Consolidating UTXOs in wallets.

[BitcoinsGreat]

I prefer to just use multiple wallets for different things and not connect KYC coins with non-KYC coins, for example. Wallet creation is free, use a new one (and new addresses from it) only for a specific purpose. For instance, my Sinbad signature payments go into a new wallet that's got nothing to do with my non-public addresses, private investments or my other coins I am holding for whatever reason in completely different wallets. If I do consolidations and mixing, I will still not connect those "different-purpose" coins unless I have a reason why I am doing that or don't care.    

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.

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   )

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.  

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  

[apogio]

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   )

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.

[Pmalek]

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  

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.