[Apr 2024] Fees are HIGH, wait for opportunity to Consolidate your small inputs

[LoyceV]

Update: In the past hours, transactions with 2.2 sat/byte have been confirmed.
My Bitcoin Core shows 168 MB waiting in mempool, Johoe's site shows 79 MB. I don't know what causes the difference.

It looks like the coming weekend is going to be a great chance to consolidate small inputs, 2 sat/byte or less might just get through. Fees haven't been this low in 4 months.

[1715101128]

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[LFC_Bitcoin]

@PocketBitcoin
Mempool soon to clear 1 sats/vbyte transactions which hasn't happened since early January 🔥🥰

Who feels like us? 💜

https://twitter.com/pocketbitcoin/status/1390595067547721728?s=21

[LoyceV]

Who feels like us? 💜

It took a coal mine accident in China, which caused a blackout, drop in hash rate and very high fees. Eventually this lead to a lower difficulty while miners were back online.

TL;DR: enjoy it while it lasts!

[philipma1957]

Who feels like us? 💜

It took a coal mine accident in China, which caused a blackout, drop in hash rate and very high fees. Eventually this lead to a lower difficulty while miners were back online.

TL;DR: enjoy it while it lasts!

next diff jump it will end.

but we should have three to five more days of it.

[LoyceV]

next diff jump it will end.

I'm afraid so. It's nice to see though how much difference a small increase in block capacity makes.

Someone just broadcasted 38 MB of transactions at 4 sat/byte:

In the same picture you can see an earlier broadcast of 6 MB at 3 sat/byte too. I see this a lot nowadays: the moment fees drop enough, someone (maybe an online casino) uses the opportunity to fill up many blocks (most likely consolidating a couple hundred thousand inputs).

I keep track of the total number of funded addresses. When fees drop, the number of funded addresses often drops too.

[TheQuin]

Someone just broadcasted 38 MB of transactions at 4 sat/byte:

In the same picture you can see an earlier broadcast of 6 MB at 3 sat/byte too. I see this a lot nowadays: the moment fees drop enough, someone (maybe an online casino) uses the opportunity to fill up many blocks (most likely consolidating a couple hundred thousand inputs).

I keep track of the total number of funded addresses. When fees drop, the number of funded addresses often drops too.

The 4 sats/vbyte consolidation is all going to https://btc.com/3EiEN1JJCudBgAwL7c6ajqnPzx9LrK1VT6

With a balance of over 3000 BTC I would guess an exchange rather than a casino.

[LoyceV]

Last call this weekend for low fees 2.x sat/byte is now being confirmed, and only 5 MB to confirm transactions with a fee lower than 2 sat/byte.

[Poker Player]

Hi, thanks to this post I sent a low fee transaction yesterday that was confirmed relative quickly.

I would like to ask a (probably simple) question: until now I had thought about saving everything I earn in the signature campaign and leave them in the same address where I receive the payments.

After discovering this thread, I have made some transactions to consolidate small inputs but from other addresses I had years ago where I had small amounts.

What I have been thinking lately is that I will have to consolidate some inputs from the address where I receive the payments of the signature campaign, because the first payments were of very little amount (the payment system goes by tiers and the lowest tier pays very little). In particular, I see that I have several payments from the beginning, of around 0.0001 BTC.

What do you think about it. Should I consolidate them next Sunday if fees are still low or maybe just wait? Maybe if I save everything I have in that address, and the price continues to rise in the future, that amount might be more tradable even if I pay fees.

[TheQuin]

What do you think about it. Should I consolidate them next Sunday if fees are still low or maybe just wait?

I would do it right now while you can at 1.2 Sats because there will be a difficulty increase before next weekend. Fees can't get much lower than they are right now so there is no point in waiting.

[Poker Player]

What do you think about it. Should I consolidate them next Sunday if fees are still low or maybe just wait?

I would do it right now while you can at 1.2 Sats because there will be a difficulty increase before next weekend. Fees can't get much lower than they are right now so there is no point in waiting.

Hi thanks! I've done it just now. The thing is I was not thinking about the small inputs of that address for a while, because they were part of the same address and as I am a bit of a noob I was not aware that although they are the same direction they are small inputs that will cost me more expensive to spend in the future if I do not consolidate them.

