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Bitcoin Transaction Fees and UTXO Management

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- when bitcoin blocks are full, highest fee transactions are confirmed first

- your bitcoin wallet may show a single balance but the reality is that it is made of many different unspent transaction outputs (UTXOs)

- when you make a bitcoin transaction your wallet will select as many UTXOs as necessary to reach the amount of bitcoin you wish to send

- onchain transaction fees are calculated based on size in bytes not the amount of sats sent

- the more utxos required on the input side the higher the fee paid

- from a cost perspective you want to consolidate utxos, fewer utxos with larger amounts

- consolidation has privacy tradeoffs though: you link any UTXOs you consolidate as owned by the same person + larger UTXOs mean you will dox more of your stack to anyone you pay in the future

Therefore you want to reduce the number of UTXOs you have while being mindful of the privacy concerns.

Lightning Transaction fees are calculated differently: based on the amount in sats sent. Opening lightning channels when fees are low can enable you to save money in the future when fees rise. 🤙

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Discussion

BitPLATES - Bitcoin Backup 2y ago

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MyneThyneSwyne 2y ago

Thanks man. This info was great refresher and a nice link to send people for quick FAQs

doot 2y ago

🤙🏼

how do you manage your UTXOs

Satoshi Coffee Co. 2y ago

One by one

Strider 2y ago

Specter or Sparrow

dwarner5522 2y ago

Curious about the same

Jor 2y ago

Cheers brother. 🍻

Any tips for the relays here for a non-techy guy? Should we be subscribed to more than the default 7?

WINTER ☩ HODLER 2y ago

high value concise bullet points here 🤙

Avid 2y ago

Except when a miner decides to skip your fees and mine a 4mb block for free right?

XBT_fi 2y ago

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The Fishcake (nostr.build) 2y ago

I observed different LN fees depending on whom and from wallet I sent them. How does that work? 🐶🐾⚡️

SamBTC5150 ☣️⚡️ 2y ago

Is it best to consolidate first before mixing? Or mix and then consolidate?

Kruw 2y ago

You can consolidate within a coinjoin using Wasabi Wallet so you keep your privacy on every input.

SamBTC5150 ☣️⚡️ 2y ago

Any step by step guides that you know of that you can recommend?

Kruw 2y ago

Yes, here's the download and setup walkthrough: https://www.youtube.com/watch?v=fM5pVMj91D0

And here's the coinjoin walkthrough: https://www.youtube.com/watch?v=UbOAbXjzBJg

SamBTC5150 ☣️⚡️ 2y ago

Awesome! Thanks 🤙🏼

Max 2y ago

1. Receive bitcoin

2. Wait

3. Spend bitcoin anonymously

Using Wasabi got pretty simple, coinjoin just happens by default in the background.

Sid Shattuck 2y ago

If we take whirlpool as an example, you are effectively doing both at the same time. You select a number of UTXO inputs to coinjoin,selectt pool size which represents the size of each UTXO output. In general you want to batch into material amounts to minimize coinjoin and miner fees.

Kruw 2y ago

Whirlpool does not do both at the same time. It creates a pre mix transaction called "tx0" that consolidates your inputs and produces traceable change.

Sid Shattuck 2y ago

Thankyou for clarifying. That's a better way to explain it.

moujle 2y ago

The privacy piece is hard, haven’t wrapped my head around it yet.

Mixing services seem like an “easy” component of the privacy piece, but the Tornado Cash debacle has me second guessing this. What’s to stop bitcoin mixed through whirlpool et al being tagged & declared tainted like other coins did with Tornado Cash?

