Not sure i know what a UTXO, or at least the acronym ... so can you explain?
Scenario I'm thinking is : buying sats (btc) from a person in a face-to-face transaction. Seller has btc in a central exchange, buyer has non-kyc , self-custodial btc wallet. Would it make sense to transfer the sats through LN, and then convert to BTC chain at a later date ?
Depends a lot on the amount you wanna to buy.
Small amount->LN
Big amount->on-chain
LN
It's ok to send amounts as tiny as 1sat via lightning, the bigger the amount the worse LN works, at least in my experience.
I've never had a problem sending 1, 21, 420, 210k, 1m sats, sending a couple of million though I often had to try a few times til it worked.
But that's expected, on every hop there needs to be enough channel liquidity to route the payment through.
on-chain
It's ok to pay a $5 fee for a $5000 on-chain tx, 0.1% is not that bad,
but if you just want to send/receive $5, that would be a 100% fee you probably don't want to pay.
It also depends on what you wanna do with it, like, do you wanna use it to zap nostriches, or buy/pay for stuff?
Or does it go straight to cold storage for the next decade?
If you receive any amount of on-chain bitcoin in a single tx - that is one UTXO.
If you received two separate txs, you now have two UTXOs.
A UTXO can be any amount.
Let's say you received two tx in your wallet, each worth 100,000 sats.
Your wallet shows a single balance of 200,000 sats. In reality, you have two UTXOs worth 100,000 sats each.
Let's say you want to spend 150,000 sats from this wallet. The wallet will take both UTXOs, spend them, and return 50,000 sats to you, which is a new UTXO that you now own. (Note that I haven't included the tx fees in this example for demonstration purposes.)
There are wallets that allow you to choose which UTXOs you spend and even label them. This is important when you start using coinjoins. If you mess up by sending certain UTXOs together, the common ownership will be revealed and this could destroy your privacy.
