When you move the analog stick, it touches the other part of the Controller and doe to this, some plastic rubs itself off the stick, producing a sand-like substance. This is no reason to worry, it's perfectly normal and one of my PS2 controllers actually has like 1mm of plastic missing on the left stick.
My controller makes a slight rattling sound as well and it also works perfectly fine. So as long as your controller still works, there is no need to buy a new one.
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