • Cross-chain bridges: Transfer assets between blockchains (e.g. Ethereum → Solana) to make tracking more difficult.
     • NFT Markets: Buying and selling non-fungible tokens to legalize funds.
     • P2P exchanges: Exchange crypto for fiat in jurisdictions with low levels of regulation.
   • Example: In 2023, carders used NFTs to launder money by purchasing tokens at inflated prices from fake accounts.

3. The evolution of carding methods under the influence of DPS​

DPS is forcing carders to shift from simple attacks (stealing card numbers) to more complex and technical methods. Here's a comparison of the traditional and new approaches:

Aspect	Traditional carding	Crypto-carding in DPS
Target of the attack	Card number, CVV, customer details	Private keys, seed phrases, and smart contract vulnerabilities
Theft methods	Skimming, phishing, database leaks	Phishing wallets, malware, and DeFi exploits
Payment channels	E-commerce, POS terminal	DeFi platforms, P2P exchanges, NFT markets
Laundering	Fake bank accounts, gift cards	Mixers, privacy coins, cross-chain bridges
Detection	Banking ML models, chargeback	On-chain analysis, but more difficult for privacy chains
Risks for the carder	Card blocking, chargebacks, and account seizures	Cryptocurrency volatility, mixer sanctions, and KYC
Technical complexity	Average (skimmers, phishing)	High (programming skills and knowledge of blockchain required)

New carding techniques:​

• AI-based fake transaction generation: Using AI to create plausible transaction patterns to avoid suspicion.
• Social Engineering 2.0: Attacks on users via Discord, Telegram, or fake DeFi platforms disguised as legitimate projects.
• Rug-pulls: The creation of fake DeFi protocols where carders lure victims and then disappear with their funds.
• Liquidity manipulation: Using flash loans to artificially inflate token prices and withdraw assets.

4. Regulatory and technological countermeasures​

DPS creates new challenges for law enforcement and industry, but also provides tools to combat carding.

1. Regulations:
   • MiCA (Markets in Crypto-Assets) in the EU (full effect in 2024–2025) requires KYC for all exchanges and major DeFi platforms, making anonymous withdrawals difficult.
   • The Financial Action Task Force (FATF) recommends that countries implement the "Travel Rule" for crypto transactions, requiring exchanges to disclose sender and recipient information.
   • Example: In 2022, the US imposed sanctions on Tornado Cash for laundering $7 billion, forcing carders to seek alternative mixers.
2. Protection technologies:
   • On-chain analytics: Tools like Chainalysis and CipherTrace monitor transactions in real time, identifying suspicious patterns. For example, they can link a wallet address to an exchange that requires KYC.
   • AI and ML: Adaptive machine learning models detect anomalies in DeFi transactions, such as sudden surges in liquidity.
   • Multi-factor authentication: Hardware wallets and biometrics make it difficult to access assets even if the seed phrase is leaked.
3. User education:
   • The primary attack vector is inexperienced users who don't understand how to store private keys or verify the legitimacy of platforms. Digital literacy campaigns (such as those run by Binance Academy) reduce the risk of phishing.

5. Forecasts and long-term consequences​

1. Reducing traditional carding:
   • As DPS adoption grows (it's projected to account for 15-20% of the payments market by 2030), traditional cards will be replaced by wallets and stablecoins. This will make card number theft less of a threat.
   • However, during the transition period (2025–2030), hybrid systems (fiat + crypto) will be vulnerable, as carders will be able to use cards to purchase crypto.
2. The rise of crypto carding:
   • Seed theft and DeFi exploits will become dominant forms of fraud. According to Chainalysis, crypto fraud (including phishing and rug pulls) will already total $3.7 billion in 2023.
   • Privacy coins and decentralized mixers will remain a problem until regulations become global.
3. Technological progress:
   • The development of quantum computing (expected by 2030–2035) could threaten the security of blockchains using current encryption algorithms (e.g., ECDSA). This will require a transition to post-quantum cryptography.
   • Improving AI detection will make crypto carding less profitable, but will also increase the difficulty of attacks by AI-based attackers.
4. Global cooperation:
   • Combating crypto-carding will require coordination between countries, as DPS operates across borders. The creation of international standards (for example, through the FATF) will be key.

6. Recommendations for users and businesses​

1. For users:
   • Use hardware wallets to store your crypto assets.
   • Enable MFA and avoid storing seed phrases digitally.
   • Verify the legitimacy of DeFi platforms (for example, through smart contract audits from Certik).
   • Learn the basics of blockchain security through resources like Binance Academy or Ethereum.org.
2. For business:
   • Implement on-chain analytics to monitor transactions.
   • Integrate KYC/AML checks even if the platform is decentralized.
   • Train employees and customers on cybersecurity basics.
3. For DPS developers:
   • Conduct regular audits of smart contracts.
   • Use multi-chain protocols to improve security.
   • Develop anti-phishing solutions (e.g. integration with anti-phishing plugins).

7. Conclusion​

The development of decentralized payment systems is fundamentally changing the carding landscape. On the one hand, DPS enhance security through distributed architecture, transparency, and smart contracts, making traditional carding less effective. On the other hand, they open up new opportunities for attackers: seed theft, DeFi exploits, and anonymous money laundering through privacy coins. In the coming years (2025–2030), carding will evolve into "crypto-carding," requiring new security approaches from users, businesses, and regulators. The key to minimizing risks lies in a combination of technological innovations (AI, on-chain analytics), strict regulations, and digital literacy. In the long term, DPS can make the financial system more resilient, but only with global cooperation in the fight against cybercrime.