What risks will the introduction of blockchain payments pose for carding?

[Student]

For educational purposes, we will examine the risks posed by the introduction of blockchain payments for card fraud in more detail, taking into account technical, economic, and social aspects. Card fraud is a form of fraud in which criminals use stolen bank card information to conduct unauthorized transactions, purchases, or withdrawals. Blockchain, as a decentralized and cryptographically secure technology, is changing the payment system landscape, creating new challenges for carders but also providing them with potential loopholes. A detailed analysis is provided below.

1. Transaction transparency and traceability​

Blockchain payments, especially on public blockchains (e.g., Bitcoin, Ethereum), record all transactions in an immutable and publicly accessible ledger. This creates the following risks for carders:

• Transaction tracking: Each transaction on the blockchain is associated with unique sender and recipient addresses. Law enforcement agencies and analytics companies (e.g., Chainalysis, Elliptic) use blockchain analysis tools to track the flow of funds. If a carder uses stolen funds to purchase cryptocurrency or pay for goods, their actions can be traced back to an exchange, wallet, or even a cash-out point.
  • Example: If a carder converts stolen funds into Bitcoin and then attempts to withdraw them through an exchange with KYC (know your customer), their identity may be exposed.
• Risk to anonymity: In traditional carding, anonymity is achieved through fake identities, proxy servers, or disposable cards. On the blockchain, anonymity is more difficult to maintain, as even pseudonymous addresses can be linked to real data through behavioral analysis or on-ramp/off-ramp entry/exit points.

Educational aspect: Public blockchains operate on a distributed ledger, where every transaction is confirmed by a network of nodes and stored forever. This makes concealing fraudulent transactions more difficult than in centralized systems, where data can be altered or deleted.

2. Reducing dependence on centralized systems​

Traditional carding often relies on vulnerabilities in centralized systems such as banks, payment gateways (Visa, Mastercard), or trading platforms. Blockchain payments minimize the role of intermediaries, which creates the following risks:

• Fewer attack points: In centralized systems, carders can attack databases containing card numbers, hack POS terminals, or use skimmers. In blockchain systems, payments are made directly between parties (P2P), reducing the number of vulnerable points.
  • Example: Instead of stealing card data from an online store's server, a carder needs to gain access to the private key of a crypto wallet, which requires a completely different approach.
• Decentralization makes manipulation more difficult: In traditional systems, carders can use chargebacks or fake transactions. In blockchain, transactions are irreversible (especially after confirmation), making such schemes impossible.

Educational aspect: Blockchain uses consensus algorithms (such as Proof of Work or Proof of Stake) to guarantee the integrity of transactions without the involvement of a central authority. This reduces the likelihood of successful attacks based on the manipulation of centralized databases.

3. Cryptographic protection and private keys​

Blockchain payments are based on cryptography, meaning funds can only be accessed through a private key. This creates significant barriers for carders:

• Difficulty of key theft: With traditional carding, it's enough to obtain the card number, CVV, and expiration date. With blockchain, a private key is required to complete a transaction, which is typically stored encrypted on the user's device or in a hardware wallet.
  • Example: Even if a carder gains access to the card data, it is useless for direct blockchain payments, as transactions require a private key signature.
• Two-factor authentication (2FA): Many blockchain wallets and platforms support 2FA, biometric security, or multi-signature, making it even more difficult for unauthorized access.

Educational aspect: Blockchain cryptography uses asymmetric algorithms (for example, ECDSA in Bitcoin), where the public key is used for addresses and the private key is used to sign transactions. Security depends on protecting the private key, making it a prime target for attackers.

4. Smart contracts and automation​

Smart contracts are programs running on the blockchain that automatically execute transaction conditions. Their implementation poses the following risks for carders:

• Conditional payments: Smart contracts can require certain conditions (e.g., identity verification, product delivery) to be met before funds are transferred. This complicates fraudulent schemes where carders use stolen credentials to make instant purchases.
  • Example: Payment for an item can be frozen in a smart contract until delivery is confirmed, preventing instant withdrawal of funds.
• Transparency of terms: Smart contract code is often publicly available, allowing for vulnerability testing. This reduces the likelihood of carders exploiting flaws in transaction logic.

Educational aspect: Smart contracts, like those on Ethereum, are self-executing programs written on the blockchain. They eliminate the need to trust intermediaries, but require a high level of code security to prevent exploitation.

