Avoid A Bitcoin Fee NIGHTMARE - UTXO Consolidation Tutorial
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- čas přidán 2. 06. 2024
- Join me as I explore the incredible strategy of UTXO consolidation in Bitcoin! In this video, I'll share my personal insights on how managing your Unspent Transaction Outputs (UTXOs) can dramatically lower your future transaction fees. I'll guide you through the process of combining smaller UTXOs into larger ones, especially during times of low network activity. This isn't just about tidying up your wallet; it's a smart move for saving on fees down the line. Whether you're deeply involved in Bitcoin or just starting out, understanding UTXO consolidation is a game-changer for cost-effective transactions. Let's dive into this essential Bitcoin management technique together!
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RELEVANT LINKS:
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The term UTXO Management scared me. Then I watched this video, and was like... "oh no shit, that's it, cool"! thanks man.
About time someone spoke seriously about this issue. Fees can add up massively on DCA HODLling. Bitcoin saving is very different from keeping money in a wallet. I wish a wallet would add the function of notifying us when fees allow reasonable consolidation
FYI, for fees, each UTXO you add to the transaction adds on 0.5x the fee. So if sending btc from 1 UTXO is 1000 sats, sending from 2 UTXOs is 1500 sats, sending from 3 UTXOS is 2000 sats, etc. (for single sig wallets).
One thing you didn't mention is you can SPLIT UTXOs using the same technique. Choose a large UTXO, and send 1/2 of it to yourself.
What a great tutorial, Thanks! I'm saving this video for when I need it.
Excellent video. I did not know any of this.
Thank you Ben.
I had a 71 Input and 141 output incoming transaction to my sparrow wallet and it was taking forever so I boosted the fee using the increase fee and it did the consolidation and then was confirmed quickly. it went to 1 input, 1 output plus fee. AMAZING!
Very helpful. Was unsure what UTXO was now I have a better grasp, very much appreciated.
Very informative as always. Thank you!
As many of us try to connect our wallets and learn on the fly rapid pace...
You are the m************ cherry strawberries and pineapple on top of crypto shake, 😂...
I thank you my brother and keep up the amazingness!
Excellent video, your clarity of explanations is second to none.
This is an amazing video. I am a total noob that is just dipping my toes to try and understand Bitcoin. Your explanations are perfect for the person that is starting fresh. This encourages new people to join in and get on the bus to the future. Thank you
Very helpful! I think it raises more questions for this noob, but I'm sure I can figure those out over time too. Continuing to watch! 🙂
I would love to see a video with Sparrow and Trezor UTXO consolidation! Thanks for your awesome vids.
Great info, I love learning from you, I will save this for later. You rock! 🇨🇦
Incredibly useful. Thank you!!!
Fantastic all info I had no idea about. Thanks
Awesome. Thanks as always for the education.
Good job on making this super simple to understand, you cut out a lot of the flufff I've seen elsewhere.
I couldn't agree with your Final Thoughts more. If you are comfortable and competent working with Layer 1, then you have the option to be the bank for others going forward.
Thank you Ben! that is a real help and very straight forward, and as far as spending, and the merchant seeing the change come back, i would imagine cold storage for savings, and a hot wallet would be a bit like a current account
This is very helpful. Great video.
amazing explanation. thank you
Well done...a convoluted branch of the rabbit hole well explained... keep the spot lamp on for us please
Marvelous info. thanks!
Excellent tutorial 👌
you're awesome dude, thank you so much!!!
Very helpful. Thank you
If I'm understanding this correctly., I'm really feeling sorry for those who have been DCAing lower value fiat into Bitcoin. This is the first time I'm learning about the UTXO issues. Also seems like an infomercial for non-techy people (most people I know) to just buy the ETFs rather than self-custody, which is very unfortunate. :-(
It doesn't work that way. If you DCA small amounts it doesn't create many utxos. When you transfer from the exchange to your wallet it comes in one utxo even if you purchased it with many small $ amounts.
Non-techy people are considerably more likely to lose access to their funds through self custody than an ETF, don’t you think?
@@dmpathSo every time I transfer from an exchange to my wallet that creates a new UTXO?
@@onehappydawgyes, so you can dca in the exchange but once you take self custody to your wallet it creates a UTXO
@@noeespinoza7977 ok, thanks.
