Topic: Why is "consolidating inputs" considered to be profitable? (Read 433 times)

If you use Android or iOS, i would mention about clipboard permission. But since you mentioned windows, it's probably weird bug on Windows Explorer which could be fixed by close and re-open it.


It's not practical for most people though. And for miner, it means they pass opportunity to collect fee from other transaction, unless they already include all TX on mempool and their block still not full.

Not every time. For example: testnet4 is a young network. If you are a miner, you can consolidate your coins for free: https://mempool.space/testnet4/tx/9bab50dee590122a20a3d840d0e2d99bd495044975da8f8e5f517f347e48e7e0

If you will wait instead, then you may no longer be a miner, many years later, and then you will have to pay more for consolidation. Also note, that in 2009, it was possible to send transactions for free, and get them confirmed. If some people would consolidate then, they would pay smaller transaction fees now. And note, that there were even times, when "non-standard transaction" was not a thing, so you could create some outputs then, which could be very hard to move now.

Not really. If you can see, that your mempool is empty, and you can use the minimal fee, and get things confirmed, then fees will not go down with 50% probability: they will stay there. You will not go from 1 sat/vB into 0.1 sat/vB. You will need to find some mining node with custom settings to do that.

As long as the basic block reward is quite huge, compared to transaction fees, it is not that important. However, if you will wait for more halvings, then miners will run out of new coins, and you will end up in the same situation, as it is in testnet3: you can consolidate your coins at 1 sat/vB, or wait for 10 or 100 sat/vB, if not more. Choose wisely.

Yeah, "moving coins is risky, so let's never move them".

Because of halvings. We are going from free transactions (2009) into only-fee-based-transactions (2140). There will be no more than 21 million coins. Also note, that 1 sat/vB is still there, and 2017 was the last time, when minimal fees were lowered, because of Segwit discount. I don't know, if people will agree to change their settings from 1 sat/vB into 0.5 sat/vB or some lower values. Because 1-4 MB block, with 1 sat/vB, simply means something like 0.01-0.04 BTC per block, forever, as long as people are willing to transact. So: do you believe, that people will agree to drop "minimum 0.01 BTC fees per block" that easily?

Imagine that you do a lot of daily purchases, with cash. Using small coins, like single cents or dollars. Imagine having $1000 in $0.01 coins, and never consolidating them. See the problem? You will need a huge bag, to physically transport all of your wealth. If you never consolidate any coins, then you look like a man, walking to the store, with a huge bag of $0.01 coins, and trying to buy something for $100.

If you support silent payments, then you can safely send your coins to the same address, and avoid address reuse, because "sp1" address will be automatically converted to the proper "bc1" address.

Because in case of real payments, there are usually at least two outputs: which means, that both the sender, and the recipient, can do CPFP in the future.

Exactly, that's usually the case. However, if you are going to deposit your funds to an exchange, and then withdraw them, then don't be surprised, if your own deposited coins, will be sent back to you, and you will pay a bigger fee, because of that.

I couldn't find the exact article again but I think it involved the victim using metamask and it may have been this one but i'm not sure:
https://www.coindesk.com/business/2024/05/03/exploiter-steals-68m-worth-of-crypto-through-address-poisoning/

But here's another one:

https://cointelegraph.com/news/dea-loses-tether-in-address-poisoning-scam

The funds were put in DEA-controlled Trezor crypto wallets and stored securely, according to a search warrant seen by Forbes. As part of standard forfeiture processing the DEA sent a test amount of just over $45 worth of USDT to the U.S. Marshals Service.

An on-chain sleuth picked up on the transaction and then quickly set up a crypto wallet with the same first five and last four characters of the Marshals account — a scam tactic known as “address poisoning.”


Metamask is really bad about not showing the full address!

Interesting. Mind giving the source? Scammers aren't generating fake addresses, but my hunch is that it's a vanity address that they're generating on the fly. The more similar the address, the harder it is to generate. I'll probably stand by my statement though, no matter how similar it is I should be able to catch it with a glance.

