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What is Dust Transaction?
Dust transaction is any crypto transaction that involves sending an amount of crypto that results in leftovers that are typically less than the amount required in gas to send it again.
Each blockchain will have different definitions of the amount of crypto involved to be considered a dust transaction. However, in most cases, it typically refers to any transaction equal to or less than the gas fees required to send it.
So, if you regularly engage in crypto transactions, there is a good chance you have some dust lying around in your wallets. Dust is simply very small amounts of cryptocurrency left over after transactions.
Key Takeaways
- Dusting attacks are on the rise.
- Consolidating dust can compromise a user’s on-chain privacy.
- Dust transactions have multiple use cases.
- The best defense against dusting attacks is to never move unsolicited and unknown dust transactions.
- Exchanges and wallet providers have novel solutions for resolving dust.
History of the Dust Concept
The concept of dust has been around for years, but it came to prominence when malicious actors started weaponizing it to target large Bitcoin holders around 2018.
Since then, exchanges and wallet providers have created a series of tools to help protect users and consolidate dust into larger amounts. Dust is less of an issue today because users can more easily manage it, and attacks are primarily targeted at large account holders.
Why Dust Transactions Occur
Dust and dust transactions can occur for a number of reasons.
Dust can accrue from something as innocent as a by-product of multiple transactions. However, the true dust transaction meaning is usually in reference to one of the following three examples:
- Dust transactions can be used in marketing. Companies can deliberately send newly listed coins and tokens to help promote their projects and raise excitement.
- Law enforcement and government authorities can use them to form links and gather information between individuals and criminal organizations’ accounts.
- Attackers can also use them maliciously to remove the pseudonymous identity of public blockchain users so they can be exploited in real life.
How Dust Transaction Works
A simple way to think about how dust transactions work is by understanding the relationship between gas fees and Unspent Transaction Outputs (UTXOs).
Gas fees are the amount that a user is required to pay in order to send a transaction on the blockchain. UTXOs are the amount of cryptocurrency left over from a completed blockchain transaction that is recorded in the UTXO database and can be used in a new transaction.
Dust transactions occur when the UTXOs at the end of the transaction equal less than the amount that it would require to cover another transaction’s gas fees.
Dust Transaction Impact on Trading
Dust transactions can impact trading by creating cluttered wallets with unusable balances, which can increase transaction fees and reduce traders’ margins.
What is Dusting Attack?
Dusting Attacks are a way to exploit users on public blockchains. It removes the pseudonymous identity of significant account holders and then targets them in real life.
The process involves three steps:
- The attacker will send a high volume of dust transactions to unsuspecting accounts.
- The attacker then monitors the blockchain to see which dust transactions consolidate into single wallet addresses.
How Do You Remove Crypto Dust?
There are a number of methods users can utilize to remove dust. However, users should be aware of the source of the dust they are removing to ensure they do not fall victim to a dusting attack.
- Utilizing Hierarchical Deterministic Wallets (HD) automatically consolidates small UTXOs across multiple wallets into a single larger one. However, the consolidation can create links between wallet addresses and leave users exposed to dusting attacks.
- Many of the larger crypto exchanges, such as Binance, Kucoin, and Crypto.com offer dust conversion tools that enable users to consolidate their dust.
- Users can “dust off” their accounts by sending a small amount of crypto to the wallet address with the dust. It would require enough to push the total amount of dust over the transaction limit to send the dust back out. This is cumbersome and is cost inefficient.
- Utilizing third-party software like DustSweeper can consolidate all your dust into one larger amount.
- Many wallet providers have enabled a “do not spend” feature that users can place on suspicious UTXOs, preventing the dust from being moved and exposing users’ end addresses.
Dust Transaction Risks
The risk of accepting dust transactions and moving the dust to another account is that it could be used to de-anonymize your identity to expose you in real life. The safest measure for users is to never engage with unsolicited and unknown dust transactions or to implement a do-not-spend feature within their wallet.
The Bottom Line
For people who make frequent transactions, dust can easily accumulate within wallet addresses. However, with the threat of dusting attacks, it is important for people to understand the dust transactions meaning so they can better protect themselves from malicious actors.