[TheQuin]

Hi thanks! I've done it just now. The thing is I was not thinking about the small inputs of that address for a while, because they were part of the same address and as I am a bit of a noob I was not aware that although they are the same direction they are small inputs that will cost me more expensive to spend in the future if I do not consolidate them.

That's something a lot of people miss. Even if they are from the same address each UTxO has to be signed individually which takes up a lot of space. Fees haven't been this low for four months and it could easily be as long again until the next chance to consolidate cheaply. If you needed to spend them when fees are higher it could you many times more.

[PrimeNumber7]

That's something a lot of people miss. Even if they are from the same address each UTxO has to be signed individually which takes up a lot of space.

There is an argument to change from signing individual UTXOs, someone spending coin would need to sign an address plus a nonce. This would encourage address reuse, which reduces privacy, and would make CPFP more complex, but would increase transaction throughput. It would also eliminate change addresses, which would also reduce privacy. It would be required that nonces are confirmed in order, but two nonces could be confirmed in the same block.

The topic of "consolidating inputs" has come up often in this thread, and the above would largely eliminate the need for that.

[NeuroticFish]

That's something a lot of people miss. Even if they are from the same address each UTxO has to be signed individually which takes up a lot of space.

There is an argument to change from signing individual UTXOs, someone spending coin would need to sign an address plus a nonce. This would encourage address reuse, which reduces privacy, and would make CPFP more complex, but would increase transaction throughput. It would also eliminate change addresses, which would also reduce privacy. It would be required that nonces are confirmed in order, but two nonces could be confirmed in the same block.

I am not sure, but won't Schnorr/Taproot fix this too? Or is it only wishful thinking from my side?

[pooya87]

That's something a lot of people miss. Even if they are from the same address each UTxO has to be signed individually which takes up a lot of space.

There is an argument to change from signing individual UTXOs, someone spending coin would need to sign an address plus a nonce. This would encourage address reuse, which reduces privacy, and would make CPFP more complex, but would increase transaction throughput. It would also eliminate change addresses, which would also reduce privacy. It would be required that nonces are confirmed in order, but two nonces could be confirmed in the same block.

I am not sure, but won't Schnorr/Taproot fix this too? Or is it only wishful thinking from my side?

Technically ECSDSA (Schnorr digital signature algorithm) has the defined method to aggregate signatures which could be used to produce a single signature for multiple public [different] keys. Also technically we can add an option where a single signature (regardless of Schnorr) is produced for the same output scripts.
But neither one (as far as I know but definitely not the second one) are going to be added in the upcoming softfork.

What Taproot does is that you can have a more complex spending script that is bigger but you only reveal a portion of it that has to execute, that way you reduce the transaction size. There are also other benefits using Schnorr which include smaller fixed signature size and signature aggregation for multi-sigs.

[NeuroticFish]

Technically ECSDSA (Schnorr digital signature algorithm) has the defined method to aggregate signatures which could be used to produce a single signature for multiple public [different] keys. Also technically we can add an option where a single signature (regardless of Schnorr) is produced for the same output scripts.
But neither one (as far as I know but definitely not the second one) are going to be added in the upcoming softfork.

Thank you for clearing it up.
However, it's a bummer, since it would have been of great help for common people, especially as after the next difficulty adjustment (i.e. in less than 3 days) the fees will probably rise again.

[PrimeNumber7]

That's something a lot of people miss. Even if they are from the same address each UTxO has to be signed individually which takes up a lot of space.

There is an argument to change from signing individual UTXOs, someone spending coin would need to sign an address plus a nonce. This would encourage address reuse, which reduces privacy, and would make CPFP more complex, but would increase transaction throughput. It would also eliminate change addresses, which would also reduce privacy. It would be required that nonces are confirmed in order, but two nonces could be confirmed in the same block.

I am not sure, but won't Schnorr/Taproot fix this too? Or is it only wishful thinking from my side?

Technically ECSDSA (Schnorr digital signature algorithm) has the defined method to aggregate signatures which could be used to produce a single signature for multiple public [different] keys. Also technically we can add an option where a single signature (regardless of Schnorr) is produced for the same output scripts.
But neither one (as far as I know but definitely not the second one) are going to be added in the upcoming softfork.

What Taproot does is that you can have a more complex spending script that is bigger but you only reveal a portion of it that has to execute, that way you reduce the transaction size. There are also other benefits using Schnorr which include smaller fixed signature size and signature aggregation for multi-sigs.