I first heard of this a few weeks ago on Bitcoin University’s channel and I think I’m finally getting my head around it.
It’s probably not as complicated as I’m making it but it’s just new information I haven’t heard before.
Fantastic video. Thank you. Really appreciate you 💖👍💥💥🚀🚀🎉
Good work!
Incredible video!
Great info! Thanks!
Great video thanks!
This video captures such an interesting point in time and makes a good example. Since recording only 2 months ago, btc is up and a million sats is already like $700 USD, by the end of this year it could be $1,400 for all we know. I feel like the fees being denominated in sats on chain, but the dollar value of those sats is pulling apart privacy and efficiency at a crazy rate. I hope lightning continues to develop well.
(edit) just wanted to add, since this video, fees have returned back down to a somewhat normal level.
Great video & well explained. Thanks.
How do the btc miners cope with their utxo burden? Theirs must be awful. Lots of really small transactions
Great video Ben, is this the same as 'Rinsing' ?
can you also put this on X? youtube is forcing to turn off ad blocker which I won't tolerate.
Awesome!!! greetings from Peru
I wonder how many UTXO’s are and will become economically unspendable? This could further add to bitcoin’s deflationary nature. Millions of coins have been lost due to mistakes in security and/or sending, and now with the higher fee environment more and more sats will be economically unspendable with so many people being unaware of UTXO management.
Thanks for the knowledge shared Ben!..
My question is are we able to do this on unisat wallet ?
and remember during minting, u have to go individual and not bult in some cases, so dont u end up spending the same fee as u will be spending smaller utxo from a consolidated uxto
Heard Staxum is gearing up for a Binance listing. 🚀 Exciting times ahead!
Benjamin - is there an app or alert notification (on any platform) that will ping me when the fees are low? It'd be nice to not have to check the mempool so often. Or is the best way to just gamble and set a low fee hoping eventually it will be included?
Ben, if I take all my funds off the exchange in one transaction consisting of many UTXOs. Will all the UTXOs arrive in my wallet seperately or all combined?
Quick question. Do I have to move my BTC from my Ledger to Sparrow hot wallet to do UTXO Consolidation? Of can it stay on the Ledger wallet and just be consolidated using Sparrow?
I moved from Ledger to Tangem awhile back when ledger had all their concerns with keys potentially being exported to the cloud... I unknowingly combined all my utxos at that time at a low fee. Now that i watched your video it makes sense though. Thanks for helping everyone understand. I wish i could use my Tangem with sparrow wallet though now that I'm learning more about it.
why can't you? tangem doesn't hold your UTXOs, they're on the block chain. if you have your seed phrase you can load it into sparrow as well.
@@rationalevidence9095 Tangem doesn't have a seed phrase that you can obtain. Or at least the one I have is like that. I guess on the newer versions you can choose to know your seed phrase which would allow it to work with sparrow also.
the original tangem stores the seed phrase on the card and you cannot know it.@@rationalevidence9095
@@rationalevidence9095 be careful telling someone that - remember that loading a seed phrase into Sparrow means you're creating a hot wallet where the seed is stored online - a VERY bad decision if your intention is to hold keys on a hardware wallet.
@@rationalevidence9095 The default when setting up the Tangem is not to have a seed phrase - it's all hidden in the Tangem card(s). But there is an option to set it up using a seed phrase, so if you've done that you can recreate the wallet in Sparrow. But when you make changes such as consolidating UTOXs in Sparrow, are those changes reflected in the Tangem app? Any issues or dangers in doing this?
Question for you Ben, if there isn’t any soft or hard fork for bitcoin in the future, eventually, all UTXO’s will be in spendable? For example, if we are trying to finalize transactions, eventually, the UTX so fees will be too large to spend incoming UTXO “change” or dust? I’m not referring to layer 2 or 3s but ultimately, all future small balances will be unspendable.😢 am I missing something?
Fees will likely fluctuate, but we don't know where they'll settle over longer periods of time. We also don't know how the increased dollar value of Bitcoin will affect fee rates either. "Small" utxos will be a relative term based on what the average base layer transaction looks like. It could be that in 10 years Bitcoin is the global settlement layer and most of us never use it explicitly.
