What’s the point of UTXO consolidation? If I think about it like cash, why would I want a bunch of hundred dollar bills? Aren’t $5, $10, and $20 bills more useful?
Discussion
Because at some point fees may become so expensive that the fee to transact would cost more than the UTXO itself, making it unspendable.
Here’s a quick primer https://www.discreetlog.com/utxos/