Topic: [Aug 2022] Mempool empty! Use this opportunity to Consolidate your small inputs! - page 26. (Read 83494 times)

I would not do so. A very good explanation on why consolidating dust is a very bad idea is here, from Wasabi's Docs. While of course these remaining coins might add up to at least a few bucks in the long term which only might become valuable within years/decades, if you care about privacy it might be a better idea to in fact not consolidate change.

Best you can do is keep using the same seed over the years, lock down/hide dust and if Bitcoin ever becomes expensive enough, it might be more worth it to consolidate/spend them at the expense of privacy which again I doubt, at least in my case ... because the only thing that hurts your privacy more than anything imo is consolidating dust and linking all your previous txs to a single wallet. This makes it easy for a perpetrator to understand how many coins you had and how you spent them.

If change worth $1, $2... damn, even $10 or $50 in total is going to become worth a ton of money over the years, then from a privacy perspective it would be a much better idea right now to simply purchase the same amount of BTC and keep it over the long term. The point I'm trying to make is, if privacy is important to you now then I see absolutely no reason to trade it off in the future for a sum of money. It's literally as if you sold your privacy for money. It gets worse: if you care about the privacy of your txs today, then by consolidating dust you will in fact expose your entire history including the transactions you make today.

Last but not least.. If your $10 in change will become a lot of money in the future, I would safely assume that you would have enough money by then to not care about the change anymore.

Yes, but in a practical way: do you change your address every time you receive a payment from the sig campaign?

You can receive several payments in one direction, and if you want privacy, you pass it through a mixer. It sounds to me that o_e_l_e_o said he does that with the payments he receives.

Another thing: if you have small inputs but you are going to hold them for the very long term, do you think it might not be necessary to consolidate them? I got the idea from this:


Let's suppose you have two wallets, one that is for very long term hold (minimum two cycles) and one that is for expenses. If Bitcoin price rises as many of us expect it to in two cycles, it may not be worth consolidating the small inputs now. Although we would have to see if the fees go up proportionally as well.

What do you think?

Edit: after seeing pooya87's comment on that thread, it seems that swiftxi did not have a very clear concept of what dust is.

If you sent me three transactions to the same address, an observer would, at a minimum, know that I own the sum of the transaction amounts received from you.

If I asked you to send the transactions to unique, and unused addresses each time you were due to send me coin, an observer would only know that addresses "a", "b", and "c" had received a particular amount of coin. Depending on your privacy practices, an observer may, or may not know the coin was sent by the same person.

You are correct that consolidating three outputs all sent to the same address will not further reduce privacy, but that is because privacy has already been incrementally reduced via the address reuse.

Not necessarily.
Imagine if you and I had a private deal and you gave me your address and I sent you 3 payments on 3 different occasions. As far as the rest of the world knows an arbitrary address received coins from 1 to 3 [sending] addresses but they don't know if that address belongs to you. Consolidating those 3 outputs doesn't change that either.

If you have reused addresses, you have already negatively affected your privacy.

Yes, one "cost" of consolidating unspent outputs is a reduction in privacy. This should be considered when deciding if you want to consolidate your unspent outputs. The value of privacy is not infinite.

I don't think consolidating unspent outputs and subsequently mixing the resulting coin would provide much privacy benefit. When you consolidate unspent outputs from two previously unconnected addresses, an observer would know that the two addresses likely belong to the same entity. Mixing your consolidated coin does not change this fact. If you want to maintain your privacy, you will need to move your unspent outputs through a mixer before you consolidate your unspent outputs, or you could send your coin to multiple deposit addresses to a mixer, and have the mixer send you a single output. If you engage in the above, an observer may still be able to draw a link between the inputs and outputs in the mixing service. You will also need to trust the mixing service to not log, nor intentionally leak information about their customers.

It does when the outputs being spent are coming from different addresses. But sometimes (due to address reuse) all the transaction outputs are from the same address, like when people keep receiving payments in one address.