If you have 10 inputs in a transaction, all 10 inputs will need to be in the transaction, even if they are all from the same key. If each address had a balance instead of unspent outputs, a transaction with 10 inputs could be potentially reduced to a single input with a nonce and an amount (and a signature).

[pooya87]

However, it's a bummer, since it would have been of great help for common people, especially as after the next difficulty adjustment (i.e. in less than 3 days) the fees will probably rise again.

If 2 things happen we won't see any big fee spikes any time soon even with price surges or even if we see another small hashrate drop.
1. (smaller effect) If multi-sig users start using Schnorr instead after activation of it.
2. (biggest effect) If we move the traffic from big bitcoin exchanges to lightning network. If you look at each big fee spike in history they are almost always happening because bitcoin price either goes up A LOT or drops A LOT. That means the extra on-chain transactions are from traders. If that is moved to LN the on-chain capacity is left for other transactions. Not to mention the ability to deposit/withdraw bitcoins in an instant with virtually no fee while being in full control of the keys instead of having to leave them on the exchanges.

If you have 10 inputs in a transaction, all 10 inputs will need to be in the transaction, even if they are all from the same key. If each address had a balance instead of unspent outputs, a transaction with 10 inputs could be potentially reduced to a single input with a nonce and an amount (and a signature).

Bitcoin design is based on outputs not addresses and balances so it is not possible to do this without significant changes to the protocol.
However it could be implemented as a softfork with a new witness version for example. Something like this:
Assume an address has 5 UTXOs and you want to spend 2 of it (input 1 and 3) in a transaction while aggregating their signatures: (P2W3 is pay to witness version 3 as an example)

Code:

[
 [input0_addrA_P2PKH][sig0]
 [input1_addrB_P2W3][empty_sig]
 [input2_addrC_P2WPKH][empty_sig]
 [input3_addrB_P2W3][empty_sig]
 
 [witness0_empty]
 [witness1_witnessB]
 [witness2_witnessC]
 [witness3_empty]
]

Code:

[witness1_witnessA] = [1][3][signature][pubkey]

[1][3] are integers saying the follow up signature is for inputs at index 1 and 3 then signature and public key is used in OP_CHECKSIG and witness3 is empty because we have already added the signature for both inputs in witnessB

[NeuroticFish]

If 2 things happen we won't see any big fee spikes any time soon even with price surges or even if we see another small hashrate drop.
1. (smaller effect) If multi-sig users start using Schnorr instead after activation of it.
2. (biggest effect) If we move the traffic from big bitcoin exchanges to lightning network. If you look at each big fee spike in history they are almost always happening because bitcoin price either goes up A LOT or drops A LOT. That means the extra on-chain transactions are from traders. If that is moved to LN the on-chain capacity is left for other transactions. Not to mention the ability to deposit/withdraw bitcoins in an instant with virtually no fee while being in full control of the keys instead of having to leave them on the exchanges.

I hope that at least the withdrawals from exchanges will become smaller. That would be your [1] I guess.

I know that big variations in price make tx fees go crazy. I've suspected the arbitrage traders/bots, but it's more than that. However, as long as LN is "advertised" as beta, unfortunately the exchanges can easily make a point of not adding the LN support. And even afterwards it could be difficult to get all of them use LN (I'm sure you remember the we had the same with the adoption of SegWit).

[PrimeNumber7]

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It would probably be better if any implementation of my proposal would only apply to transactions sent after a cutoff date.

It could that effective block number x, transactions can be sent to addressed starting with bc2 that are "balanced based" addresses, and that after block number x plus n, no transaction will be valid until all outputs are sent to a "bc2" address that keeps track of address/key balances.

[pooya87]

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It would probably be better if any implementation of my proposal would only apply to transactions sent after a cutoff date.

It could that effective block number x, transactions can be sent to addressed starting with bc2 that are "balanced based" addresses, and that after block number x plus n, no transaction will be valid until all outputs are sent to a "bc2" address that keeps track of address/key balances.

That requires a hard fork and a significant change in the database and chainstate which is harder than it sounds. There is no benefit in "balance base" bitcoin that I can think of either since it could be implemented using the way it is.

BTW "bc" is the fixed human readable part of SegWit addresses, "1" is the separator not the version, and the next letter after separator (in addresses) represents the version with "q" being first, "p" second, "z" third and so on.