What Is Crypto Dust?

The universe of cryptocurrency is rapidly expanding as more and more people discover the potential that lies in trading altcoins and recognise its benefits. But, like many other things, crypto isn’t perfect, and there are small nuisances you have to deal with, such as crypto dust.

Whether you’re a novice or an experienced cryptocurrency user, you must’ve dealt with the small amount of crypto in your wallet that you just can’t seem to get rid of because it’s too small to trade with. This is exactly what crypto dust is and, in today’s article, we’ll talk about where it comes from and whether you can get rid of it and discuss the so-called dusting attacks. Let’s begin!

What Is Crypto Dust and How Is It Created?

Crypto dust refers to the trace amount of cryptocurrency that’s created in a user’s wallet after each completed transaction. This is usually a very small amount of crypto that’s below the required transaction fee, making it unusable and unspendable on its own. If we make an analogy with fiat money, cryptocurrency dust would be the small change (a few pennies or cents) you’re left with after a purchase, which you can’t really use to buy anything else in the store.

Bitcoin surrounded by gold dust on dark surface

Let’s take Bitcoin, for example. The smallest amount of BTC required for a regular transaction is 546 satoshis (0.00000546 BTC, or about 8 cents), which would make it the dust limit on Bitcoin. If the amount of BTC you have in your Bitcoin wallet is below or equal to 546 satoshis, your transaction will fail. You can also think of it as the minimal amount of cryptocurrency you need to have in your wallet address to use the network.

So, essentially, crypto dust becomes an unspent transaction output (UTXO), created as a byproduct of each transaction on a blockchain network, and you can only use it once you have accumulated more crypto.

Crypto dust is not inherently malicious, but it can be used with malicious intent in the form of crypto dusting attacks.

What Is a Crypto Dusting Attack?

A crypto dusting attack is a form of cyberattack where hackers and scammers send tiny amounts of altcoins (in other words, crypto dust) to tens of thousands of users at once on a certain public blockchain like Bitcoin, Litecoin, or others. The amount can range from as little as 1 satoshi to a few hundred satoshis below the dust limit. 

Dusting attacks are a threat to the pseudonymity provided by blockchain networks. The goal of the attack is to track the UTXO transactions and then link different wallet addresses to one specific user and uncover their identity. The malicious actor may then use the collected information for cyber extortion or phishing attacks.

In order for the dust attack to be successful, the user has to spend the tiny amount of funds they had received from the hacker because once these funds are combined with the existing UTXOs in the user’s wallet addresses, the hacker will find out that the addresses are owned by the same person.

However, it’s important to note that sometimes crypto dusting isn’t necessarily a dusting attack. In some instances, dusting is used for advertising a company’s products and services. Users may receive a small amount of cryptocurrency and a short promotional ad for the company’s services. Moreover, dusting can also be used by law enforcement agencies as a tool to track down criminal activity in the crypto world or even as part of research for academic purposes.

Binance, Litecoin, and Bitcoin Dusting Attacks

The first dusting attack of a large scale that was discovered was back in October 2018 when Samourai Wallet posted a tweet warning their Bitcoin users that they detected small BTC funds being transferred to a large number of Bitcoin wallets. They immediately advised their users to choose the “Mark as do-not-spend” option for these funds in order to protect themselves. But, a couple of more notable dusting attacks have happened since.

Gold physical bitcoin on reflective surface

In August 2019, Binance announced on Twitter that a large-scale dusting attack on Litecoin users had taken place. Binance revealed that roughly 50 Litecoin users received trace amounts of LTC, or more specifically, 0.00000546 LTC. Soon after, the blockchain data provider Glassnode revealed that the number of affected users was actually much larger. According to their analysis, nearly 300,000 wallet addresses were affected by the dusting attack.

Later, it was revealed that Binance found the identity of the attacker, who was an owner of a mining pool based in Russia. Binance elaborated that the goal of the attacker was to advertise their services to Litecoin users, not to cause a commotion. Reportedly, they were unaware that what they were doing could potentially endanger the privacy of Litecoin users if the data fell into the hands of malicious actors.

However, in 2020, Binance saw a different type of dusting attack aimed at BNB users. The scammers sent tiny amounts of BNB to a number of wallets along with a malware link for claiming 50 BNB. Of course, there were no BNB to be claimed, as the whole thing was a scam designed to get a hold of the users’ information.

How to Protect Your Cryptocurrency Wallet

Dusting attacks aren’t as common as you might assume, so there’s no need to worry about them excessively. Yet, you shouldn’t underestimate their potential consequences. If you have large funds in your crypto wallet, it’s better to be cautious and pay attention to any small increases in your holdings because it could be a sign of a possible dusting attack. With that being said, there are several ways to protect your crypto wallet from being a target and preserve your privacy and anonymity. 

The most effective way to ensure the safety of your funds is to use a hierarchical-deterministic (HD) wallet, which is a digital wallet that automatically generates public and private keys from a single seed. The patterns of the keys are random, so it would be very hard to guess them. In other words, HD wallets create random new addresses after every single transaction you make, making it harder to track down which wallet addresses belong to the same user. 

For added security, you could also create separate email addresses for each wallet and use an IP-concealing service each time you make a transaction, such as a VPN or the Tor network.

Finally, some wallet providers also offer the option to isolate a certain amount of UTXOs and mark them as “do-not-spend”, as was the case with Samourai Wallet. The flagged funds will remain as UTXOs on the wallet address until you decide whether to use them or not. This is a pretty safe way to protect yourself because as long as the funds aren’t moved, the hacker won’t have a way to track you down. 

Is There a Way to Get Rid of Cryptocurrency Dust?

Cryptocurrency dust can be annoying, but it’s an inevitable part of blockchain networks, so we have to tolerate it. Some users believe that its value will increase with time unless transaction fees continue to rise. But that’s another conversation. 

Binance native coin icon in gold bubble

Currently, there is no effective way to completely get rid of crypto dust. However, some crypto exchanges have started offering the option to covert the crypto dust in your wallet into their own native token. 

For example, Binance allows its users to convert any amount of crypto dust to BNB every 24 hours for a small fee. Crypto.com is another exchange that offers a crypto dust conversion to CRO, allowing up to 5 units of dust per conversion with no added fees. Alternatively, you can consolidate all of your UTXOs from different wallet addresses into a single address.

Closing Thoughts

Crypto dust is an indelible part of cryptocurrency trading, so instead of trying to get rid of it completely, it’s smarter to convert it to a different cryptocurrency or consolidate it. On its own, crypto dust is a harmless byproduct, but if you notice an increase in your funds that you weren’t informed about beforehand, you should be cautious. Of course, it might just be advertising, as it is in most cases, but it could also be a dusting attack. 

Dusting attacks aren’t frequent, especially in the past couple of years since the transaction fees have risen as it’s getting more expensive for scammers to perform such an operation. Blockchain networks still remain a fairly safe place by way of their design, despite these types of attacks. Still, it would be good to stay vigilant, especially if you have large holdings.