This is especially true if we have UTXOs smaller than the transaction fee. In such cases, our BTC becomes impractical to send, as the fee would surpass the UTXO value. Therefore, when receiving Bitcoin/ managing our wallets, it's crucial to consider future fee scenarios.
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For instance, if fees rise to $25 in five years, having numerous small UTXOs, each worth less than $25, renders our entire stack unusable. So, how do we get around this?
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For me, I approach UTXO management by accumulating purchases on exchanges until reaching an amount that I would feel uncomfortable losing, say ~$500, before withdrawing to a hardware wallet. This strategy ensures UTXOs remain sufficiently sized as fees continue to rise.
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Additionally, fees fluctuate— they're not on an endless upward march. During periods of lower fees, it's a good time to consolidate your UTXOs. With @SparrowWallet, it's simple. Just choose the UTXOs you want to consolidate, pay the transaction fee, and presto!
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You'll have a single UTXO instead of multiple smaller ones.
In conclusion, UTXOs matter. While they may sound like technical jargon gobbledegook, it's vital to grasp their significance, especially with the potential for rising transaction fees.
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Understanding their importance and adopting strategies to prevent Bitcoin from getting stuck in small UTXOs is key.
Hopefully, you found value in this thread. Comment below if you have any questions!
Still lost? nostr:npub1jqckepsld3xn98aeq7yg72g0yrqkz92vegkv6k3prfhkzu356v5qa6akee & I will be discussing UTXOs at @BitcoinAtlantis.
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