Anyhow, I think this is also diverting from the topic already. It has to do more with the user behavior and experience rather than consolidation.

ok well maybe i need to give electrum a second look.


i remember reading about someone that got scammed with an address that not only matched the leading characters but also the last characters too. so the scammers are becoming more sophistocated in their ability to generate fake addresses. you have to check the entire address.

if you consolidate lots of utxos back to yourself you wasted a fee just to give you funds you already had. and then if you then as a separate transaction then spend funds on one purchase you use another fee for one destination and then you get change. then when you spend funds(change) as a separate third transaction your wasting a third fee.. however if you know you want to buy 2 things this month but only have alot of dust, you can consolidate all utxo and have 2 destinations(purchases) and a change address all as one transaction and use a fee that is 1tx length+2x32byte rather than 3tx length

EG consolidate 10 dust to 1 lump(10in 1out) = 1524 vbytes
EG spend one lump for one purchase (destination+change(1in 2out)) = 226 vbyte x 2    
= 1,976 bytes worth of sats over those 3 transactions to consolidate and then buy 2 separate items
or
EG consolidate and buy 2 items in one transaction and get change(10 in 3 out)=1592 vbytes



when a cex does sweeps to cold, or hotwallet withdrawals they are spending deposits. so if they have pending deposits they can(and some do) charge those withdrawing a withdrawal fee thats higher than a measure of 32bytes+% of batched tx input length to be where the batched withdrawal is the CPFP of the pending deposits, paying  higher fee of withdrawal to speed up the pending deposits confirmation

I do consolidate inputs but not very frequently, may be once or twice in a year or so.
This post reminded me that I am due consolidating my inputs since it has been a while.
I have been following this since LoyceV posted his thread [Jul 2024] Fees are low, think about Consolidating your small inputs @4.1 sat/vb
Thanks to him as well as OP.

IMO, that isn't too big of a hassle for me so I might not be able to understand the issue as well as you. It's pretty fast for me to compare addresses visually even if its across multiple tabs.

But, I believe that this isn't too widespread of an issue to be saying that consolidating inputs is a bad thing to do or something that is too complicated. This would be more of an issue about the general usability of your wallet.
Technically, everything other than Bitcoin Core is a non-reference version. BIP39 is a standard, but Electrum tries to address some of the shortcomings of BIP39 with their own version of their seed. Your user experience or utility should be the priority.

Electrum gives you a preview before signing and after signing the transaction. Generally, you don't have to verify the address to that level of specificity; first part and last part of the address would serve as a foolproof confirmation since it is very difficult for you to generate an address which meets all of those criteria.

if someone emailed me an address to send to then i can compare it to that address but if i'm trying to send to one of my own addresses, i can't just copy and paste the address into a text editor i would have to take a screenshot of the address as it appears in the software and then compare to that address when i am going to send to it. its not impossible to do but it is a bit of a hassle. compared to if there was a button inside the software that i could just click and it would fill it in for me not using the clipboard. 

maybe i'll do that but i have a feeling that they won't consider something like that a priority.

unfortunately i never have used electrum since i thought it was a nonstandard implementation of a bitcoin wallet since it doesn't use bip39. but maybe i should take a second look. i need the final confirmation screen to show it is an address that i control though. not just a preview page. if anything can change between the preview and the final confirmation page then the preview page is not going to help me. i would still need to visually check all the characters on the final confirmation screen in that case.

Would it be difficult for you to check the address that is being pasted against the address that you were trying to copy? I think this is a simple implementation, where it is implemented with change addresses automatically. But generally, I don't see anyone complaining about it and thus no one is doing it. If you think its a necessity, then it would be good if you could open a PR with your modifications in your desired wallet. As a bonus, Electrum does show that you're sending coins to another address that you control in the preview popup. That should be okay as a visual confirmation.

i dont think it was malware but the clipboard didn't work correctly and was not updating the clipboard with the new address i was trying to copy and paste!




i need to avoid having to depend on the windows clipboard i think it sometimes doesn't copy things to its clipboard and keeps a previous item on the clipboard. sometimes it works perfectly maybe even most of the time but i just can't trust it. how hard would it be for a developer to put a button that lets me create a transaction where the "send to" field is automatically filled in with my next unused address? but yet they don't do that, forcing me to copy and paste. that's really not ideal but it is what it is. i know why they don't do it because normally you're not sending to yourself. but still.

