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

[LoyceV]

I am referring to txid d3cccd9d47798f9e26f9a95d4ebc2da651d66e606154284afaed013bbaad4850.  All inputs are from what appear to be unique addresses, and all are in the amount of 0.005318xx BTC, or 0.005317xx BTC. The inputs appear to be payout addresses from mining pools.

That doesn't mean they do this just to increase fees for other Bitcoin users, especially since the transaction pays only 3.02 sat/vbyte in fee. That's barely competing with other users.

There is blockchain evidence that a miner is receiving mining payouts to many addresses. I cannot imagine any good reason to do this, except maybe for privacy reasons, but their consolidating the outputs removes any privacy advantage they had by doing this.

What if you don't trust the pool much? It's better to have regular payouts than fall victim to a potential exit scam.

That is a typical deposit wallet consolidation transaction. There's an automated program from Bitpay that many services use. It'll go through the deposits in descending value order and consolidate them into a single address. Then use those outputs consolidated together to fund the cold wallet and withdrawal hot wallet.

This makes sense. I'm glad to see (some) exchanges are starting to be more sensible with fees compared to (for instance) Binance. I like how mempool gets filled with low-fee transactions in batches when fees are low. This is much better than competing against exchanges for the highest fee later on.

[1715236582]

1715236582

[PrimeNumber7]

I am referring to txid d3cccd9d47798f9e26f9a95d4ebc2da651d66e606154284afaed013bbaad4850.  All inputs are from what appear to be unique addresses, and all are in the amount of 0.005318xx BTC, or 0.005317xx BTC. The inputs appear to be payout addresses from mining pools.

That doesn't mean they do this just to increase fees for other Bitcoin users, especially since the transaction pays only 3.02 sat/vbyte in fee. That's barely competing with other users.

This transaction is actually from huobi, not the miners. The reason huobi has these inputs is because miners deposited mining rewards into their huobi accounts.

I first saw this transaction a few days ago, but only learned that the addresses in question belong to huobi yesterday. A miner who sends many small deposits to an exchange will pay to have the outputs sent to the exchange, but will never pay to have the outputs consolidated.

Even though your point about the fee rate is not applicable after considering the input addresses belong to huobi, a miner trying to increase fees for users will not fill their blocks with high paying transactions, they will fill their blocks with lower-paying transactions so that users will have to bid against higher paying users.

There is blockchain evidence that a miner is receiving mining payouts to many addresses. I cannot imagine any good reason to do this, except maybe for privacy reasons, but their consolidating the outputs removes any privacy advantage they had by doing this.

What if you don't trust the pool much? It's better to have regular payouts than fall victim to a potential exit scam.

They are withdrawing from the pool to multiple addresses in a day. This in itself is a little extreme IMO if the withdrawals were made throughout the day. They are making withdrawals at around the same time, but may not be processed at exactly the same time, so one withdrawal might be processed at 12:00, another at 12:10, another at 12:20, but I don't think they are evenly spread out. I think most likely, a miner had many ASICs, and x number of ASIC would receive its mining earnings from that day to huobi address y every day.

Ah, so it's a totally different kind of transaction.
I don't get how is that a "blockchain evidence" since you already know that the transaction is from Houbi exchange and Exchanges always consolidate their users' deposits.

How do you account for the fact that so many miners are sending approximately the same amount to huobi, often on a daily basis?

[TheQuin]

How do you account for the fact that so many miners are sending approximately the same amount to huobi, often on a daily basis?

Mining pools have a minimum withdrawal amount. They have many thousands of customers who all withdraw as soon as they can. Most of them are based in China so they use Huobi.
Huobi could be consolidating several months worth of deposits at one time. As the software they use groups deposits by value you'll probably find a lot of deposits from the same mining pool together.

Does Huobi even have a facility to generate new deposit addresses? Most exchanges do not. If they don't then this miner would have somehow managed to open thousands of accounts and get them all through KYC. I think that's unlikely. Even more unlikely that if their aim was to spam the mempool that they would use an exchange rather than their own wallet.

[nc50lc]

I don't get how is that a "blockchain evidence" since you already know that the transaction is from Houbi exchange and Exchanges always consolidate their users' deposits.

How do you account for the fact that so many miners are sending approximately the same amount to huobi, often on a daily basis?

TheQuin already answered this in his two replies.
Here's a review:

• Almost all mining pools have a setting where you can set your preferred auto-withdrawal amount, those users have set their value to 0.005BTC.
  Or it must be the widely used default minimum value that's why the number of withdrawals with that amount is higher than the rest. (like F2Pool, Antpool, Poolin, BTC.com, etc.)
• Most Exhanges sort their inputs (users' deposits) based on their value so when they consolidate, those with the close to similar values are the ones used together as inputs.

