How to manage your bitcoin UTXOs in an Unchained vault

Listen to Tom Honzik, Technical Director at Unchained, explain how to best manage your UTXOs (unspent transaction outputs) in a collaborative multisig bitcoin vault.

[@peterspz]

Fascinating - UTXO management made simple

[@BobE_Nagesh]

Thanks for this clear explanation Tom! When importing to caravan or sparrow, does this duplicate my Unchained vault to the external coordinator (caravan or sparrow)? Is it now a 2 of 2 multi sig instead of a 2 of 3?

[@robertthieman6010]

Will consolidating UTXO in this way reduce or compromise privacy?

[@n8katz]

Does this apply to IRA vaults? If not, are there additional considerations or restrictions?

[@tomhonzik_unchained]

Most IRA vaults don't have many unique deposits (UTXOs) to warrant much concern about UTXOs and consolidations. However, anyone who has an IRA vault with several UTXOs and is interested in consolidating them, can reach out to Unchained!

[@stevekalka3987]

Wondering same.

[@tomhonzik_unchained]

@n8katz @stevekalka3987 Most IRA vaults don't have enough deposits/UTXOs to need consolidation. However, in the less common cases where a consolidation is advisable, it is possible in an IRA vault, as long as the only sats leaving the vault are transaction fees.

[@stevekalka3987]

@@tomhonzik_unchained thank you. I was concerned it might trigger some antiquated IRA early distribution rule.

[@n8katz]

@@tomhonzik_unchained thank you. What's the best practice as far as a threshold to consider consolidation?

[@PeterMartin-ev8pz]

In the video you selected all 3 utxos from one address and 4 of the 7 utxos at another address. If the 7 utxos you have selected are moved/consolidated in a transaction like you suggested, there would be 3 utxos "left over" in that second address that were not consolidated. Do you send those to another new address, or do they stay at the same address? If they stay, is that not an issue?

[@tomhonzik_unchained]

Good question. If I completed the Caravan transaction in the video and did nothing else, then there would indeed be 3 UTXOs left behind on the address that used to hold 7. There's no technical issue with that, but there could be privacy implications, as there always are when doing transactions and consolidations. We've done another CZcams video about privacy, and also have a blog article on the subject.
And yes, the 3 remaining UTXOs could be consolidated to another address, by themselves or along with other remaining UTXOs. I hope this helps!

[@jeb1110]

How many UTXOs in a vault meet the threshold for consolidation? Above x ?

[@tomhonzik_unchained]

If you have 2 or more UTXOs, you can technically perform a consolidation. However, it's often worth it to wait until there are a larger amount of UTXOs. Doing a consolidation every time you have 2 UTXOs would end up costing more fees than necessary. Most Unchained clients might start considering a consolidation in the 10 - 25 UTXO range. If someone has 50+ UTXOs, that would be considered an abnormally high count.
On the other hand, the average value of each UTXO in a vault can also matter. I recommend an average UTXO size (vault balance divided by UTXO count) of 0.03 or higher. The lower the number, the more important a consolidation is, and the higher the number, the less important.

[@P__114]

Is selection coming to Unchained?

[@tomhonzik_unchained]

Yes, we definitely want to build this feature at some point!

[@ikust007]

Like it . Please mute the musak. Ain’t shopping …