Almost every  wallet  accepts  copy and pate  unless you feel like typing it and that's more prone to errors (typos/ommissions)...  I don't know why you're really afraid of malware on your clipboard. Just verify your address and you will be fine or have you experienced it before??
It's just like spending all inputs on a single  address in a single transaction  and then we are back to it again, with Electrum It's even better, you can choose too consolidate the inputs you want(just like a normal spending) and then you will provide the new address you want (not hard).
Why would you prefer auto?? What if you are to spen to another wallet entirely??

The general opinion out there is that if you are receiving multiple payments to
a wallet address its good practice to move the funds to another address.

If you have to move multiple UTXO's to a consolidated location it isnt going to be free,
there are costs and the prudent approach is to do that when fees are low.

Using a hardware wallet like Trezor definitely reduces the necessity to consolidate
UTXO's given the possibility of multiple wallets with multiple addresses with
multiple amounts.

To some people, consolidating UTXOs allow for easier and quicker transactions. Fewer UTXOs in a transaction would of course reduce the transaction fee.

However this is also done if an individual is planning on executing a large transaction later in the future. It all depends on the individual and their preferences, really.

You're right, caution is key!  Taking extra time for larger transactions is definitely wise.

Actually, most of my coins are in secure cold storage for long-term holding.  For smaller amounts I use a mobile wallet, but for frequent transactions, I find a desktop wallet the most practical.  It offers a good balance between security and convenience. I do most of my online stuff on the desktop anyway.


Honestly, I can't imagine why it takes you so long to make a simple transaction.  I've seen entire step-by-step video tutorials explaining the whole process - installing an Electrum wallet, setting a seed phrase, creating a receiving request, AND sending coins - and they take less than five minutes! Maybe some practice makes perfect? (Just kidding... mostly.)


Yeah, haven't seen a wallet with that one-click button either. Honestly, I prefer doing it myself.  Gives me more control over the fees and which coins I use.

There are definitely desktop wallets that make consolidation easier though, like Electrum for example. Activate the "Coins" tab, select all UTXOs you want to consolidate and right-click to select the "Fully spend..." option.

exactly! that's what i've been saying. see point #1 in the original posting.  

i don't see how that really does anything though. each input utxo still gets charged like it would be if you were doing individual transactions no?

really? they will do that? that sounds too good to be true. then i could just send all my utxos to coinbase paying 1 sat per byte anytime i want to. no matter what the current network rate is. why isn't anyone talking about that?? and if that's the case you could also do that to someone you are making a payment to, just tell them they need to bump up their transaction fee so they can get yours confirmed. but i don't think they would appreciate you treating them like that    but maybe that's their problem?

Something that I can't wrap my head around is why is copy and pasting from a clipboard such a big issue? I've been doing it for the past 10 years and never have I gotten it wrong, or never have I gotten a clipboard malware. Again, if you have a clipboard malware, then it would've probably stolen your wallet file already. No difference if you're consolidating it or not.

If you're extremely lucky to get a clipboard malware, then it is okay, just make sure that the first few characters and the last few characters corresponds to whichever destination you're sending to. This is pretty much a foolproof, 20 seconds method to verify that you've pasted the right address. If you're typing it in, then even better; the checksum is quite good at detecting invalid addresses and you probably won't get it wrong.

In terms of features, I don't think there is a need for it because it can be done very easily. Adding this sort of features would probably not be needed for most people; how hard can sending funds back to yourself?

Back to the topic: Fearing that you're going to make a mistake when making a transaction, or fearing that a random malware steals your lunch money doesn't discount the fact that consolidating inputs is the logical way to go if you know how to send a transaction.

how do you do that without copying and pasting from the clipboard though?


the wallet i used in the past is pretty nice but i don't think i could use it for consolidating inputs since it would require me to actually copy and paste a bitcoin address. or type it in. which is even worse.

someone mentioned using a hardware wallet but i don't think that's going to work for me since i don't use hardware wallets. i probably should but they seem too inconvenient.

all i need is a button in the desktop software that performs the consolidation function so i don't have to do anything else. except maybe set the fee. to what i want it to be if i dont like its default suggestion.