5. Decreased relevance of bank card data​

Blockchain payments often bypass traditional bank cards, which reduces their value to carders:

• Direct transfers between wallets: In blockchain systems, payments are made between crypto wallets, not through bank accounts or cards. Stolen card details become less useful, as they are not applicable for direct cryptocurrency transactions.
  • Example: An online store that accepts payments in USDT or ETH does not request card details, making carding in such systems irrelevant.
• Declining Liquidity of Stolen Data: The darknet market for stolen card data may become less relevant as demand for it declines in favor of crypto wallets.

Educational aspect: Blockchain payments often use stablecoins (e.g., USDT, USDC) or native cryptocurrencies (BTC, ETH), which are linked to wallets rather than bank accounts. This changes the economic model of fraud.

6. Regulation and KYC/AML​

Many blockchain platforms, especially exchanges and payment gateways, implement strict KYC and AML procedures, which creates additional risks for carders:

• User Identification: To purchase cryptocurrency or withdraw funds to fiat, carders are often required to complete KYC (provide passport, address, etc.). This increases the likelihood of their identification.
  • Example: If a carder uses stolen funds to buy BTC on an exchange, they may be forced to reveal their identity when withdrawing the funds.
• Monitoring suspicious transactions: Regulated platforms actively cooperate with law enforcement agencies to monitor suspicious transfers, reducing the opportunity for laundering stolen funds.

Educational aspect: KYC/AML are international standards developed to prevent money laundering and terrorist financing. In blockchain, they are applied at the exchange and gateway level, making them an important barrier to fraud.

7. New challenges and opportunities for carders​

Despite the aforementioned risks, blockchain payments also open up new opportunities for fraudsters to adapt:

• Anonymous blockchains: Some blockchains, such as Monero or Zcash, use technologies (such as ring signatures and zk-SNARKs) to provide enhanced anonymity. Carders can use these technologies to hide transactions.
  • Example: Monero hides the sender's and recipient's addresses and the transaction amount, making it attractive to scammers.
• Phishing and social engineering: Carders may focus on stealing private keys or seed phrases through phishing sites, malicious apps, or fake wallets.
  • Example: A fake website that impersonates a popular wallet (such as MetaMask) may trick a user into entering a seed phrase.
• Smart contract vulnerabilities: Errors in smart contract code can be exploited to steal funds. For example, in 2021–2023, hackers exploited vulnerabilities in DeFi protocols such as Poly Network.
• Theft via DeFi and NFTs: Decentralized finance (DeFi) and non-fungible tokens (NFTs) create new attack targets, such as fake NFT marketplaces or counterfeit tokens.

Educational aspect: Anonymous blockchains use sophisticated cryptographic methods, such as zero-knowledge proofs, to protect privacy. However, even in such systems, entry and exit points (such as exchanges) remain vulnerable to regulation.

8. Social and economic aspects​

Beyond the technical risks, the introduction of blockchain payments changes the economic and social dynamics of carding:

• Declining Carding Profitability: If traditional cards become less popular, the market for stolen data could shrink, forcing carders to learn new skills (such as hacking crypto wallets).
• Need for new skills: Carders will have to learn blockchain technologies, cryptography, and DeFi, which requires significant effort and resources.
• User education: Increasing user awareness of crypto wallet security (e.g. storing seed phrases, using hardware wallets) can further complicate fraud.

Educational aspect: The transition to blockchain payments requires a new level of financial literacy from users and businesses, including an understanding of cryptography, key management, and DeFi risks.

9. Long-term prospects​

In the long term, blockchain payments could radically change the carding landscape:

• Global standardization: If blockchain becomes the basis of global payment systems, carding may lose its mass appeal as traditional cards become less common.
• Regulatory measures: Strengthening international regulation of cryptocurrencies (e.g. FATF standards) will make money laundering through blockchain more difficult.
• Innovations in fraud: Carders may shift to more sophisticated forms of attacks, such as attacks on smart contracts, DeFi protocols, or vulnerabilities in blockchain infrastructure.

Conclusion​

The introduction of blockchain payments poses significant risks to traditional card payments due to transparency, cryptographic protection, decentralization, and the reduced role of bank cards. However, fraudsters can adapt by exploiting anonymous blockchains, phishing, smart contract vulnerabilities, and social engineering. For users and companies, the transition to blockchain requires increased cyber literacy and the implementation of new security measures, such as multi-signature systems and hardware wallets.

Recommendations for protection (for educational purposes):

1. Use hardware wallets (e.g. Ledger, Trezor) to store private keys.
2. Never reveal your seed phrase and avoid suspicious websites.
3. Verify smart contract addresses before interacting with DeFi protocols.
4. Use two-factor authentication and multi-signatures for large transactions.
5. Stay up-to-date with regulatory updates and choose platforms with KYC/AML compliance for greater security.

If you have specific questions about blockchain or carding, I can dive deeper into either topic!