Is this a false equivalence or a real risk?

captain ☦️ 2y ago

This is a real risk

Matt 2y ago

Did you format this, or is that just happening client side?

theGig 2y ago

For privacy minded people it is worth the extra fees to use more utxo's like with stonewall tx's

Hypno Kitty 2y ago

Great recap

Nashville Hot Chicken 2y ago

What an awesome explanation

Keysa - Simplest Bitcoin Edu 2y ago

Zap 🤙⚡️

My2Sats 2y ago

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Disturbia 2y ago

This is very educational. Wow

Disturbia 2y ago

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Cutetug 2y ago

Its overwhelming for tug

mchotbot 2y ago

Your post is getting a lot of eyes on it.

Added to the https://member.cash/hot feed

Hidden 2y ago

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StarBuilder 2y ago

good one @npub1qgwhaaa2lsp54rl0hfx7qa3z678ax6wlre0em475rhpvl7n54cpqgg7y7n

LibertyBTC 2y ago

Consolidate???

LMAO....

I think each of my utxo are bigger enough for the future...

Gary ₿usey 2y ago

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StStolz 2y ago

"highest fee transactions are processed first" - not exactly. Miner selects transactions. Because the miner consumes fees mostly his primary goal will be to select highest fee transactions. But small transactions with low fees can be lucky to be used to fill a block. And a miner has the ability to set other priorities.

Fox Den 2y ago

Thanks. But how do you reduce utxo from your wallets without fee?

Dan Gould 2y ago

“you link any UTXOs you consolidate as owned by the same person” until you normalize payjoin 🤠

BitcoinEagle.dev 2y ago

Isn't payjoin obvious like reverse peelchain that merchant just accumulates payments into ever growing UTXO?

Dan Gould 2y ago

if you only accept payjoin and always choose to contribute the same coin, sure. otherwise it’s covert

Dan Gould 2y ago

(the default Unnecessary Input Heuristic avoidant coin selection in use in BTCpay and elsewhere avoids this problem)

DragonKun 2y ago

What is the acceptable amount per utxo for you ? 0.1btc ? 0.01btc ? 100k sats ?

If we are in an hyper bitcoinised world 1 sats will be worth a few cents.

Buying a beer will be done over Lighting or whatever second/third layer will be in use with low fees right ?

So On-chain payment will be use for expencive stuff like a house or just a used car.

What ever you will get that day, your spent utxo may be or too much or not enough. And those services requiere your ID anyway... 🤔

superkruger 2y ago

Awesome summary.

Nostr needs a bookmark feature.

beefcat 🥩⚡ 2y ago

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Eymon 2y ago

I think one should have a diversified set of utxos from small to very large so that he can combine the smallest amount of utxo possible to pay any amount, the different coinjoin sets in sparrow comes in handy 100k sats 1m sats 5m sats..

Kruw 2y ago

Wasabi does this even better since you get private outputs of many denominations, allowing you to easily compose transactions that don't even create a change output-

Max 2y ago

That's one of the important improvements of Wasabi 2.0, low hamming weight standard denominations help in two ways:

First, in a coinjoin to efficiently decompose any arbitrary input value into less than 8 output values. This avoids non-standard change output.

Second, in a single user transaction to efficiently consolidate only a few inputs to generate an arbitrary output value. This avoids payment change output.

Red 2y ago

I have my all my utxos in 1 adress only, an issue or not? All superior to 100k sats

🍊⚡adam sandals 2y ago

Personally, I am stacking a diversified set of utxos. Thinking long term, I want to have smaller utxos available to spend when their purchasing power is much greater than today.

MAV21 2y ago 💬 1

You think mixing at higher amounts is a good compromise? Like .05 or higher?

Adarnit 2y ago

The best and most succinct description of UTXOs I have seen. 👏

Harold Thomas Zuccotti II 2y ago

How to open a lightning channel for complete newbies? Anyone?

nobody 2y ago

Download wallet of satoshi for iOS or android

Plug your LNURL to your profile under edit profile

Once that’s done let me know, I’ll send you some sats

Harold Thomas Zuccotti II 2y ago

Thanks! I'll try when I get home. I've got amethyst on my Android, Iris and astral on my computer. And get Alby. If I can't do it through through those i'll try wallet of Satoshi

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