alot of people dont consolidate inputs to put funds back into their wallet as one lump. because it would cost them more later

instead they would wait until they need to make more then one payment and consolidate multiple payments into destinations inside one transaction and then select utxos as the funding to fill the amounts needed plus a utxo to destroy as fee. to make each of the payments less thus destroying less utxos just on fees

and ofcourse many just consolidate where the destination is a CEX but use a low sat utxo to destroy as the fee. whereby its then upto the CEX to then CPFP on the deposit to rush the confirmation delay due to low fee parent

You'd be surprised to know what malware can do. If you've got a malware that can change your clipboard, then you'll probably have other malware to worry about. The lamest malware will copy your clipboard and the normal ones would have gotten your private keys already. If you're scared of making Bitcoin transactions, then use a hardware wallet where you have visual confirmation on the device themselves.

Regardless, if you're this paranoid, then you probably should re-evaluate what your security practices are. This shouldn't be discouraging people to consolidate inputs, because this wouldn't be a concern for most.
Just send all the funds to another address that you control, it shouldn't be complicated enough for you to have to implement another function.

i haven't used every bitcoin wallet out there but the ones i have used required copying and pasting payment addresses. which is something i don't like to do. i think it's very risky because i heard of malware that will change the address. then you have to manually check if the address is correct or did it get changed. maybe after you check the address and click submit that's when it might try and change it, you never really do know. that's why i don't like doing unnecessary transactions personally. it's a pain having to go through all that.

but if you know of a wallet that has a button called "consolidate all my utxos" and does it automatically i'd be interested to know what desktop software that is. not android or iphone app.

It's not about profit, it's about keeping things lean. Yes, transacting a lot of data in peak costs a lot of satoshi, but consolidation during low periods (or using spend opportunities to consolidate) costs you a few sats.


This is incredibly unsound logic. Every transaction carries this same risk of wrong address. Besides, consolidating to your own wallet has no risk of mistaken address, if you're only opening your own wallet. If you're risking being hacked every time you use Bitcoin, you're using it wrong.

That is what most wallets do for you, and it is a very good way of doing so. However, most people won't have unlimited amount of money and the way that change works is that you're bound to end up with a whole bunch of inputs which makes little sense to spend when fees are high. More often than not, it is necessary to spend those when paying.

Let's say I've got a client that pays me regularly for a server hosting that I do. When I'm paying someone else, the entire transaction amount would be far higher than any of my largest inputs. Hence, I'd have to spend all of them or I won't be able to pay them.

30 minutes is probably one of the longest I've heard of anyone making a payment... But yes, to each their own and I've never heard of anyone taking more than a minute even if they're going back and forth to check the transaction 

if the solution was as simple as storing it on a centralized exchange then i would have mentioned that. you're not holding real bitcoin when you have it on an exchange for one thing.


i believe you so why not just make payments using one or two bigger inputs? if you happen to need to make a payment. no need to mess with all those smaller ones. that avoids churning your bitcoin account.


i think if someone wants to be careful they need to take more than just 10 seconds. you must be someone who holds their entire balance in hot storage on some android app. i don't trust android apps with lifetime savings. android apps are for everyday expenses and so there would be no need to consolidate things like that since you're using the utxos on a regular maybe even daily basis.

to me doing a transaction involves alot of attention and time. at least 30 minutes. just to save $5 or $10 i probably have better things to do. but to each their own.

Then don't consolidate your small inputs and instead, wait for one of the days the fees are a bit high and make then a test:
* try to make a payment from one (bigger) input
* try to make a payment from all those small inputs
You don't have to actually sign the transactions, you have to only check/compare the total fee (at identical sat/vbyte fee).

Of course, you can simulate this with specialized websites too, but imho the real feeling is when you do have to spend and realize that you didn't consolidate and the fees eat up a too big chunk of your funds.



A small extra: many simply don't need to consolidate funds because they don't receive so small inputs. You know, never over-generalize anything.