@@BTCSessions Thanks for answering my question. I like that theory. The base layer will be for governments and major business transactions. I hope during that time, the average person will still run nodes and not just leave it up to governments to corrupt.
It seems like, for reasons stated above, just make your UTXOs in cold storage as big as possible. Crazy to think that if bitcoin does what people hope it will do, many many of them will be shocked to learn their urgency to get sats off exchanges like everyone in the community has told them to do will render their savings useless. Useless sovereign property rights.@@BTCSessions
So is the point consolidating when fee's are low? Consolidating 10 UTXO's and sending the same 10 UTXO's out for payment seem to have the same fees.
Great video, Ben. But it still left me with unanswered questions.
1. What determines the size of a UTXO in bytes, is it just the type of address or are there more factors?
2. If I consolidate 5 UTXOs, for example, does it mean the size of the transaction (in bytes) will be 5x the size of 1 UTXO transaction and therefore 5 times more expensive, or are there other factors that change the transaction size in bytes?
Love your videos , learning something new every week!🙏
you can find these answers yourself by playing around on sparrow wallet. they let you set all the factors above and you can see the difference yourself.
1) type of address AND amount of utxos sending the btc.
2) Each UTXO you add to the transaction (after the first one) adds on 0.5x the fee. So if sending btc from 1 UTXO is 1000 sats, sending from 2 UTXOs is 1500 sats, sending from 3 UTXOS is 2000 sats, etc. (for single sig wallets).
i tested this up to 10 utxos.
@@rationalevidence9095 Thanks!
I have a ledger and want to transfer all my bitcoin to my new coldcard. Would it be the same to consolidate all the utxo’s when sending to coldcard rather then consolidating on ledger then sending to coldcard? Newb here 😊
great video:) hope u could clarify a few questions though:) why would u choose a sw wallet on desktop like Sparrow instead of using a known hw/cold wallet? isn't there security issues adding due to using a desktop wallet instead of a hw wallet? and isn't Sparrow also just a one mans shop? hope you have time to revert, probably just my ignorance playing w my brain here...
When you send BTC on a transaction, what happens to that used UTXO from the original BTC that I received previously?
Another great video, thanks Ben! Is there an 'ideal' UTXO size? A size that's least likely to become unspendable in the future?
He suggests 1M+ sized utxos. Then a variety of those. So have some 1M, 2M, 3M, etc
@@Cronus6
$IM dollars?😊
Damn im poor
@@summerbreeze5115 1M sats 😆
Hi, is Electrum wallet considered a safe way to transfer Bitcoin ?
Thanks .. amazing content you provide .👏👏⭐️✌️
Super helpful
Let's say buy $1 an hour on strike
I wait until my btc on strike is worth $1000
I send that $1000 via lighting to my Muun wallet
Then I send that $1000 from Muun wallet to a Trezor on chain
How does the UTXO consolidation work when it comes to lightning and on chain transactions?
If you let your dca build up on Strike and only send it out at $1000, you’ll only be sending out 1 utxo. So you’d have no worries. The problem would be if you buy $1 an hour and send each one out separately, then you’d have 1000 very small utxo’s and it would be a nightmare to consolidate those later. Also, the fee concerns really only apply to on-chain transactions (right now) - Lightning Network is still crazy cheap. Hope that helps.
@@narwhaltacos2197 thanks for the insight!
I still don't understand how UTXO works on chain vs lightning
If I sent $1 each hour via lightning to muun until I accumulate $1000 , would I have 1000 UTXO? What if I sent that $1000 via lighting back to strike, then one on-chain transaction of $1000 to trezor?
Lightning transactions don't have UTXOs right?
A lightning channel is a multisig between two nodes, that holds a UTXO of a certain value. When a lightning channel get closed, that utxo is split up between the two parties accordingly.
@@narwhaltacos2197 He would have to worry if bitcoin does what we hope it does. I don't think it's far fetched to think that if bitcoin get mass adoption globally a $1000 UTXO could be worthless.
Stirke can send on-chain too. Why do the extra hops?
Thanks a lot ❤❤
Finally I understand utxos thank you. I dca into muun from swan but am going gto get cleaned out transferring to sparrow n hard wallet. Any ideas guys
Great Vid Ben and explained so well. One question. When you consolidate UTXO's, how does it differ to spending those UTXOs? Ie. I would have thought consolidating is still sending them to miners and there is a fee associated with each UTXO to 'consolidate' it down into 1 UTXO... so how does this differ to sending those same UTXO's to miners to spend? Feels like the fees would be the same....