To improve privacy you can use a mixing technique, that too will benefit from the lower [network] fees. However if you consolidate first that will link the previously unconnected addresses together which may not be desirable.

Doesn't consolidating hurt privacy? Maybe consolidate, then mix? What's your opinion on this?

If fees are very high, you can opt to either send more to the recipient than they are owed, or to pay a higher fee than necessary, if that means avoiding having some coin sent to a change address, and the additional amount you are paying is less than the additional fee you would have paid if coin was sent to a change address.

By consolidating everything into one address, you give up privacy (and possibly safety). Not only can anyone you've transacted with find some of your other transactions, they can also see how much Bitcoin you have. When you buy a coffee, you don't want them to know you own a small fortune in Bitcoin.

When buying something, it's unlikely to have an input of exactly the right size. Sending one input and one output works well when depositing to for instance an exchange.
It is indeed worth trying to avoid small change outputs. At low fees it could be worth adding another input and consolidating it into a larger change address. Sometimes I send the change to a custodial LN wallet, or sending it to an exchange would also mean it's no longer your problem. Even better if you can pay several services at once (that works well for payments you can plan, such as hosting, subscriptions or VPN).

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In retrospect, most of the consolidations I ever did were at fees >1 sat/vbyte. And, looking back, I could have had a lower fee if I would have waited. But the total "damage" isn't that bad, and well worth the possible risk of high fees later on. Half a year ago I didn't expect fees to get this low for so long.

All are bech32. I wouldn't see the point in doing otherwise.


I put round numbers because I thought it would be clearer. I didn't think of that, lol.

Think 0.01 on address1 and 4 inputs of 0.001 on address2.


I had not thought of this, thank you.


Yes.

1. This time you didn't mention if address2 is legacy or not. I'd advise to consolidate to bech32.
2. 0.1BTC is not small input, it can stay as it is. If you spend less than 0.1BTC (normal), then only one input is used from address2; if you spend more than 0.1BTC at a time you won't care that much if you pay a bit more for the fee, even if the fees are not low.
3. If you have one bigger consolidated input already which you can spend when you need it, it's no rush to consolidate address2 inputs and you better wait until there will be more of them (and smaller too).

But since it's a hypothetical scenario, maybe the addresses are actually bech32, maybe the inputs are actually much more and much smaller and then the scenario would be pretty much OK.

Well you need to make assumptions and act accordingly. If you think fees will reach 0.001 for a one input, one output txn, the threshold for consolidating will be low. If you consolidate into too few inputs, you may end up paying unnecessary fees when you are having to send some of your coin to a change address when you could have planned ahead to consolidate to the point in which you can spend entire inputs without having to send a portion of an input to a change address.

I use bech32 adresses but I never talked about consolidating into the same (old) address. I was thinking something like:

I have 1BTC in one input in address1.

In address2 I receive 0.1BTC every week, so after 4 weeks I have 4 inputs for a total of 0.4BTC.

I could consolidate the 4 inputs of address2 into a new address3 but let's suppose that the mempool hasn't cleared for the past couple of weeks. I can sent the transaction with just 1 sat/byte as fee and if the transaction takes a while to get confirmed and I need to spend I can still use address 1.

This was a hypothetical scenario because the most normal thing is that if I had to consolidate I would consolidate everything, all the inputs from all directions, using a rate that would prevent the transaction from being stuck in the mempool and I would not be able to use the funds. For this I could use fee calculators or this thread.

I would consolidate into a new bech32 address. I don't see any good reason to consolidate to the same address, especially if it's legacy.
Let the old funds keep going there, OK, but you'll be able to spend from bech32 to any direction (old or new) and if it's SegWit then you'll pay less for the fees.