Plus, don't take an exchange like a wallet with few available inputs, some of those aren't from miners and we don't have a reliable way to check if all those are from miners, moreover from a single miner just because the amounts are approximately the same.
I think there's no reason for me to extend the discussion about the "blockchain evidence" since your previous reply already answered your earlier post.

This would be more than a theory. There is blockchain evidence that a miner is receiving mining payouts to many addresses. I cannot imagine any good reason to do this, except maybe for privacy reasons, but their consolidating the outputs removes any privacy advantage they had by doing this.

-snip-
One of the addresses that have an input that is part of the above transaction is 1Le7X5MkbXjhEWwBJ3NHzAqFatCvjHMu8h, and it appears this address belongs to Huobi. It appears that Huobi is consolidating their unspent outputs, maybe after reading this thread. It also appears that one or more miners its receiving their withdrawals/payouts from pools to deposit addresses at Huobi.

Like I said, Exchanges always consolidate their users' deposits; and the above.

regards

[LoyceV]

They are withdrawing from the pool to multiple addresses in a day. This in itself is a little extreme IMO if the withdrawals were made throughout the day. They are making withdrawals at around the same time, but may not be processed at exactly the same time, so one withdrawal might be processed at 12:00, another at 12:10, another at 12:20, but I don't think they are evenly spread out. I think most likely, a miner had many ASICs, and x number of ASIC would receive its mining earnings from that day to huobi address y every day.

That makes sense. If they don't pay to consolidate their outputs, Houbi doesn't charge them for it, and the mining pool has a certain minimum withdrawal (possibly without charging a fee), this just means they get their earnings converted to fiat on a (very) regular basis.

Huobi could be consolidating several months worth of deposits at one time.

Fees have been high for months in a row, so they could indeed be clearing up their backlog.

Mining pools have a minimum withdrawal amount. They have many thousands of customers who all withdraw as soon as they can.

Almost all mining pools have a setting where you can set your preferred auto-withdrawal amount, those users have set their value to 0.005BTC.

Now this makes me curious what percentage of all Bitcoin transactions comes from miners. Let's ignore for a moment the large miners, and assume there are only small miners in pools. They all withdraw their earnings when they reach 0.005 BTC. That means every 6.25 BTC block reward is split up into 1250 outputs for every block! That takes a significant part of block space to consolidate again.

[TheQuin]

Now this makes me curious what percentage of all Bitcoin transactions comes from miners. Let's ignore for a moment the large miners, and assume there are only small miners in pools. They all withdraw their earnings when they reach 0.005 BTC. That means every 6.25 BTC block reward is split up into 1250 outputs for every block! That takes a significant part of block space to consolidate again.

I haven't mined for a long time but it always used to be that each pool would have 5 to 10 whales and a few thousand minnows. Those whales would probably account for 70% of the rewards in each block. Using my guestimate would reduce the 1250 outputs to 375 but then the small guys don't get to minimum withdrawal on every blocked mined. Some might be big enough to get paid every day and others every week or 2.

[PrimeNumber7]

How do you account for the fact that so many miners are sending approximately the same amount to huobi, often on a daily basis?

Mining pools have a minimum withdrawal amount. They have many thousands of customers who all withdraw as soon as they can. Most of them are based in China so they use Huobi.

This might be a fair point. Although some of the input addresses I reviewed had daily transactions to a huobi deposit address.

Does Huobi even have a facility to generate new deposit addresses? Most exchanges do not. If they don't then this miner would have somehow managed to open thousands of accounts and get them all through KYC. I think that's unlikely. Even more unlikely that if their aim was to spam the mempool that they would use an exchange rather than their own wallet.

I don't know if huobi allows for users to generate additional deposit addresses. I don't think it would be especially difficult for a single miner to have the ability to procure multiple sets of KYC documents, see the 2019 april fools joke, especially the prevalence of people willing to post their ID in order to collect "bounty" rewards.

[TheQuin]

I don't know if huobi allows for users to generate additional deposit addresses. I don't think it would be especially difficult for a single miner to have the ability to procure multiple sets of KYC documents, see the 2019 april fools joke, especially the prevalence of people willing to post their ID in order to collect "bounty" rewards.

it might be feasible but I don't think it is an effective way to spam the mempool to make fees higher.

They could withdraw each of those ~0.00531800 BTC amounts to their own wallet and then split it into 973 dust limit outputs of 0.00000546. Then consolidating that back in batches 50 inputs would create 19 transactions of 10Kb each. Do that 6 times to fill a block.


Edit. Some more relevant information. F2pool which was the biggest until recent events in China has a minimum withdrawal of 0.005 BTC with the option to have daily automatic payouts for customers with a balance higher than that. That makes there being a large number of payouts in the value range seen quite reasonable.