Am sure there is s simple answer to this, thanks.
From my understanding , your utxo is charge as a single fee.. unlike when u have to send them without consolidation..
Wow !!! was surprised he called the BTC fees a nightmare in the title. A lot is going to have to change on the transaction side of things if BTC is ever going to be adopted by the masses. It seems like a lot of people in the BTC community are afraid to admit this. I think we will get there one day, but it appears it will be years in the future.
I wouldn't say it's scary. It's just an economic reality that having society store your transaction data forever into the future is costly. For day to day small value interactions, this is likely not needed and can be easily abstracted to layers with various tradeoffs.
Can't decide between BTC and STX? Why not both? Staxum is my alt gem
So another way to fix the unspendable problem would be to send all of your DCA amounts to a personal wallet? How I personally go about my purchases is make purchases in my exchange ounce I reach .001 or .003 I will send to my cold wallet If I don't have a sparrow wallet. Does this sum it about right? And over the years as I learn about the cold wallets I will move my bitcoin to new cold wallets which keeps all of my bitcoin in one UTXO. Did I get this right?
you're wasting a lot. if you buy on exchange, don't send to wallet until you have at least 0.01 btc. anything smaller is going to kill you in fees.
Do you seen any privacy concerns in consolidating coinjoined/mixed UXTOs?
I take it this video is in response to the tweet i sent you yesterday, thank you for making me this video but its too late😢
Solid stuff
Thank you for explaining how to combine UTXOs! My question is: Is doing this a taxable event??
I would think of this as shuffling around bills in your own wallet. It never leaves your possession and never gets exchanged for another currency, asset, good or service. It’s like taking small bills and exchanging them for one large bill, but you can do it yourself without having to exchange with another person or business.
@@BTCSessions I did exactly as you suggested, I created a transfer of 8 x 100,000 sats but it made me pay a fee of least 13636 sats or else it would not do the transaction. Plus, after 2 days, it has not confirmed even one one confirmation. So, it looks like it will take several days or maybe weeks to get confirmed, lol, like my other transfers have been taking. Have you had this happen?
Thank you
Question: does liquid bitcoin have this utxo problem?
My wallet uses an old address convention. Is there a way to update so I'm using a more efficient address type?
Best bet is to create a new seed, then migrate funds to the new wallet.
Ben, your sessions on channel management, liquidity management and UTXO management are excellent. But I’ll admit I understand only 20% of much of it.
Lightning inbound Liquidity management is especially baffling to me. I see a day when I’ll be making twenty micropayments per day with Lightning. But as I’ve experimented with Lightning in Phoenix, Greenlight and others, I find myself painted into a liquidity corner, having to pay commitment fees when I don’t expect to.
I wonder if an API could feed a real time transaction fee reference to make the test net experience more realistic?
What is the diff in spending the fees to consolidate over just using bitcoin normally, and spending the fees as they come?
same thing this guy is just talking to get views. ultimately your utxos will take space in the blockchain, and that’s what you are paying for, so adding an additional transaction to consolidate will just make you spend more money on a new utxo, so actually it’s just worse.
Do I understand this correctly?
UTXO consolidation is quite expensive, but you want to do it as soon as possible to avoid even higher fees in the (distant) future - correct?
@@MrNicolinoTv I think we need a better solution for small UTXOs in the future. A lot of people DCA small amounts weekly or monthly, directly into their hardware wallets - as they should. 10 or 20 years down the line, their 2019 $100 weekly DCA UTXO might be unspendable because fees are too high?
@@sm0ki correct very unfortunate I think over a milllion sats UTXO is on the safe side.
Setting aside the privacy concerns, I'm still puzzled..If there's a fee involved, what's the advantage of consolidating UTXOs within the wallet?
@@sadven consolidating your smaller UTXOs into larger ones make your future transactions spendable. Yes there is a fee to consolidate your UTXOs whatever the sat/vb is at the time of consolidation. Base off some research it looks like you want to consolidate UTXOs to a minimum of 1 million SATS. My UTXOs range from 1-3 million SATS.
