Do not trust crypto dust: Small sums, big risks

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What is crypto dust: A hidden threat or a useful tool?

What is crypto dust?

Crypto dust refers to small amounts of cryptocurrency that, in essence, become invisible to their owners. Usually, these amounts end up in users' accounts after transactions with small fees. For example, if you send a certain amount of cryptocurrency, but due to the transaction fee, a small amount remains in your account that cannot be used in future transactions. This is what crypto dust is.

Where does crypto dust come from?

The reasons for the appearance of crypto dust are related to the features of cryptocurrency networks. In most cases, it is the result of fees that are charged when sending funds. For example, Bitcoin’s blockchain may charge a fixed transaction fee, which can result in a small unused amount left in your wallet.

This often happens when you can’t transfer the remaining balance because the minimum amount required for a new transaction exceeds the cryptocurrency balance.

While $1 can be divided into 100 cents, 1 BTC can be divided into 100 million satoshis. In a Bitcoin wallet, your balance consists of the sum of unused transaction outputs, known as UTXO (Unspent Transaction Output).

Let’s assume you have a Bitcoin wallet with several UTXOs:

- 0.30005000 BTC (UTXO 1)

- 0.42000000 BTC (UTXO 2)

- 0.15000000 BTC (UTXO 3)

- 0.81000000 BTC (UTXO 4)

If you want to send 0.25 BTC to a friend, you can use any UTXO except number 3, as it’s smaller than the amount you want to send. With each of the remaining options, you will still have some cryptocurrency left after you send 0.25 BTC (plus a transaction fee of 0.0002 BTC). However, when using the first UTXO, the remainder after the operation will be negligible — 4985 satoshis. This is what we call crypto dust.

If the second or fourth UTXOs are used for the transaction, the remainder will be larger and won’t be considered crypto dust. Earlier, wallets allowed users to manually choose UTXOs for operations, but today most wallets do this automatically to minimize both fees and the creation of crypto dust.

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Crypto dust can also accumulate on exchange accounts. This usually happens when you try to exchange one asset completely for another. For example, exchanging all your Ethereum for Bitcoin. In this case, you won’t be able to convert it precisely to eight decimal places — there’s always a small amount left. Some exchanges automatically accumulate this dust and credit it in their native cryptocurrency, encouraging clients to continue using the platform.

What is a crypto dusting attack?

Dust attacks are a specific method of using crypto dust by malicious actors. The main principle of dust attacks (or dusting) is to link user addresses together. This can happen in the following way:

- Fraudsters send dust to users' wallets, which they simply ignore.

- The recipient, not noticing that crypto dust has been sent to their address, performs a transaction where assets from multiple addresses are used. As a result, the fraudsters can "link" these addresses together and determine which addresses belong to the same user.

- This use of crypto dust allows malicious actors to gather information about cryptocurrency wallet owners, opening the door for further attacks. When the victim of a dust attack sends cryptocurrency to a centralized exchange, they may not notice that the crypto dust is sent along with the main amount.

This is significant because centralized platforms require users to provide a lot of personal data. Often, dust attacks can lead to personal data leaks or even be used for extortion purposes.

The benefits of crypto dust

Crypto dust is not always something dangerous. It can also have positive aspects. For example, blockchain platform developers use crypto dust to test new features or updates. The dust can be spread across wallets to check the functionality of updates or test the system's reliability.

Crypto dust can also be used as a marketing tool. Some exchanges and cryptocurrency platforms credit it to users as bonuses, encouraging them to continue using their services. Moreover, crypto dust can be useful for research purposes. For example, it can be used to analyze network performance, check blockchain resilience, and identify vulnerabilities.

Conclusions

Crypto dust is an inevitable byproduct of working with cryptocurrencies. Although it may seem harmless, dust has both positive and negative consequences. On one hand, it can be useful for system testing or marketing purposes, but on the other, it is a vulnerability that could be used for manipulation or attacks.

However, the popularity of dusting has significantly decreased nowadays, and it is probably more of an annoying factor than a serious threat. Even in the case of a successful dust attack, no funds will be lost from your account. Hackers will not be able to access your private key or take over your account.

Still, it is important to understand the nature of crypto dust and take steps to minimize its accumulation. Be cautious when conducting cryptocurrency transactions and monitor the status of your wallets. Considering all the risks, one can minimize opportunities for malicious actors and make cryptocurrency usage safe and convenient.

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