Topic: Consolidating UTXOs in wallets. (Read 747 times)

We need a way to differentiate between addresses of the same wallet and addresses of two completely separate wallets. They are all addresses, though. In your example with Electrum, you are talking about one wallet. Let's call it Wallet #1.

Let's say you have a business or hobby that pays you in bitcoin. You could use Wallet #1 and all its addresses to receive payments for that. That's what wallet #1 will be for.

Remember, Bitcoin has a public blockchain. Anyone can check the ledger and see the history of UTXOs. Why is it a good idea to create a second wallet or a second bitcoin account? Because you may not want to connect your business coins to other types of bitcoin activity. For instance, if you are gambling, or like me and you, we participate in paid signature campaigns. Your wallet #2 with a completely different set of addresses could be used exclusively for your gambling.   

That way, there is no way to connect those two activities like when you consolidate multiple inputs into one. If you only used one wallet, you would end up with coins from your business, your gambling, something you bought on a CEX, your signature earnings, some sats your friends gave you, etc., all in the same place. If you create multiple bitcoin accounts (wallets), that would no longer be a problem, unless you intentionally connect them. It's better for your privacy and separating different activities.   

No, I was refering to wallet accounts, as described in BIP-44, BIP-49 and BIP-84.

When you import a seed phrase (12-24 words) into a software that generates a wallet, it will essentially create a large structure behind the scenes. The wallet is not just a private key and an address. It is an extended private key and an extended public key. Each of them generates a set of child keys. Then each child in the set generates another set and so on. Please observe this picture to understand what I say:



Having said that, you can create multiple accounts from the same entropy (aka seed phrase). Each account has its own unique set of addresses. Brilliant, isn't it?

Please read this article to understand how extended keys work: https://learnmeabitcoin.com/technical/extended-keys
Please read this article to understand how derivation paths work: https://learnmeabitcoin.com/technical/derivation-paths#bip-84-m840000

I am not lazy to explain, but I believe this website is better at transmitting bitcoin knowledge.

When you say that instead of using different wallets, you can create different accounts which have the same seed phrases. I think the correct word for "Account" is the different wallet address as each wallet contains many different address ( if that is what you meant   )



Same question to you ? Why don't you call it different bitcoin addresses instead of accounts. Like in Electrum you have many addresses including the change address. We don't call them accounts. I hope you and me are on the same page  

That's exactly what I do, but in my previous message I didn't call them accounts so as not to create confusion and make people think of custodial accounts on exchanges for example. I see that it still created confusion, though. Hardware wallet users will be familiar with the term 'accounts' referring to a new Bitcoin account at a different derivation path (+1) than the previous one. It still feels weird sometimes using that terminology. 

The only problem I see here is that you have to manage multiple backups because each wallet has a different seed phrase

Alternatively you could use less wallets and create various accounts for each wallet. For instance Wallet A could be the payments wallets as you said and each account could be known to the "real life instance - company" that you pay or get paid from. Thus, Wallet A - Account 0 could be for payments with company A, Account 1 could be for company B etc.

Then you could use wallet B for different reason and also use various accounts of wallet B.


This is much easier to manage.

Saving the money is not a lone  motive for consolidation  especially when the issues at hand are UTXOs relevant to hardware wallets which generally have the limited size of memory allocated for transaction data. If the given transaction has a huge number of UTXOs to sign and associated data don't fit the memory of HW, the  latter will refuse to proceed with signing and stall out.

Many people even does not know that once they spend a certain bitcoin to a wallet, the rest of the coins are send to a change address. If this information is known to people, they may think of using the coin control feature much more than they are using it right now.

The only thing which the majority of people are concerned about the Tx fee they would need to spend and most of them even do not know the reason for the high transactions fee is that Bitcoin is stored in different UTXOs in a wallet and consolidating them at a time when mempool fee is low, can be a big money saver.

Coin control has same limitations depending on the user profile.
I use multiple wallets, the one I'm doing only deposits has no problem with it as I spend the entire output, makes no difference if I want to play around with $200 for a few bets on some Ascot festival or F1 circuit and I deposit $217, on that wallet I can safely control the coins perfectly.

But on my other messy wallet I use to buy cheap small things and pay vps and vpn subs, I end up with so many and so tiny outputs they are unusable, I batched them last week and 3 or 4 of them would have been a loss over 5sat/b

That aside I don't understand the privacy thing in this so-called conjoin.
Outputs a1,a2,a3,a4 which are let's suppose known are being consolidated into b1 2b b3, calling b1 a decoy...
How is that different from sending a1,a2,a3,a4 to c1 and then splitting that for payments?

If we assume ax are known everyone can see the trail of the coins, there is no privacy whatsoever, you could have just sent each output a1>b1, a2>b2 and then consolidated those it would have set the same level of privacy, which is approximately zero.


