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What is utxo management and how is it “done”

Imagine you bought water over time, but every time, you got it in a small bottle, where each bottle is a utxo with a little Bitcoin in it. Utxo management is taking the water from all of these little bottles and pouring them into a single, big bottle, or one large utxo.

Spending from a large utxo is cheaper because there's only one input address to put in the transaction. It's theorized that one day the smallest utxo's won't be worth the fees it'll take to spend them, so utxo management while fees are low is crucial.

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Discussion

jin 🧙‍♂️ 2y ago

So let’s say you have one wallet with multiple utxos. What’s the easiest way to combine to one utxo in that same wallet?

Zach⚡️ 2y ago

Generate a new receive address and sweep all funds to it

Zach⚡️ 2y ago

I’ll add that ideally you’re using a wallet with coin control so you can choose which individual UTXOs you spend

Deleted Account 2y ago

Sparrow 🦅

Dan Wedge 2y ago

Was planning on Sparrow. all of this is very new to me, utxo managment is like collecting coin clippings until it needs to be melted then paying miner, to create recognized coins that can buy freedom. It's always cheaper to wait till the miners are in such demand.

I guess I could just create transactions and float them in the mempool till the fee drops. Is that kinda how forced closesures get stuck in the pool with high fees?

Zach⚡️ 2y ago

Yes, you could. No harm in having some low fee consolidations waiting.

It’s not the end of the world, and it’s good that you’re learning this lesson now. You can always spend a few UTXOs at a time, you don’t have to use every input in every transaction.

Consolidating is more like “fee market arbitrage”. Combine UTXOs when fees are low, so you can more efficiently spend or open channels in high fee environments.

I love sparrow, but sparrow is a more advanced tool which allows you much more flexibility. You can consolidate using any wallet and you can see the inputs and singular output on any timechain browser like mempool.space

[ARCHIVED] Jay 2y ago

I use nunchuk for my consolidations. What you do is generate a new recieve address. Then send a transaction from your small utxos into that new address and send the maximum amount.

Some people like to coinjoin before making that final utxo using whirlpool (samourai, sparrow) or wasabi.

The Daniel ⚡️ 2y ago

While fees WERE low.

Dan Wedge 2y ago

Up down high low I have seen wonderful thing for miners I have seen slow days. I hope I will be ready when the time comes