What Is Bitcoin Dust?
Bitcoin dust refers to the very small amountsof bitcoin leftover or unspent in a transaction that is lower in value than the minimum limitof a valid transaction. Thus, processing the transaction is impossible, trapping a tiny amount of Bitcoin (perhaps 0.00000012 BTC, for instance), in a wallet or address.
Key Takeaways
- Bitcoin dust is a series of trace amounts of bitcoins that individually are less valuable than the computing power or fee that is required to process them; as a result, the transaction is impossible to process.
- The cost of the fee to process a bitcoin transaction fluctuates based on the volume of transactions on the network.
- While Bitcoin dust can slow down network transactions, attempting to clean up Bitcoin dust can create a privacy problem, especially for small users.
Understanding Bitcoin Dust
Bitcoin dust is the small amount of Bitcoin that remains in a particular wallet or address because the monetary value is so tiny that it is below the amount of the fee required to spend the bitcoin. It makes the transaction impossible to process.
Whenever any transaction occurs on the bitcoin network, it needs to be validated for authenticity so the transaction can be processed in a reasonable amount of time. Miners validate the transaction and add it to the blockchain network. They are paid a mining fee for performing this service (this amount can vary).
Due to the working mechanism of the blockchain network, at times the mining fee can be higher than the actual amount of the transaction. Bitcoin dust refers to a bitcoin transaction amount where the fee is higher than the transaction amount, making it impossible for the transaction to occur.
As of July 25, 2021, the average Bitcoin transaction fee was roughly $2.00, up from $0.59 a year prior.
Example of Bitcoin Dust
For example, you start with an unspent transaction output (UTXO). This is Bitcoin at a place on the network that hasn't been spent. You must have one or more UTXO to initiate a transaction, and one or more UTXO are created at the same time.
The Bitcoin process involves a fee for the miners who are recording the transaction on the blockchain; that fee is proportional to the number of bytes the transaction occupies on the blockchain. Each UTXO requires a number of bytes, so the more UTXOs you have, the larger the transaction. Consequently, the larger the fee.
If a user has one Bitcoin stored in one UTXO, it will cost less to transact it than one Bitcoin spread across 10 UTXOs of 0.1 bitcoin or 100 UTXOs of 0.01 bitcoin. When you get to very small numbers of Bitcoin in a UTXO, the cost of recording the transaction on the blockchain will be greater than the value of the Bitcoin.
Such minuscule transactions, if initiated,are dropped, and need to be carried out again between the sender and receiver. This Bitcoin dust can remain in different wallets, making it a worthless holding until the mining fee comes down (or more bitcoins are added to the wallet to process a larger transaction).
Disadvantages of Bitcoin Dust
A disadvantage—and more importantly, a risk—of bitcoin dust is the chance of de-anonymization, which is when a person's identity can be linked to their Bitcoin transactions.
Hackers have developed a strategy called a dust attack where micro amounts of Bitcoin dust are sent to an unsuspecting user's wallet. When the user spends the dust-tainted, hackers use software to analyze the user's other transactions and develop an identity profile for malicious purposes.
FAQs
Bitcoin dust represents minuscule amounts of unspent bitcoin in a transaction that falls below the minimum limit required for processing. This leftover amount, trapped in a wallet or address, poses challenges to transaction validation.
What is the main disadvantage of Bitcoin? ›
Investing in Bitcoin cryptocurrency has its pros and cons. While its transactions are relatively secure, it's also prone to volatility, with large dips and spikes in price.
What is the dust threshold for Bitcoin? ›
It is the minimum amount considered dust by a particular wallet. The Bitcoin blockchain, for example, considers anything below 546 satoshis (parts of a Bitcoin) to be dust. However, this threshold can vary between different implementations. Dust is often equal to or lower than a transaction fee.
How do you clean money through Bitcoin? ›
One such technique involves the use of cryptocurrency tumblers and mixing services. These services break down illicit funds into smaller amounts and distribute them across multiple addresses before recombining them, effectively severing the link between the original source of the funds and their final destination.
How do I know if my Bitcoin is dirty? ›
A coin is considered dirty if it has been involved in any illegal activity, such as exchange and wallet hacks, money laundering, fraudulent schemes and projects, darknet drug markets, stolen card data, etc. You can identify dirty bitcoins using AML checks. Blockchain analysis software is a rapidly growing industry.
What is the dark side of bitcoin? ›
Types include pump and dump schemes, fake ICOs, phishing scams, and fake exchanges. Risks inherent in crypto investing due to market volatility and lack of regulation. Protect by researching projects, using secure exchanges, and enabling 2FA.
What was the worst year for bitcoin? ›
2017 boom and 2018 crash. The 2018 cryptocurrency crash (also known as the Bitcoin crash and the Great crypto crash) was the sell-off of most cryptocurrencies starting in January 2018. After an unprecedented boom in 2017, the price of Bitcoin fell by about 65% from 6 January to 6 February 2018.
Can I sell crypto dust? ›
Crypto Dust is a byproduct of trades and transactions found in most blockchains. It typically has a monetary value that is lower than the minimum trade (BUY/SELL) limits, which disallows users to trade the residual amount.
Why people avoid Bitcoin? ›
This reason can be attributed to crypto's volatility. Since the crypto market has very little regulation, it's subject to being manipulated. Individuals can dump large sums into the market, driving prices up, and then unloading the remainder of their assets for gain.
What is the major flaw in Bitcoin? ›
Design Flaw 1.
Around half the Bitcoins that were ever designed have been created already. The money supply will increase by another 66% between now and 2025, but by then the rate of creation of new Bitcoins will have slowed to a negligible amount, essentially making it a fixed money supply by 2025.
Cryptocurrencies are subject to high fluctuations in value. A decline in value or a complete loss are possible at any time. The loss of access to data and passwords can also lead to a complete loss.
What to do with Bitcoin dust? ›
For instance, you can create a separate wallet to deposit any crypto dust you receive. This will frustrate malicious actors behind the attack, as they won't be able to monitor your on-chain activities.
What are the disadvantages of dust? ›
They can also irritate eyes, throat and skin. Human health effects of dust relate mainly to the size of dust particles. Dust may contain microscopic solids or liquid droplets that are small enough to get deep into the lungs and cause serious health problems. Large particles may irritate the nose, throat and eyes.
What is the Bitcoin dust issue? ›
Bitcoin dust refers to a bitcoin transaction amount where the fee is higher than the transaction amount, making it impossible for the transaction to occur.
What to do with crypto dust? ›
Step 1: Navigate to the Crypto Dust feature via the Services or Wallet screen. Step 2: Select the balance(s) you wish to convert to CRO before tapping Review Conversion. For your convenience, the first 20 small balances will be pre-selected. Step 3: Review the conversion quote and tap Confirm Conversion.