[PrimeNumber7]

I don't know if huobi allows for users to generate additional deposit addresses. I don't think it would be especially difficult for a single miner to have the ability to procure multiple sets of KYC documents, see the 2019 april fools joke, especially the prevalence of people willing to post their ID in order to collect "bounty" rewards.

it might be feasible but I don't think it is an effective way to spam the mempool to make fees higher.

They could withdraw each of those ~0.00531800 BTC amounts to their own wallet and then split it into 973 dust limit outputs of 0.00000546. Then consolidating that back in batches 50 inputs would create 19 transactions of 10Kb each. Do that 6 times to fill a block.


Edit. Some more relevant information. F2pool which was the biggest until recent events in China has a minimum withdrawal of 0.005 BTC with the option to have daily automatic payouts for customers with a balance higher than that. That makes there being a large number of payouts in the value range seen quite reasonable.

Splitting the inputs would cost money. Depositing small amounts to an exchange does not. A miner with a large amount of hashpower could create many pool accounts, make the pool pay for sending many withdrawal transactions to an exchange, then make the exchange pay for consolidating the many deposits. The cost to the miner would be close to zero.

[TheQuin]

Splitting the inputs would cost money. Depositing small amounts to an exchange does not. A miner with a large amount of hashpower could create many pool accounts, make the pool pay for sending many withdrawal transactions to an exchange, then make the exchange pay for consolidating the many deposits. The cost to the miner would be close to zero.

The big pools all use PPS payout system so the miners have nothing to gain from high fees. Only the pool operator makes more. Taking the example I gave of F2pool they have a minimum withdrawal of 0.005 and Huobi a minimum deposit of 0.001. the pool operator doesn't need to be concerned about the minimum withdrawal so if they wanted to do what you suggest they could create 5 times as many inputs for Huobi to consolidate. They are also unable to influence when or at what fee Huobi decide to do their consolidation.

I don't know whether or not pool operators do spam the mempool to make higher fees but I am absolutely certain that the transactions you showed are just normal miners withdrawals.

[NeuroticFish]

Mempool is empty now. This may or may not last, depending on how will the hash rate "evolve".


(source: mempool.space)

[Pmalek]

This may or may not last, depending on how will the hash rate "evolve".

Looking at a chart showing the total network's hash rate is pretty scary. Looks like an altcoin after a huge sell-off. From around 150 TH/s at the beginning of June, the hash rate dropped by almost 50% in July. But it seems to be taking a turn for the better now after reaching a bottom at around 84 TH/s if the data I am looking at is correct. 


https://www.blockchain.com/charts/hash-rate   

[TheQuin]

Looking at a chart showing the total network's hash rate is pretty scary. Looks like an altcoin after a huge sell-off. From around 150 TH/s at the beginning of June, the hash rate dropped by almost 50% in July. But it seems to be taking a turn for the better now after reaching a bottom at around 84 TH/s if the data I am looking at is correct. 

I don't find it scary at all, it's good news all around. There's now far less of a concentration of miners in China. The difficulty has dropped making mining more profitable for everyone else. The mempool didn't get excessively congested while it happened so fees weren't too bad. Eventually, all those mining rigs will find their way out of China and get redeployed somewhere else.

[LoyceV]

Looking at a chart showing the total network's hash rate is pretty scary.

I don't find it scary at all, it's good news all around. There's now far less of a concentration of miners in China.
~
Eventually, all those mining rigs will find their way out of China and get redeployed somewhere else.

Allow me to quote myself:

That worries me (a bit): More than 54% of bitcoin’s hashrate ~ has dropped off the network since its market peak in May. If someone were to collect all this hashing power, it would be enough for a 51% attack.

Fees are as low as they get now: 1 sat/vbyte. Use it

[Pmalek]

I don't find it scary at all, it's good news all around. There's now far less of a concentration of miners in China.

I like that part of mining leaving China as well. What I don't like is a +50% less secure bitcoin network precisely for the reasons LoyceV mentioned in his post above. Although I don't find the threat of a 51% attack that realistic because it's almost impossible that all the missing hashing power could end up in the hands of the same individual or a malicious group who are going to use it for such a purpose. It's even less realistic that those who are still providing their computational power to the network do the same thing. A combination of 1 and 2 makes more sense, but I doubt it.     

Eventually, all those mining rigs will find their way out of China and get redeployed somewhere else.

Sure, but that is going to take time. It's not a one-click process. If the miners decide to sell their equipment, it's gonna take weeks to pack up, ship, and connect and configure at the new destination. If they decide to leave China to mine somewhere abroad, it might take even longer. Finding a new location, ensuring you understand and comply to local laws and regulations, finding an electricity provider, filling out the paperwork, setting up your farm...

[PrimeNumber7]

Looking at a chart showing the total network's hash rate is pretty scary. Looks like an altcoin after a huge sell-off. From around 150 TH/s at the beginning of June, the hash rate dropped by almost 50% in July. But it seems to be taking a turn for the better now after reaching a bottom at around 84 TH/s if the data I am looking at is correct. 

