It is difficult to express how f'ing wrong you are. Jesus christ. There's nothing worse than a confident idiot.
Yes, it is for charging. There are plenty of sources for this, here's one:
https://team-xecuter.com/forums/threads/154232-Why-isn-t-my-TX-SX-Pro-Dongle-Working
My experience is that the dongle has died on me probably a dozen times now. It dies, the light won't come on and the Switch won't boot. I plug it in for a minute or two, then try again and it works. It might be true that it draws power from the Switch itself, but I wouldn't know since I don't leave the dongle plugged in. Plug in dongle, press power button, put dongle back in the case and done.
I use the dongle a lot, necessitating frequent recharges, because the switch f'ing crashes at least once a day. SXOS 2.0 was even worse, crashing multiple times a day, but 2.0.1 has gone back to only crashing intermittently. If it never crashed I might not use AutoRCM, but I have to reboot both of my hacked switches at least once a day, sometimes more, at totally random and inconvenient times. I keep a dongle downstairs and upstairs next to my bed since these crashes are so frequent and unexpected.
charging the dongle?
the dongle takes the power from the console, so hence the part where it says make sure your console is fully or nearly fully charged.
once you install autorcm your console will not boot unless the dongle is inserted.
pressing and holding the power button will do nothing, well done you have instructed your console to turn on, then turn straight off again.
people really need to read the guide before doing things, its all explained how to use and is very simple to use, id say n00b friendly but then god makes better n00bs.
installation steps:
1) make sure console is fully charged or nearly fully charged and powered off.
2) remove right joy con and insert jig
3) download latest boot.dat from the website and copy to root of sd card (formatted as EXFAT)
4) insert sd card into console
5) insert usb dongle
6) press power button and press vol + and keep vol + held down
7) sx menu will load
8) install auto rcm if you dont want to keep using the jig everytime
9) install sx cfw
10) reboot console
11) have wifi enabled and go to album then activate license
each time you power down your console you will need to have the dongle inserted each time you power the console on, you dont need to use the jig or keep hold of vol + button.
the usb port on the dongle will likely be a means to connect to a PC if needed to update it at a later date, it does not function as a means to charge the dongle or console.
it never states in the guide to connect the dongle and charge it, those people who then go connecting it to a direct power source then are epic n00bs, you run the risk of sending shit loads of power through the dongle and cause damage, it does not contain a battery so why on earth would you think it needs to be charged.... what is there to even charge, just a nice massive voltage sent surging through it and likely blow its capacitors.
the light on the dongle is a means to inform the user what battery power is left in the console, it will light blue to say its ok, green to say it has charge, as charge on the console depletes the colour of the dongle light will go to a yellow colour.
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Why would anyone have Auto RCM on anyway? Keep it in sleep mode
Because my switches (both of them on SXOS) crash so damn often. Maybe yours doesn't. Other people have different situations than yours, and for them AutoRCM is a godsend, please don't dismiss other people's experiences.
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Only crashes i have heard are random ones when exiting a game and going back into the Album (when docked). I have haven't had mine docked and there have been zero crashes, or error messages.
My crashes always happen undocked (never had a crash docked). It usually happens if I run a game and open the album, and happens maybe 50% of the time if I exit a homebrew app and open another one. SX OS will crash 100% of the time if you update boot.dat via FTP and then access the album (but it's fine, you need to reboot to load the new version anyway). Sometimes it crashes just from opening too many games since you last rebooted, even without touching the album. SX 2.0 crashed for no goddamn reason multiple times a day, while opening games or the album or homebrew and I reverted back to an older version until 2.0.1.