What are the best guides for:
- UTXO management
- Washing KYC sats to get more privacy
I’m new to this so all help is welcome 🫂
Discussion
This one’s good https://tftc.io/bitcoin-utxo-management/
Here’s a good one by Sparrow: https://sparrowwallet.com/docs/mixing-whirlpool.html
Two reasons for UTXO management:
- Fees
- Privacy
Regrettably, prioritizing maximum privacy conflicts with the objective of low fees, and vice versa. It's a matter of striking the right balance.
I suggest to check out nostr:npub1rxysxnjkhrmqd3ey73dp9n5y5yvyzcs64acc9g0k2epcpwwyya4spvhnp8 guides on this.
Yep that’s still my issue.. privacy vs UTXO management
Find it very difficult to know what to do
same tbh ngl.
esp since recently.. some ppl are claiming they think even 5m sats big utxos will become unspendable.
I doubt they will, at least in our lifetime. I think your smallest for super safety should be about 1m. Larger if at all possible, but over time if it makes sense with fees.
thank you tatey watey
what if you're holding for your children? maybe they were older guys that were saying this and they were thinking ab their children and grandchildren etc
Yeah absolutely. I still don’t think they’d become unspendable, but it is definitely a possibility. If you’re doing that, I think best case would be to dedicate a wallet for kids, grandkids to inherit, deposit at the frequency you want, and then snipe low fees to just get that UTXO as fat as possible. If it’s a one time deposit just to set it and put the seed phrase in the will and never look back, I think it would be safe to deposit at least 3m. That will also allow for you to manage that UTXO amongst others if you have to add on later based on how the fee market evolves over the course of years and years.
I don’t think it is good practice to get an UTXO as fat as possible.
Why so? Genuinely asking because I could have the wrong idea.
Privacy.
Consolidating your children's UTXO into a single one will result in the disclosure of their entire stack to the recipients.This approach makes them vulnerable targets for potential attackers.
Ah. Understood. What do you recommend as far as smallest UTXOs and how many you should have? Like I completely understand why you wouldn’t set your UTXO minimum at like 1m sats and just have tons of 1m sat UTXOs. Where do you draw the line of consolidating new UTXOs into those others?
In the end it’s subjective and depends on your stack how you split your UTXOs. Some chunks of 5-50 mio sats UTXOs seems a good long term solution for me. Obviously if you have <1 BTC then 50 mio is too big. Then you aim for the lower end of the above recommendation.
nostr:note1cf84lhhhnmek4qdws0qx5xceh29casmy40xcra2cl0hnhtx58skssjtynx
nostr:npub12n48gztfm3j6m9apws74chdlu2dux9ml2gxw76v95v79wtdjg6zsqdpkxr
This calculator might help:
https://jlopp.github.io/unspendable-utxo-calculator/
My opinion:
- Consolidation of UTXO < 1 million sats is a must
- Even 1 mio sats might be too low for long term (I prefer > 5 mio)
- Never consolidate kyc with non-kyc UTXO
- if possible consolidate UTXO from same source
- Having multiple different UTXO sizes depending on your stack is a good solution
- Coinjoin gives you privacy for future transactions but doesn’t affect past transactions
For example UTXO split for 1 Bitcoin:
1x 0.25
5x 0.1
5x 0.05
For 0.05 not being economically spendable, it takes an insane fee increase. On native segwit it would cost you ~80 k sats at 1000 sat/vB
sparrow
I've heard atomic swap w Boltz exchange is a great alternative to mixing. u just swap in and peg out (lightning to liquid (L-btc) to on chain w blockstream green/sideswap).
Thanks!! Will definitely check it!
Appreciate your reply
Oh bloody hell, I don't even know what a UTXO is. Something else I need to worry about 😭🫂
Jump in and learn! That’s why we’re here
baby steps hehe, the learning never stops. bitcoin is a rabbit hole.
that's why they say "bitcoin is not for everyone, bitcoin is for anyone" and "don't just buy bitcoin, study bitcoin"
conviction builds motivation to learn and this reinforces the cycle
you have to cultivate intrinsic motivation
there's no use in forcing it bc using bitcoin is not bitcoin without self responsibility.
but.. if it is any comfort, most things sound more difficult than they actually are, like UTXO.. they are just new words.. u will get it easily.. especially if u find a reason to actually use it
lifehack: make time for and watch btcsessions tutorials on bitcoin and selfcustody and coin control.. even if you do not have the equipment. spare yourself trying to learn it dry from text.
Watched it yesterday!
Very insightful
But I’m still struggling with privacy vs UTXO management
Consolidate your UTXOs and then run it through Whirlpool.
How big would you say?
0.5 and some 0.05, depending on your stack
50 million sats UTXO seems very high, no?
Depending on your stack. If you have 1 Bitcoin then yes. If you have 10+ then it is a reasonable size.
Possible splits:
1 Bitcoin:
1x 0.25
5x 0.1
5x 0.05
10 Bitcoin:
10x 0.5
10x 0.25
30x 0.05
These are just examples. It’s up to you how you want to split it.
Alright. What would you do if you already mixed kyc with non kyc?
Consolidate and then put them through whirlpool?
Combining KYC with non-KYC transactions exposes the connection between them, rendering your non-KYC UTXO traceable back to you. Essentially, it diminishes the anonymity of your non-KYC holdings, making them redundant, as it becomes evident you could have just acquired KYC-verified assets. Despite this, engaging in three or more mixing processes through CoinJoin helps restore privacy for subsequent transactions. However, it's crucial to note that the consolidation of KYC and non-KYC UTXOs during this process discloses your increased Bitcoin ownership to those aware of your KYC UTXOs, and this revelation is irreversible.
Follow up question since you know a lot
Pure hypothetical:
If I would have accumulated 1full coin over kyc and non kyc road but I already mixed some utxos so it’s compromised.
Would it be best to combine all utxos into 1 UTXO of 1BTC. Put them through a mixer a few times, splits them into for example 0.5, 0.2 and 3 times 0.1 utxos
Then send them back to my wallet and never consolidate with new KYC utxos?
That’s my thought now
There's no need to consolidate them into a single UTXO before using a mixer. For future privacy, opting for three or more mixes is recommended. Afterward, designate these UTXOs as "mixed" and label upcoming ones as "kyc" or "non-kyc" for straightforward privacy management in any transaction.
However, it's essential to note that regulators frown upon mixers. In the US, certain centralized exchanges flag UTXOs from mixers, and Chainanalysis scrutinizes your last three hops for this. This can be circumvented by conducting three transactions before sending to such exchanges. In the EU, a new law by the end of the year may label self-custody and mixers as "risky," requiring proof of fund origin. Regularly exporting your buy history from an exchange is crucial.
Nevertheless, these considerations become irrelevant if your intention is not to sell on a centralized exchange. Peer-to-peer selling remains a viable option.
But why would you sell hardest asset known to mankind for toilet paper anyway? 😊
With that being said, as long as you can prove that you purchased an equal or greater amount of Bitcoin than you intend to sell, I don't foresee any issues. You'll be able to establish the origin of funds even after undergoing the mixing process.
One last thing. If not urgent, perform mixing and consolidation during low fee environment.
One of the best guides I know for UTXO mgmt https://iv.melmac.space/watch?v=33H3uqgmw6k
For coinjoin and more privacy check out the guide by BTC Sessions
Thanks 🫂
