Consolidating UTXOs and maintaining privacy

[apogio]

Hello.

Current Situation
I have 3 UTXOs (A, B, C). A is from KYC exchange, B and C are from RoboSats.

Desired Actions

1. Mix the UTXOs doing some coinjoins
2. Consolidate the UTXOs to a larger UTXO and send it to a specific address that I own (D).

Possible Actions

1. Do some coinjoins on A, B, C separately and then consolidate them into D.
2. Do some coinjoins on A, B, C separately and then consolidate only the non-kyc UTXOs (B, C) and send them to D.
3. Consolidate A, B, C in advance and then do some coinjoins and send the output to D.

Thoughts - Questions

Q1: I reckon that action 3 is the worst since I am mixing the original UTXOs all together and therefore someone would be able to tell that the person who owns A, does own B, C too. Am I correct?
Q2: I believe (1) and (2) to be the same actually. If I mix the UTXOs separately, someone would be able to know that A is linked to my Identity, but they wouldn't be able to know which coinjoin output corresponds to the input. Therefore, I should be ok. Am I correct?
Q3: Which of the possible actions should I choose?

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[Charles-Tim]

Know that if you want privacy, you may not need to use a KYC exchange at all because all the coins you buy or received on the exchange are recorded and known even after  you withdraw the coins. Although, there may still be other reasons you feel like to consolidate coins from KYC exchanges.

2. Do some coinjoins on A, B, C separately and then consolidate only the non-kyc UTXOs (B, C) and send them to D.

I will prefer this because I will prefer to conjoin the KYC one separately and will not make it link to the non KYC ones. Although...

Q1: I reckon that action 3 is the worst since I am mixing the original UTXOs all together and therefore someone would be able to tell that the person who owns A, does own B, C too. Am I correct?

...this one is good as well.

3. Consolidate A, B, C in advance and then do some coinjoins and send the output to D.

Not advisable because of the KYC coins.

[apogio]

Know that if you want privacy, you may not need to use a KYC exchange at all because all the coins you buy or received on the exchange are recorded and known even after  you withdraw the coins. Although, there may still be other reasons you feel like to consolidate coins from KYC exchanges.

2. Do some coinjoins on A, B, C separately and then consolidate only the non-kyc UTXOs (B, C) and send them to D.

I will prefer this because I will prefer to conjoin the KYC one separately and will not make it link to the non KYC ones. Although...

Q1: I reckon that action 3 is the worst since I am mixing the original UTXOs all together and therefore someone would be able to tell that the person who owns A, does own B, C too. Am I correct?

...this one is good as well.

Hello. From your response, I believe that I should treat Non-KYC and KYC coins completely separately, even after coinjoining them. That's what I thought too, but I am not certain why (1) and (2) differ. Finally, I must say I started buying Non-KYC bitcoin thanks to this forum, but I still own some UTXOs that are linked to Binance, unfortunately.

[LoyceV]

Current Situation
I have 3 UTXOs (A, B, C). A is from KYC exchange, B and C are from RoboSats.

Desired Actions

1. Mix the UTXOs doing some coinjoins
2. Consolidate the UTXOs to a larger UTXO and send it to a specific address that I own (D).

How about this alternative:
Send A to D.
Create a new address E.
Send B and C to E.

Usually, consolidating funds is meant to reduce transaction fees in the future. If you're using coinjoin, you pay a fee that is higher than the transaction fees, so there's no gain in consolidating funds anymore.

[apogio]

Create a new address E.
Send B and C to E.

You mean consolidating them. Not just use address E twice. Correct?

Usually, consolidating funds is meant to reduce transaction fees in the future. If you're using coinjoin, you pay a fee that is higher than the transaction fees, so there's no gain in consolidating funds anymore.

But I want my UTXOs to be larger. Do you mean that coinjoin and consolidation mustn't be combined, or that it is not worth it in terms of fees?

[Poker Player]

How about this alternative:
Send A to D.
Create a new address E.
Send B and C to E.

Usually, consolidating funds is meant to reduce transaction fees in the future. If you're using coinjoin, you pay a fee that is higher than the transaction fees, so there's no gain in consolidating funds anymore.

What about privacy?

If you send all the funds you have in each of these addresses, first from A to D and then from B and C to E, if in the future you use D and E for a transaction it will be clear that you, the owner of A that has passed KYC in the exchange, also own the other addresses.

The only thing I can think of is not to send the whole amount in those transactions you propose so that it is not obvious that it is a self-transfer.

[LoyceV]

You mean consolidating them. Not just use address E twice. Correct?

Yes. Just use both inputs for the transaction.

But I want my UTXOs to be larger. Do you mean that coinjoin and consolidation mustn't be combined, or that it is not worth it in terms of fees?

I don't know the fees your planning to pay. Can you share (approximate) numbers?

What about privacy?

B and C both came from RoboSats, so someone knows the link already. A and BC won't get linked on-chain if you send them to D and E respectively.

If you send all the funds you have in each of these addresses, first from A to D and then from B and C to E, if in the future you use D and E for a transaction it will be clear that you, the owner of A that has passed KYC in the exchange, also own the other addresses.

So don't do that in the future

[Poker Player]

If you send all the funds you have in each of these addresses, first from A to D and then from B and C to E, if in the future you use D and E for a transaction it will be clear that you, the owner of A that has passed KYC in the exchange, also own the other addresses.

