Dust transaction

What is dust transaction? It is the very small transactions like fine dust, therefore the name seems to be given appropriately. But what was more of a concern for those interested and engaged in Bitcoin transactions is that the Bitcoin foundation announced that they are about to kill all Bitcoin dust!

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What is Bitcoin Dust?

Bitcoin transactions of very small amounts are called Bitcoin dust. The latest recommendations by the Bitcoin foundation state that these types of transactions will be considered to be “uneconomic dust” and users should not accept them on the network if any single output is under 54.3µBTC.

But the problem here is that Bitcoins are infinitely divisible and will remain so. But the purpose of this announcement is to avoid bringing any fundamental change to the working of Bitcoins. Actually the policy will allow transactions on the network and it’s just a default configuration that will come into effect in the forthcoming update of Bitcoin software (0.8.2). An operator of a Bitcoin server can still change this setting to their own preference. Thus your Bitcoin will remain divisible even up to a single satoshi; but you will face a lot of problems to receive or send payments under the set threshold if majority of servers won’t accept these transactions.

Why is Dust Unwanted?

Dust TransactionThe fraud prevention system of Bitcoin network makes it necessary to save every single transaction forever. This translates to occupancy of some bytes by the data on the network forever. The size in bytes of a transaction isn’t formed of the Bitcoins transacted, but of the number of inputs and outputs involved in the transaction. There is a charge for data storage and also the network needs some time to process, confirm and include transactions individually in the network. So, here the problem steps in. The tiny “dust” transactions will require lots of storage space and computation time and power, and they won’t have any significant value. This will decelerate the speed of network and will create expenses for the operators of Bitcoin servers. So, it has become necessary for the Bitcoin foundation to declare these tiny transactions as “spam” and not to process them any longer.

Why is This Necessary?

Some malicious individuals have been found to send satoshi (which has no real value yet) to
non-existing receivers with an intention to embed some rubbish-containing bytes on the network. And this is real Bitcoin spam. These are hurting Bitcoin credibility and slowing down lawful transactions.

Bitcoin fee is a way to limit this spam, but there are ways to avoid it and so the dust threshold has been proposed. It will keep spammers away and make Bitcoin transactions smoother and faster.

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