Dust transaction Meaning

What Is a Dust Transaction?

A dust transaction involves sending crypto that is less than the transaction fee required to process the transaction on the blockchain. It occurs when the wallet’s UTXOs (Unspent Transaction Outputs) total to crypto or “dust” less than the gas fees to cover another transaction.

Dust is a remnant of multiple crypto transactions, which lead to the accumulation of fractions of crypto in the user’s wallet. It generally occurs as a result of rounding errors or transaction fees associated with each transfer.

For example, a wallet has a balance of 1.2502921 BTC, and you transfer 1.25 BTC to another address. If the transaction incurred 0.000257 BTC in fees, you’ll be left with a very small amount of ~0.0000351 BTC.

These amounts are too small to move dust due to negligible value and exorbitant transaction fees. Hence, are non-tradable and often remain stranded.

However, dust can also be added deliberately. For example, some protocols send a very small amount of crypto to the user’s wallet address to promote their project. It can also be used to track a wallet or malicious activities like dust transaction attacks. 

Through dust transactions, malicious actors send unnoticeable amounts of crypto to random wallets. They use dust to track users’ activity and linked accounts to identify them through off-blockchain activities. 

When the user moves funds from a wallet address to a centralized exchange, which has their KYC and other personal information—it can be used to find their real identity and exploit them through blackmail, extortion, and phishing scams.

Some crypto exchanges and dust conversion tools enable users to consolidate and transfer their dust and even isolate it.