[tomsem]

I do not know for sure, but I think it is very likely you need to register the Kindle to have Vocabulary Builder feature. The vocabulary database gets synced to cloud.

For example, you cannot create collections without signing in.

Also, if it is not registered to your account, you cannot use its serial number to DeDRM any books you purchase from Amazon (if that matters to you).

If you want to run KOReader, a Kobo or Pocketbook would be a less troublesome device to set up.