Dust refers to a tiny amount of coins in fractional values and usually below the network/transaction fee. The Bitcoin protocol sometimes generates tiny outputs of coins when users send BTC back and forth. Other UTXO (Unspent Transaction Output) blockchains that are forked from Bitcoin also generates this same tiny output, e.g. Litecoin (LTC).
Dust has 3 negative impacts -
It is unprofitable for users to spend funds that requires a larger value of network fee to confirm your transaction
It pollutes the ecosystem by overloading the network with uneconomic transactions (in terms of data storage and time, small-value transaction requires data space storage similar to large-value transaction)
It decreases your privacy level when you are consolidating your dust from various wallets to one, this exposes your wallet identities where by others can guess the wallets all belong to one person
When you are trying to send BTC/LTC on Crypto.com DeFi Wallet, dust UTXO error might occur when
The transaction is rejected by the network because it is constructed with dust UTXO, requiring more fee to spend the actual amount of what it’s worth, this is to prevent the network from being “spammed” with transactions that will slow down the network and creates costs to those running the BTC/LTC servers.
The transaction would generate dust change output that would make spending them challenging (referring to previous point)
How can I solve this dust UTXO error?
Do not send small-value transactions with a higher fee amount. Since the network will attempt to create a UTXO from a small transaction, the transaction will fail.
Try adding more funds first to the wallet before sending them all out. Having a larger transaction will ensure that the network accepts the transaction right away.
Choose a lower fee tier in the send confirmation screen
Make sure to leave a considerable amount of remaining balance on the wallet so that the network will not consider it as a dust transaction when you’re trying to spend the remaining balance