@@sadven Two advantages:
1) Really small UTXOs might be unspendable in the future, when fees are much higher. You can avoid this by combining several small UTXOs, creating one or more bigger ones.
2) Even if the UTXOs are big enough to spend them, the fees might be way too high in the future in relation to the total amount of the small UTXOs you want to spend. The idea is: Now that the fees are relatively low (compared to decades in the future), it's a good idea to practice UTXO consolidation.
Disadvantage:
Privacy concerns and high fees. There's no way around it, UTXO consolidation will cost you! Also, the whole "set it and forget it" narrative is over! You have to teach new Bitcoiners about UTXO consolidation.
Exactly! this video is what us bitcoin-ers need!
I use sparrow for non KYC… I have maybe 55-60, 50,000 sat UTXO’s…
I’m not worried, as ‘.1’ Btc is my goal… if I haven’t already gotten there 😅 privacy is important and what a time we are in!?
I'm worried, if a 50,000 sat UTXO is unusable now (really a 100,000 sat since you have a 50,000 sat UTXO after fees) I don't think its a stretch to think that a 0.1 BTC UTXO could be unusable in the future. We all want to see BTC go up in price, but we (including me) don't fully know what those unintended consequences could be.
@@ds78349
Damn😢
Do UTXOs apply to all cryptos or just BTC?
You can also have separate UTXOs in the same address I learned
I’ve been buying bitcoin via Strike by dollar cost averaging . I’m getting ready to move my bitcoin onto a hard wallet.
Will I run into the same high fees?
Maybe a topic for another video?
From the strike faq:
On-chain send fees
When you send funds with Strike via the Bitcoin network (also known as an on-chain transaction), you have the option to select how quickly your transaction is settled. For the faster delivery times (Priority and Standard), Strike charges an on-chain send fee. Strike does not charge an on-chain send fee for the Flexible delivery time.
I assume they batch with flexible and also probably wait for low fee times.
So, moving your DCA to your cold wallet shouldn't need to be fast, choose flexible.
could TET SoftNotes solve this headache? what do U think?
Thanks!
Thank you so much!
Great summary about UTXO management!
I was basically already aware of all these aspects at this point.
There is just one question I am still left unanswered with :
When you use one UTXO as a trasaction input and send an amount smaller than what you could to a destination address, will the transaction always drain the whole of the Bitcoin on the input UTXO?
Using Blue Wallet on my android phone I sent a tx from one UTXO to another in the same wallet.
As expected I got the output on my new address and the change on another adress that I did not specify in advance. BUT the wallet did not empty the whole input UTXO!! I was left with 2000sats on the input utxo! It seems to be related to the fact that these 2000sats were sent in a distinct tx to this utxo! I am annoyed about that. Apparently The history of sats in a UTXO matters!
Are the 2000 sats just the change? Because every time you use a UTXO in a transaction it is destroyed and new utxos are created. Typically if you had one utxo it would look like:
one input ---> 3 outputs (recipient, change, fee to miners)
The old input is used entirely no matter what. If you need to use two UTXOs, both of them will be used entirely.
@@BTCSessions Thanks for your reply! No, the 2000 sats were left on the initial utxo. The change is bigger.
Yes, one input ---> 3 outputs
BUT the amount that is left stuck on the input corresponds to an earlier input to that address! So there were like 2 distinct coins on the same utxo.
Now I did another tx draining all my wallet to a new address in the same wallet. It should be clean now.. (as soon as confirmed..)
Ah.. Maybe UTXO is not equal "address". So you can have several utxo on the same address, right? @@BTCSessions
Awesome tutorial Ben. Just subbed to Wicked Smart Bitcoin too!
Any idea how to consolidate with Tangem?
So, if a global adoption were to occur, would we see a point where the average holder gets priced out of the network from fees?
Depends on what other base layer improvements happen before the protocol ossifies.
If it stood still as it is now, on-chain fees will likely be regularly high, yes. In that case new users would mitigate custodial risk with things like federated models (Fedimint, Liquid, etc)
If some base layer improvements happen, then you may have the possibility of partial ownership of a UTXO. Best to work with the tools we currently have though, and use new ones if/when they become available.
