The Dark Forest Crossing Manual: A Detailed Anti-Theft Guide under the "Observing Wallet" Trap

“The Dark Forest,” which originated from “The Three-Body Problem,” is also the most naked summary of the current Web3 security track:

The encryption industry, especially the emerging field of on-chain, has enough room for imagination and innovative gameplay, but at the same time, it is like a ‘dark forest.’ Whether it is old users or new players, familiar with the various risks that may be encountered on the chain and trying to avoid them is an eternal topic that we need to learn.

Recently, a scam targeting non-custodial wallet users has quietly become popular. It exploits the ‘watch wallet’ feature of wallets that support ‘watch mode’. Through a forged trust mechanism and carefully designed logical chain, victims fall into the trap without any defense. For ordinary users, this scam may seem basic, but it is highly deceptive and destructive.

Scammers exploit the unfamiliarity of novice users with decentralized technology and wallet operations to steal encrypted assets. In this context, it is particularly important to understand and be alert to these common yet deadly security risks. This article will analyze in detail the operational mode of this new type of fraud, and provide users with a series of prevention techniques.

What is the ‘watch-only’ mode of a non-custodial wallet?

As we all know, the watch-only wallet mode is a feature of the non-custodial wallet for encrypted assets, which allows users to view the balance and transaction history of a specific wallet address.

Due to the transparency of the blockchain, all wallet addresses, corresponding balances, and transfer records on the chain are transparent and visible. Users can input any blockchain wallet address through blockchain browsers and other tools to view their asset balances and on-chain records, including receipts, transfers, on-chain authorizations, etc. During this process, the identity of the wallet owner remains anonymous unless he/she voluntarily discloses it.

As a non-custodial wallet, SafePal Wallet also provides the watch-only wallet mode. For example, when users create a new wallet, they can choose to create a new wallet, restore an old wallet, or import the watch-only wallet mode (click here to view SafePal’s official tutorial on importing the watch-only wallet mode).

The following image is a comparison between the observation wallet mode and the normal wallet homepage. From it, we can see that the observation wallet only allows viewing of the balance, but does not have options for transfers, flash exchanges, etc.

When users import the watch-only wallet mode, they only need to fill in the wallet address to conveniently view the on-chain balance and transfer records of this wallet. However, since the watch-only wallet does not represent actual ownership of the wallet, it only provides viewing functionality, so users cannot operate the assets in the wallet in watch-only wallet mode.

For this reason, wallet mode observation is often used by the public to track and monitor the on-chain fund situation and trends of specific wallet addresses, such as regulatory monitoring of anti-money laundering in blockchain, fund tracing for hacking incidents, etc.

However, it is important to note that it does not support users to make any transfer transactions to this wallet address, nor does it equate to owning the specific wallet address. Only users who possess the private key/mnemonic phrase of the wallet address can access and manage the assets in the wallet address.

The fraud technique we mentioned today is a scam designed by scammers taking advantage of users’ unfamiliarity with this background knowledge.

How does the ‘Observation Wallet’ scam work?

The core operation of this scam is for scammers to contact and manipulate victims, making them believe that they can access the funds in the wallet address (usually scammers will use wallet addresses with large amounts of funds), and tell the victims that they need to make transactions to unlock their funds. In reality, they can only view the wallet balance and have no access or ownership rights.

Here’s how this scam typically works:

Scammers approaching users: Scammers may impersonate wallet team support staff. They often contact users through social media platforms (such as Twitter, Telegram, or Reddit) and initiate conversations by offering ‘help’ or ‘investment’ related to the wallet. Some scammers may also post ‘fake help posts’ online, similar to ‘I’m having trouble with my money here, can anyone help me get it out? I am willing to pay a high reward.’

Fake news: The scammers claim that a user’s wallet needs to be “verified” or “upgraded” in order to access the funds inside. They usually direct the user to download the wallet app from the app store so that it looks like they are walking the user through the normal process of creating a wallet.

Importing Wallet Address: Then, the scammer asks the user to import the address into the wallet in watch-only mode, which allows the user to see the balance of the wallet, which may include a large amount of cryptocurrency. The scammer will continue to claim that the user needs to pay a Gas Fee or deposit additional cryptocurrency into the specified wallet address, tricking the user into believing that they need to pay a fee to unlock the funds in that wallet address.

Fund Theft: Once users send funds to the scammer’s address, they will not receive any returns and the scammer will disappear. In other cases, the scammer may continue to request additional funds to be deposited or transferred to a wallet address under other false pretenses or promises.

Why does this scam work?

The reason why this scam is effective is that users usually do not fully understand that, due to the transparency of blockchain, all wallet addresses can be traced and viewed on the chain. Checking the balance in a wallet address may make inexperienced users mistakenly believe that this is equivalent to accessing or owning the wallet, when in fact it is just viewing.

In this scam, the scammer not only took advantage of the victim’s lack of understanding of the wallet pattern, but also tried to stimulate the victim’s greed or sympathy through the chat process, making it exploitable.

So how to protect yourself? It’s simple: if you’re using SafePal or any other decentralized or non-custodial cryptocurrency wallet, be sure to pay attention to the following security tips to avoid falling into these scams:

Do not believe messages from strangers in private: under normal circumstances, the official wallet team will never contact users through social media or direct messages (DM). Any messages offering help and wealth opportunities, or asking for personal information, should be treated with extreme caution;

Understand the observation mode or view the on-chain wallet address: Whether it’s SafePal or other non-custodial wallets, the observation wallet mode is a function only for viewing the wallet balance. It allows users to track the wallet balance and transaction history, but does not allow any transfers or withdrawals (actual access to the specified wallet address requires the private key or mnemonic phrase). Users cannot transfer funds from the wallet in observation mode, so if someone asks you to “unlock” or “access” the funds in the observation wallet mode, there is no need to doubt, it’s a scam.

Avoid sending funds to unknown addresses: If someone asks you to send funds to an unknown address to ‘unfreeze’ your crypto assets, this is a dangerous warning sign. Scammers typically ask users to pay Gas Fees or other charges, but SafePal and most legitimate wallet platforms never require users to transfer funds to a specific address to unlock assets;

Only download applications from official websites: Make sure you only download wallet applications from official app stores (such as Google Play Store or Apple App Store) to avoid downloading from unverified websites or links, as these applications may be malicious or fraudulent apps;

Report suspicious activities easily: If you encounter suspicious messages or potential scams, please report to the official wallet channel immediately, which helps protect the community and prevent others from becoming victims of fraud;

Conclusion

“Not Your Key, Not Your COIN”.

This is actually the cruelest sentence in Web3, after all, ‘decentralization’ and ‘security subject responsibility’ are two sides of the same coin. When asset ownership is truly returned to individual control, it also forces each user to take responsibility for their own assets, completely entering the ‘dark forest’.

Therefore, with the diversified development of on-chain fraud methods, learning and understanding the working principles of blockchain non-custodial and decentralized wallets, as well as familiarizing oneself with common scam methods, has become an indispensable survival skill for every Web3 user.

Always stay vigilant and safely navigate through the ‘Dark Forest’ on the blockchain is a compulsory course for all of us to adapt to the rules of the decentralized world.