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Basically, Bitcoin creates custom notes per transaction and doesn’t use common or fixed size notes. Instead of $5, $10, $20, $50, etc, you actually hold 0.38B, 5.74B, 9.67B, 21.27B.

When you try and pay a 28.00B, you need to use two UTXO minimum (in this example) - 21.27 + 9.67 = 30.94B - 28.00B, which means 2.94B change (ignoring a mining fee).

That’s pretty typical, but pretend you only have 30 UTXOs less than 1.00B. To make the 28.00B, you. Now need 29+ UTXO inputs, which each cost extra blockchain fees (as each adds more data). Instead of 2 UTXO, you need 29+ UTXO.

If you use low mining fee times to consolidate UTXOs, the cost per UTXO can be 20-50 times less. Instead of 100 sats/vB, it can be 5-10, or less.

Hunner Sa 2y ago

This makes more sense. Thank you.

Now how would one go about getting that done?

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Discussion

Blake 2y ago

If you only want to consolidate cheaply, await a low mempool fee rate, and send all your Bitcoin to yourself in a single transaction.

Or the more complex way, you can use ‘coin control/UTXO selection’ to pick which ones to consolidate - e.g. all less than 0.0001B. Basically any that are smaller than the smallest transaction size you perform - aiming to only require a single UTXO as a transaction input instead of multiple.

Hunner Sa 2y ago

I think the first way is the best for me. So I basically generate an address using my hardware wallet and then I send all my bitcoin from the hardware wallet to the address that I generated, correct?

Blake 2y ago

Yep. It should result in a single UTXO output.

You may not even have a real need to consolidate to begin with. You should review your current UTXOs and their value. Fees are also fairly high atm - but always depends on your needs.

Another reason to consolidate is long term storage, if you expect fees to increase significantly in 5-10 years, so that again, you pay less in future fees.

Hunner Sa 2y ago

I really appreciate this brother. May Satoshi bless you