Learning a lot here but getting jaded...more to custodial risk then just losing your keys, it seems like it is not beyond the realm of possibility that if we see mass adoption the network could grind to a halt or very slow churn used by only the select few. @@BTCSessions
I'm keeping 1% of my stack in liquid in jade and 1% in phoenix lightning. If fees skyrocket then it'll be too late to set those up.
Does strike or kraken support liquid?
Strike is actively looking into it. Unsure about Kraken. Bitfinex does.
@@BTCSessions kraken doesn't support Linqid currently. Just main and lightning.
so when you send all of your btc from a wallet to a new wallet , will the utxos then be consolidated in the new wallet?
yes . Every time a wallet receives btc it receives it as 1 utxo.
So if a UTXO is too low be transacted, how does the consolidation transaction take effect?
I’m gonna have to assume you’re suggesting to do the consolidations during low fee periods, but you never mentioned that.
In general yes it's ideal to consolidate when fees are low,
However, a best practice when obtaining bitcoin is to either
1. Let a balance build on an exchange to greater than 1m sats before withdrawal OR
2. Withdraw into something like Liquid and build a balance there before moving on-chain (I linked a video on doing this in the shownotes)
Hope that helps!
If BTC is $47,000, 1m sats would be $4700. Is that the size you are recommending. I was using around $1000 as my preferred UTXO size.
@@robertruff5941 no 1m sats is 0.01 BTC, so that would be $470. There are 100m sats in a Bitcoin 👍
I would love to see a video with how to get ready to runes protocol after the Halving. I have a Bitcoin node but i also need to get the ord client to be able to mint the first runes after the Halving. And i'm a liitle lost with all of this information. If you could help, that would be great! Thanks!!
Is ledger safe
Q: Assuming there's a way to measure the total amount of UTXOs on bitcoin, i wonder if it represents a health metric for the ecosystem. Ideally more is better, yeah?
you can view total UTXO's on chain on clark moody dashboard via the UTXO set size. I agree technically more is better and I monitor that state as a function of how much HODL'ing is happening on the network. At the moment it's about 161 Million transactions.
3:41 before starting and getting to the point. Ballsy. I missed all of it as a first time viewer… will see how we go.
Please tell me an exchange with low fee in Europe
Time stamps?
Wow.. I did not know anything about utxo's...
Hope this was helpful! Glad people are becoming aware :)
I connected my ledger nano s with Sparrow sucessfully and it is all linked, however Sparrow isn't showing any transactions nor UTXO on the sparrow window. Does anybody why is this?
IDK. I connected my ledger to Nunchuck and it showed them.
Is this the same for Ethereum?
No, Ethereum runs on an account & balance model, no UTXOs.
Where does the minimum 1M sats or 0.001 BTC come from? Isn't that heavily dependent on BTC price? If you have 60 UTXOs each of which are worth more than 1M sats do you still need to consolidate? Shouldn't the trigger to consolidate be more # of UTXOs in your wallet vs just # of sats?
you pay fees in sats not in $. So, the "price" so to speak doesn't change. If it's 35sats/vB it's 35sats/vB whether btc = $10 or btc = $100,000. Of course, in $ the fee is more expensive of course.
In "theory" as BTC : $ goes up, fees would come done BTC wise. But in practice what's happening is higher prices mean more tx which means less room in blocks which drives the mining fee up.
@@pilotbobawhich basically means self Custody is suicidal
@@summerbreeze5115 That's an interesting take. Why do you come to that conclusion?
@@pilotboba
There will be a time where 0.1BTC will be unspendable at the base layer?
@@summerbreeze5115 I can't see the fees getting that high. Also, as more L2 usage happens, that will keep less tx on the base layer which will tend to push fees down.
This nerdiness needs to be sorted out if btc is to become a mainstream currency
The internet existed for decades before the general public really started using it en-masse. Anyone using it now (not via an etf) is still going to have these technical hurdles to deal with. By the time it's easy for everyone, I also doubt that the average person will be using it on-chain in this manner.
Man I've been stacking sats since 2017 and thought I was pretty knowledgeable on Bitcoin, but I'm just learning about UTXO's. Welp.
Couldn’t we just use the small utxo for lightning 😊
Can you do this with Nunchuk wallet please 🙏🏼
He does show coin management in his nunchuck video. Granted the mobile version and not the desktop version.
@pilotboba Thanks ill check it out