Depends on how you handle your wallet right form the onset, there're alto of people who don't consolidate and they still got hacked... consolidation is just a normal transaction just like every other transaction just that the idea is just only when the fee is low / very low (consolidators choice ).
If you prioritized cold storage right from onset I don't see you getting hacked unless you comprise it yourself (which can be in different ways) About the wrong address, If you feel a malware could hijack your info on clipboard before pasting then try crosschecking the whole address twice or thrice before sending (its a good habit) besides you're dealing with funds here you should always  check over and over to be rest assured

The truth is, I probably have to at times. I do certain deals with other people both on and off the forum. Not paying them immediately, and using fees to justify so is a good way to lose business.
Simple example, and it's probably worse as we see periods of high peaks and drops throughout. Regardless, that wouldn't be a good assumption to make. I would love to save $3 if it takes seconds of my time. I hate to pay so much for small transactions.

I believe that a lot of your points are founded on mistakes when making transactions. Those can happen anytime and if you think that it may happen to you, then you might need to be more careful with how you pay.

- Clipboard malware or any malware is going to steal your Bitcoins even if you don't make any consolidation transactions.
- You can copy and paste an address wrongly whenever you're making payments.

Even if you speculate that fees may drop to 1sat/vbyte instead of remaining at 2sat/vbyte, that is fine the loss vs benefits is fairly small. Besides, we don't tell people to consolidate when fees are high. We tell them to do so when it is relatively low.

1. That's true, although it's something people rarely do.
2. What is basis of 50/50?
3. Although based on example stated by @ranochigo, miner earn less in long run.
4. Sending BTC to wrong address is very unlikely since you just copy-paste address on wallet you already opened. Risk of getting hacked isn't that high, unless someone usually download pirated content.

It's true the differences is small, but i expect people who bother perform consolidation have hundred or more UTXO. And $3 difference in the example isn't small for those who live in developing country. I also expect it took less than 10 minutes, even if you select UTXO and choose fee manually.

Sure, if you'd consolidate your coins at a random point in time. But the thing about consolidating your inputs is that you actively choose to time your consolidation in a way that the chance of fees going up is much higher than the chance of the fee going down. At 2sats/vbyte the chance of fees rising is much larger than the chance of fees falling and vice versa for e.g. 200sats/vbyte. You can't necessarily time when you need the coins for a purchase though, so depending on how many inputs you consolidate in a low-fee environment beforehand you can save quite a bit.

You, me and others are free to choose how we choose our UTXOs, fee rate and when to broadcast our transactions. It's freedom.

Nobody can say others HAVE TO do anything with Bitcoin. The math is only simple that if you don't plan your transaction and consolidate your inputs when fee rates are cheap, you will have to broadcast your transaction with higher fee rates.

I said with same number of UTXOs for one transaction, if fee rates are different, transaction fees are different.

Same number of UTXOs, same transaction size, so will you choose to use 6 sat/vbyte fee rate or 60 sat/vbyte fee rate. Consolidation is only one solution but there is other solutions like storing your bitcoin on centralized exchanges, leaving it there for months or years. If you do this, no fee from consolidation but the bigger risk is you will lose all your bitcoin.

I don't argue more here, it seems you stick with your opinion and don't want to listen.

Consolidation UTXOs may literally not profit miners as may think but to me, the reminants of those UTXOs are accumulates to serve as greasing the mechanism of the exchange for executing flexible transaction because those particles of UTXOs are reservoir to enhance further transaction services.

What time? You mean that ten-second blink of an eye moment you need to create a single transaction in your Bitcoin wallet?  Yeah, real nail-biter.  Definitely not something mere mortals like us would consider time-consuming.

Besides, ranochigo only offered one example to support his point. You can absolutely scale the numbers up as needed. Instead of 10 inputs, imagine a hundred, or more.

edit:

Probably true, but not a very valid argument. You don't have the same chance at any point in time that the fees could increase tenfold or be ten times less.  Therefore, consolidating your inputs makes perfect sense if you want to eliminate the very real possibility of losing more money in fees in the future.

well if you took at 20% hit on your bitcoin portfolio, i seriously doubt your main concern for bailing would be how much it costed to "sell". you would just be willing to get out at any price to stop further bleeding am i right?

anytime you do a transaction there is a risk of something going wrong like clipboard malware which can cause total loss of funds.

What if Bitcoin price down 20% in a day and you want to sell it ASAP, but the fees is still high? don't say wait till Bitcoin price recover or anything that related to "wait". You will be forced to spend high amount of fees because you didn't consolidate your inputs.

