In case you have not heard about it, yet: There has been a small uproar in the bitcoin community lately when the bitcoin foundation silently announced that they are planning to kill all dust transactions on the network.
Dust? What’s that all about?
Dust transactions describe bitcoin transfers that deliver very tiny amounts of BTC to their receivers. Following the bictoin foundation’s latest recommendation (see here) , these kinds of transactions are to be considered as “uneconomic dust” and should not be accepted on the network if any single output of any transaction is below 54.3μBTC.
But bitcoins are infinitely divisable!
Indeed, they are! And it will stay that way! What has been proposed is not a fundamental change to the way bitcoins themselves work. It is the policy for accepting transactions on the network, and in fact just the default configuration, that will be affected in the next update to the bitcoin software (v0.8.2). A bitcoin server operator may still chose to change theses settings to their own liking.
Your bitcoins will always stay dividable down to the single satoshi, you will just have a very hard time sending or receiving amounts below the threshold if most servers will no longer confirm these transactions.
So what’s the problem with this dust?
Part of the bitcoin’s fraud prevention requires every single transaction ever processed to be saved forever. This means every transaction will require some bytes of data to stay on the network for eternity. The size of a transaction in bytes does not come from the amount of bitcoins transacted, but rather from the number of inputs and outputs used in this transaction. Data storage does not come free, and the network requires some time to process, verify and include individual transactions in the network.
So that’s where the problem is! If we have heaps of tiny “dust” transactions on the network, a lot of storage and computation power must be used to transfer values of no significance. This slows down the network and creates costs to those who run bitcoin servers. That’s why the bitcoin foundation is planning to consider such transactions as spam and wishes to no longer process them.
How can sending money be spam?
We need to keep in mind that a single satoshi does not have any real value (yet). If you are sending a single satoshi today, you are really only transacting a value of ~$0.000001. Even the proposed dust threshold equals little more than half a cent($).
The recent history has shown that there are few malevolent individuals who are sending satoshi transactions to non-existent receivers, just to embed some bytes of rubbish on the network. That’s real bitcoin spam. It hurts the credibility of bitcoin and potentially slows down legitimate transactions.
Bitcoin transactions do require a transaction fee already, which is in part also supposed to limit these spam transactions, but it is still fairly easy to circumvent these fees if you know your ways. A dust threshold on the network will make undertakings like these much more pricey and hopefully helps keeping spam off the network all together
The End of All Faucets!
Really? No, not really! We were just being dramatic!
But, many faucets and other “free bitcoin” sites (check our List) are creating transactions that would have to be considered spam by the new policies. If these sites want to continue their service, they will need to implement accumulation functions to keep balances for an address stored locally and only sending the users their satoshis once they have collected enough to not be seen as dust. A lot of the sites which are lacking such functions today are already making steps into this direction, so there’s not really any need to be worried about your free μ-coins!
Our lottery is also on the safe side! All our prizes are well above the dust threshold. Speaking about the lottery, have you grabbed your tickets yet? No? Then go and visit the Lottery now.
The Bottom Line
Bitcoins were created as a money alternative, and no person in their right mind would demand to pay/receive half of a cent, or even less. If the value of bitcoin was to rise 10 fold, the dust threshold would certainly be lowered again to match the real value of bitcoins. We should welcome this change to the protocol as it will stabilize and secure the growth of the bitcoin network while it becomes more and more relevant in the “real” economy.
[UPDATE 30.05.2013]: It’s official. The Version 0.8.2 has been release. Read here
So, what do YOU think? Is it a change for good? Or do you think this is going to hurt the community? Let us know in the comments below.