However they aren't at all in your example, there is a simple one tx link between them!


Mixers are not offering some complete secrecy, they are used to break the links, if you're not stupid enough to, quoting from your article:


However, the article also mentions:


Which is exactly the opposite of your claim!

BTW, FinCEN has issued  proposal to consider mixers as a threat to national security.  The  clauses from a) (page 8.) to f) (page 10) allow to get better view on how to obfuscate analyzing companies by building  transactions yourself rather by   looking up for mixer service. Particularly a) states :


This is where fake conjoin can help.

If you ask me, then I was not using the coin control until I knew about it. Even i may sometimes not use it for privacy reasons but it feels good to have full control over sending our coins from whichever UTXOs and it just creates a feeling that we know the most features than an ordinary Bitcoin wallet user. As i always check the mempool fee and manually select the fee, I will also manually select the address from which I will be sending the bitcoins.

Sometimes, you use the feature because you want to use it as it feels good to use it. I know most people won't understand or agree to me, but this is how I feel. Only bitcoin lovers can understand this feeling 

Isn't coin control obsolete thanks to advancements in coinjoin technology?  When I make a transaction, there's no labels necessary because any coins being spent are completely isolated from other transactions I did.

No you are not the only one. As I said, I also do it. My sparrow wallet is always opened on the "UTXO" tab. Just like I would do if I needed to get euros out of my physical wallet. It's not like a bank account, where your money is essentially a number on the screen and you just reduce it whenever you spend.

As far as consolidation is concerned, I do it only when the sizes of the UTXOs are so low that they can't be used for a payment. And even then, I do it manually.

Am I the only one who uses coin control as the default option? Whenever I want to make a payment, I start by selecting the UTXOs I wish to spend. There are lots of reasons you should do this over automatic selection. Privacy is the biggest one, as has been discussed already. I want to spend specific UTXOs for specific things, and I definitely don't want my wallet automatically consolidating UTXOs I don't want spent together. I also don't want my wallet to consolidate UTXOs in a transaction where I am paying an above average fee for a faster confirmation - I'll consolidate any UTXOs in a combination I choose, at a fee I choose, and at a time I choose. If I select UTXOs manually, I can select one(s) to create an appropriately sized change output and not be left with dust, or spend the change somewhere else simultaneously, or create no change at all in the first place. It saves me money and fees in the long run, and protects my privacy while doing so. Why would you not use it?

I wouldn't even dream of using a wallet which does not offer manual coin control, and I'd quite like to have the option to turn off automatic coin selection altogether to eliminate the risk of making a mistake.

I mean, at the end of the day, if you throw in social media apps into that list, this is basically what the majority of users are doing.

Similarly with a Bitcoin wallet, you're either looking at your balance, sending a transaction, or generating an address to receive money. Better if the address is already generated for you to copy. I don't think many people are using coin control, though I do.

Coin control is not important only for consolidating inputs. UTXO management is very important for privacy reasons too. Essentially coin control is like managing the dollar bills in your wallet. Would you pay for potatoes with a $100 bill? Probably not. What I mean is, it is much better to know how to do coin control rather than not. It doesn't suggest a bad future for the bitcoin, but rather a bad future for the coins' owner.

Luckily, Sparrow makes coin control a default feature via at- the-start-visible UTXOs tab on the left side of the main wallet window. Thus consolidation can be made manually  , but the opt via fake conjoin is preferable as it eliminates the need of  UTXOs selection in such  way that those outputs that were sitting as inputs in one of previous transaction were not separated between different addresses after end of consolidation.

Every wallet have different feature and it is not required that every user should know about each and every feature of the bitcoin wallets.
So if the user aren't aware of coin control and no nothing about Consolidating UTXOs, that will have no impact on the use and also this does not suggests a bad future for the bitcoin.

You can have an iPhone 15, use only its basic features like calling, messaging and Internet surfing, taking pictures and videos without getting into much details of all the advance features. Does it make the Apple future Dull ? No, it will not.

It is really easy to figure it out.  When you are going to sign a transaction, click on "Advanced" and it shows the inputs you spend.  If the majority of electrum users are not aware of coin control, then I predict a bad future for bitcoin. 

What I always found peculiar about Electrum was that the software doesn't have the Coins tab enabled by default and that you have to make it visible manually from the settings menu on first installation. It helps greatly with consolidation but unless you already know about it or find the option in the settings, you wouldn't know it's there.

I haven't used the sparrow wallet so i do not know how does it offer coin control in a more better way as i usually use Electrum for bitcoins.



You are right that we can use the Addresses 1 and 2 only or whichever address we want but my point of view was that most people do not know about this feature. They may even send some bitcoin to someone, and they won't even know that their rest of the UTXOs are already combined by the Electrum through change address.