This one is really unreasonable, it's actually a risk when you get involved with Bitcoin, not necessary only for consolidating inputs.

i never said you did.

why would you be so worried about the future? isn't the point of having money to not have to worry about the future?


that's a very tiny difference currently. maybe $2 vs $5. the time it takes to actually go through the entire consolidation process and attention given to it by the user, maybe their time is worth more than that. maybe they get paid $30 per hour at their job.

 Yea, your total balance will be reduced with a little amount because you have to pay for the transaction fee for consolidating those many small outputs of yours to one input. It is best to consolidate your small output when the blockchain is not congested and transaction fees are very low so that it will only cost you little amount.

Yea, since nobody knows when the network will be congested and fees will be high, it is better that you are prepared for high transaction fee than low transaction fee in the future by consolidating your transaction so that you can have a big amount of bitcoin output so that when you want to spend from it you pay very little amount for transaction fee even if the fees are high in future.

Miners get very little amount of money from this because not everyone that is using the bitcoin do consolidate their transactions, but only those who buy bitcoin with small amount using DCA or folks that are being paid with bitcoin when they render services, like forum member in signature campaigns. Miners benefits more when a new block is mined and when the blockchain is congested. In fact miners benefits from all transactions carried out in the blockchain. To consolidate your transactions, it happens once in a while when there is low fee, meaning it is peanut that the miners get from consolidating of transactions.

It is not true, that depends on the carelessness of the person who wants consolidate his small outputs. You should not forget that even if you want to make a realtransaction, and you did not recheck the address that you are sending your coins to over and over again, you can still mistakenly send it to a wrong address, especially if you keyboard is infected with malware.

It provides benefits of saving you from spending too much on transaction fee in future when you want to spend your bitcoin. This is because nobody knows how high the transaction fee will be in 10 years time, it might be very high that the profit you have made from your bitcoin investment might be eaten up by high transaction fee if you don't consolidate those many small input into one, making you to lose out from the profit that was generated by your bitcoin investment. As long as BRC-20 token and Runes have not being eliminated from bitcoin blockchain transaction fees might not be affordable in future for people with many small output.

You don't do consolidation every time you receive one new UTXO. Consolidation is for many UTXOs and as your preparation for transaction out in future.

If you don't consolidate your UTXOs when fee is cheap, you will have to pay more transaction fee later when mempools are loaded more, fee rates are more expensive.

Assume you consolidate your UTXOs today with 6 satoshi/byte as fee rate. If you don't consolidate now but wait for time when fee rate on tip of mempools is 60 sat/vbyte, you will pay x10 more in transaction fee, with same number of UTXOs and same transaction size.

It is not profitable, you can't make more Bitcoins this way. Your consideration seems to revolve around user error or looking at it from a short term and constant fee perspective.

Barring the human error, which shouldn't be a factor in your consideration, your main consideration would be if you're able to save more on fees when the network is experiencing bouts of high fees. Consolidating numerous inputs when the fees are low allows the user to spend less when the fees are high. Consolidating inputs essentially means that instead of spending from 10 of them, you only need to spend from 1 of them.

Note that people who are using Bitcoin aren't always able to spend as and when they need. By doing so, they can save more on the fees if they need to transfer them when the fees are high. You can do your calculation in the following scenario and come up with the cost:

Given 10 inputs and a period where fees are 2sat/vbyte and another where the fees are 10sat/vbyte:

Consolidation Transaction (721.5vbytes): 1430sat
Actual Transaction (140.5vbytes) 1405sat

Total: 2835sats

Vs:
Actual Transaction (721.5vbytes): 7215sats.
 
Total: 7215sats.

1) Everytime you consolidate your UTXOs, your total balance in BTC goes down.
2) The chances of fees going up or down at any point in time is pretty much 50/50.
3) Miners love it when people consolidate their inputs since that's how they get paid by people submitting transactions.
4) Consolidating inputs carries a risk of loss from either making a mistake and sending the bitcoin to the wrong address or being hacked.

Based on the above, I don't see why someone would think that consolidating UTXOs provides them with any substantial benefits. Just use your coins when you are actually making a real purchase/transaction.