So don't do that in the future

I had said that because the initial idea of the OP was to consolidate everything into one UTXo, but I think it is not in our best interest having too large UTXos either.

[apogio]

... but I think it is not in our best interest having too large UTXos either.

why do you say so? I also need to clarify that when I say large UTXO, I mean less than 500k sats

I don't know the fees your planning to pay. Can you share (approximate) numbers?

Not really, because it's hard to estimate. But assuming let's assume:

For each UTXO:

+ 2 rounds with 10 collabs with max collab fee: 2000 per coinjoin = 40,000 sats.
+ mining fees

[dzungmobile]

Why do you have idea to consolidate KYC and non-KYC UTXOs into a same D?

It is easy to create two wallets for KYC UTXOs and non-KYC UTXOs, so why don't do this and avoid unnecessary mess. Your privacy relates to your inputs and outputs, how you use them before and after Coinjoins. Mixing two types of UTXOs and send them to one wallet, one address is bad idea.

[LoyceV]

... but I think it is not in our best interest having too large UTXos either.

why do you say so?

If you make a small payment from a rich address, the seller might know too much about you.

I also need to clarify that when I say large UTXO, I mean less than 500k sats

In that case, I wouldn't worry about it.

For each UTXO:

+ 2 rounds with 10 collabs with max collab fee: 2000 per coinjoin = 40,000 sats.
+ mining fees

That's about 10% of the total amount! In this case I'd stop worrying about the "KYC exchange" knowing something about you, and just send everything to one address with the lowest possible fee.

[apogio]

In that case, I wouldn't worry about it.

In this case I'd stop worrying about the "KYC exchange" knowing something about you, and just send everything to one address with the lowest possible fee.

Just out of curiousity, what do you mean? Are the amounts too small to worry about it being KYCed?

[LoyceV]

Just out of curiousity, what do you mean? Are the amounts too small to worry about it being KYCed?

I mean I wouldn't worry about it It's not enough to fear a $5 wrench attack when you buy a coffee, and I doubt your exchange is going to hunt you down for it either.

[un_rank]

You can coinjoin A into UTXO D
Then send all of B, C and D with the lowest fee possible to one UTXO; E.

Just out of curiousity, what do you mean? Are the amounts too small to worry about it being KYCed?

Or it means that the fee being paid is to high and defeats the purpose of consolidating, so a better option will be to skip all the hoops of coinjining and just use the least expensive method to send all the UTXOs into one single output.

- Jay -

[apogio]

You can coinjoin A into UTXO D
Then send all of B, C and D with the lowest fee possible to one UTXO; E.
- Jay -

Hi Jay. This seems like a good choice. Thanks

[BlackHatCoiner]

2. Do some coinjoins on A, B, C separately and then consolidate only the non-kyc UTXOs (B, C) and send them to D.

After the coinjoins, every UTXO is non-KYC by definition. So, you can spend all the inputs to D.

If you used different Robosats identities, then coinjoining the inputs separately and then consolidating them into D is your best course. If you did use the same Robosats identity for acquiring both B and C, then your best course is to make two coinjoins, A, separately, and B with C followed by consolidation afterwards.

[apogio]

2. Do some coinjoins on A, B, C separately and then consolidate only the non-kyc UTXOs (B, C) and send them to D.

After the coinjoins, every UTXO is non-KYC by definition. So, you can spend all the inputs to D.

If you used different Robosats identities, then coinjoining the inputs separately and then consolidating them into D is your best course. If you did use the same Robosats identity for acquiring both B and C, then your best course is to make two coinjoins, A, separately, and B with C followed by consolidation afterwards.

Thanks, no I always change robosats robot (identity).

I am kind of sceptical when it comes to KYC UTXOs because I want the government to know nothing about my coins. In their mind, Bitcoin is used for illegal activities. In reality, I just exchange a small amount of Euro to buy something more valuable. But apparently it is not something they want, at least in southern Europe where I live.

[LoyceV]

I am kind of sceptical when it comes to KYC UTXOs because I want the government to know nothing about my coins.

I don't expect governments to care about 0.005BTC, and I fully trust they're not capable of tracing it.

In their mind, Bitcoin is used for illegal activities. In reality, I just exchange a small amount of Euro to buy something more valuable. But apparently it is not something they want, at least in southern Europe where I live.

Here, as long as I'm not doing anything illegal, "liking it" isn't defined in the law. So I have to report my taxes, and that's it. I'm surprised they haven't asked for a list of owned addresses yet, that's probably only because they can't handle it, not because they don't want it. But once they do, I'll create billions of addresses for them

[apogio]

I don't expect governments to care about 0.005BTC, and I fully trust they're not capable of tracing it.

Certainly, but my question can be beneficial to anyone. Therefore it can apply to people with much larger UTXOs etc.

[BlackHatCoiner]

I am kind of sceptical when it comes to KYC UTXOs because I want the government to know nothing about my coins.

Then, don't use KYC, as long as it isn't illegal to do. You have no obligation to give up everything about you and your bitcoin to the government, which is exactly what you're doing when buying from a KYC-ed exchange. Buying peer-to-peer isn't illegal, and I guess it's reasonable to assume that in countries where bitcoin is taxed taxable, reporting your profit will create no problems at all.

You can still save the situation if you sell your KYC-ed coins back to the exchange and buy peer-to-peer.