I don't find it scary at all, it's good news all around. There's now far less of a concentration of miners in China. The difficulty has dropped making mining more profitable for everyone else. The mempool didn't get excessively congested while it happened so fees weren't too bad. Eventually, all those mining rigs will find their way out of China and get redeployed somewhere else.

I don't think the difficulty dropping by this much, or that this much mining capacity going offline is "good news".

My assumption is that the majority (nearly all) of the drop in hashrate is due to Chinese miners going offline and that nearly all Chinese miners have already been taken offline. The CCP (Chinese government) does not like bitcoin because it makes it more difficult for them to control their population, and they have an incentive to harm bitcoin.

There is the risk of a government-sponsored 51% attack. This could mean that you cannot get your transactions confirmed no matter the fee you try to pay, or it could mean that you are forced to pay very high fees that make bitcoin undesirable to use.

[stompix]

Although I don't find the threat of a 51% attack that realistic because it's almost impossible that all the missing hashing power could end up in the hands of the same individual or a malicious group who are going to use it for such a purpose. It's even less realistic that those who are still providing their computational power to the network do the same thing. A combination of 1 and 2 makes more sense, but I doubt it. 

Not realistic but far more possible than it was two months ago.
We were at 170Exa, you needed 1.6 million S19 pro which nobody could manufacture with all this chip shortage, now we're at ~90 Exa with at least 80 Exa of that gear already laying around and wondering where to go, a lot of it for sale, you suddenly don't need a million and a half you need a hundred thousands.
Besides, the whole 51% is just like the killer blow, somebody mining empty blocks with 40%, and it's enough to make the network unusable...in normal conditions...which we're not having right now.

Looking at the fees and the mempool, nothing is normal, normally we would see low fees in the first two mornings of the week and that's it, now we're coming after a 27% drop in capacity for over two weeks, we're still getting 11% slower blocks two days after the adjustment and yet the mempool is completely empty.
And despite this, somebody is having fun sending 300sat/vb tx....

[Pmalek]

There is the risk of a government-sponsored 51% attack.

If we start reading reliable news coming from miners directly that someone (be it the government or anyone else), is starting to confiscate huge numbers of mining units, we could be closer to such a scenario. But it's still an expensive attack to maintain even if they gathered the required amount of hardware.

I think the Chinese government has reached its goal. Chinese miners have been shut down, they have seen what will happen to them, and their mining operations in China are now a thing of the past. With them out of the way, the communist party can now switch their attention to the digital yuan.

[icopress]

Allow me to quote myself:

That worries me (a bit): More than 54% of bitcoin’s hashrate ~ has dropped off the network since its market peak in May. If someone were to collect all this hashing power, it would be enough for a 51% attack.

Speaking abstractly, I can say with confidence that naked statistics do not reflect the real state of affairs, not to mention the fact that, earlier on my own experience, I was repeatedly convinced of this (we are talking about statistics). Continuing the thought in an abstract spirit, I can also invite all of us to think logically ... A 51% attack is the collapse of an entire industry, it is not even hundreds of billions of dollars, the success of such an attack would mean a trillion dollar infrastructure collapse. I mean, the sector leaders have definitely discussed such a theoretical scenario behind closed doors, and I think these 5-6 people have a plan of action in such a case, (I am not at all referring to shorting Coinbase stocks as a hedging tool, I mean an emergency consolidation or redistribution of m'power).

[PrimeNumber7]

There is the risk of a government-sponsored 51% attack.

If we start reading reliable news coming from miners directly that someone (be it the government or anyone else), is starting to confiscate huge numbers of mining units, we could be closer to such a scenario. But it's still an expensive attack to maintain even if they gathered the required amount of hardware.

I think the Chinese government has reached its goal. Chinese miners have been shut down, they have seen what will happen to them, and their mining operations in China are now a thing of the past. With them out of the way, the communist party can now switch their attention to the digital yuan.

I don't think the Chinese government getting miners to stop mining in China achieves anything of substance. If the miners are allowed to move their equipment overseas, the Chinese government would be hurting their own economy, and bitcoin would still be making it more difficult for the CCP to control it's population.

Information does not flow freely out of (or within) China. So if the Chinese government is seizing miners, there is a good chance this will not be publicly known. The cost to maintain a 51% attack is pretty low if you exclude the cost of the equipment. The cost of a 51% would be the cost to run the equipment, which is, with the most advanced ASICs is a fraction of the expected value of the bitcoin that would be mined absent a 51% attack.

We also had the effect of having 28% of all mined blocks have no transactions via the recent 28% drop in difficulty, and there were not major issues with transaction fees rising, or the mempool getting clogged.