Can anyone give me any reasons as to why it is bad to consolidate other than privacy reasons? Even if privacy is a concern you can just send some to Lightning or another wallet and mix. I don’t see the issue with consolidating. If one does not consolidate tiny UXTO you might be completely fucked in a very high fee environment. What am I missing? Thanks #bitcoin
Discussion
I don't see fees rising in bitcoin terms, but in relative (fiat?) terms. The wider is bitcoin spreading, the lesser UTXO's. Just can't figure out how we can divide 21 million coins between billions of people and still got 1kk sats UTXO's. Just don't see how transactions could be much higher than this in such environment.
Holding small UTXOs can potentially result in much or all of that bitcoin becoming practically immovable in the future due to the cost of transaction fees.
Can read it here https://unchained.com/blog/small-utxo-bitcoin-dust/
If I consolidate 10x 0.1 utxos into 1x 1btc utxo, then make a payment (let's say 0.01btc) , then the receiver knows I have 1 bitcoin
Yep that’s what I meant about privacy in OP…….
Here's just one reason:
A strategic element in the privacy war is the uncertainty of coin ownership (by you as well as others). Ideally this should be increased as much as possible.
By solidifying (definitely re-confirming) your ownership of those UTXO's, consolidation transactions shrink down the volume of unattributed UTXO's on the blockchain, which indirectly degrades everyone's position, including your own - via increased vulnerability to chainalysis etc.
Not missing much privacy really the only trade off when paying someone with a large utxo