It has occurred to me that something else can be done as well. Simply wait to consolidate, for example, to the 8-10 legacy inputs that poyaa87 said, and if I have to make a transaction, use coin control and use the large input. At the slightest hint of rising fees, consolidate, but just the small inputs just in case the transaction gets stuck in the mempool. If I have to spend, use the large input. Even if it would take too long to confirm the transaction to consolidate, I wouldn't care, because I could keep spending. I think that when the mempool was fuller I waited about a month. In this case I would not consolidate all the inputs, as I would finally have 2 inputs, the large original one and the second with an origin of 8-10 small inputs consolidated into one. I wouldn't have all the inputs consolidated into just one but I would save on fees as well.

I don't know if I am making myself clear, and what do you think, because little by little I am learning but I still have a lot to know.

This assumes your spending won't change in the future, while some things are out of your control. I remember paying about 0.001 BTC for a small transaction (1 input, 1 output) at the end of 2017. If fees get that high again, you'll lose half of your 0.002 BTC and might want to adjust your spending habits. If you have bigger inputs, you could for instance open a large LN-channel or deposit a larger amount at once. Spending 0.000002 BTC per input now could save you 0.001 BTC per input later. I'd say that's a small price to pay for flexibility.

The number of unspent outputs you have should not be considered when deciding if you want to consolidate. You should consider:

• the value of your unspent outputs
• how high you anticipate transaction fees being when you need to spend your unspent outputs
• the value of the transactions you anticipate spending when fees are higher (including the cost of the tx fee)

For example, if you have a bunch of unspent outputs valued at 0.002, but never anticipate spending more than 0.001 in a single transaction (inclusive of anticipated fees), you should not consolidate any of your unspent outputs, and should not consolidate anything until you have unspent outputs totaling 0.001 (including tx fees to consolidate), but once you have enough to consolidate into at least 0.001, you should not consolidate additional unspent outputs, unless you have enough to consolidate into an additional multiple of 0.001, in which case your new outputs will each be 0.001.

If you anticipate spending varying amounts, you can use a similar principle. For example, if for every three 0.002 transactions you will have, you will have one transaction valued at 0.005, you can consolidate into new outputs valued at 0.002 three times and 0.005 one time (in any order).

When deciding if it is economical to consolidate, you should add the cost to create a consolidation transaction to the cost of a transaction with one input and one output (plus change if applicable) at the fee rate you believe fees will rise to when you have to actually spend your coin. You should compare this cost to the cost of creating a transaction with however many inputs you are consolidating, and one output (plus change, if applicable). If consolidating results in a lower total fee paid, you should consolidate, otherwise, you should not.

The above ignores any privacy implications to consolidating, which you should also consider. 

Also, of course, consider the amounts.

Having multiples of around 0.01 BTC in each address with only a few inputs per address is fine unless you suddenly want to cash out of Bitcoin forever or buy a Ferrari.
Maybe just keep updating the receiving address at your BTC source every so often, depending on the size of each input and how many inputs that represents.

Of course if you are receiving lots of tiny inputs (less than about $100 at the current price) then consolidating with low fees is pretty much mandatory.

No. It depends: if a small amount arrives in my wallet, I sometimes consolidate it instantly, and sometimes just let it be. I also receive weekly payments to a cold wallet. I've consolidated those a few times (at fees higher than the current fees), but it's a lot of work to reboot into offline mode to sign the transaction. So I don't do it very often.

You can still do it when fees are 1 sat/byte. But as long as fees stay this low, waiting a week saves you a few sats. If you need the funds soon and expect fees to go up, then weekly consolidations at 1 sat/byte would be a good choice.

Inputs are larger than outputs, so consolidating 2 legacy inputs 4 times costs 4 times 340 bytes (1360), while doing it all at once takes only 784 bytes. It's always a trade off between saving bytes on transactions and future fee expectations. And at the moment you know for sure fees can't get any lower, so it can't get any better.

I was looking for something like that as a rule of thumb, thanks. Although I will continue to follow this thread and watch how the mempool goes.


I think I have just one input now, as I said above. I consolidated inputs recently. But I think pooya87's advice is what I was looking for.