Why is "consolidating inputs" considered to be profitable?

[franky1]

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

[larry_vw_1955]

Just send all the funds to another address that you control,

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

it shouldn't be complicated enough for you to have to implement another function.

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.

[ranochigo]

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.

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.

[larry_vw_1955]

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

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

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

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?

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

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?

[FatFork]

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.

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.

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.

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.)

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.

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.

[kotajikikox]

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.

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.

[aoluain]

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.

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.

[promise444c5]

Just send all the funds to another address that you control,

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

it shouldn't be complicated enough for you to have to implement another function.

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.

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??

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.

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??

[larry_vw_1955]

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??

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!

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??

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.

[ranochigo]

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.

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.

[larry_vw_1955]

Would it be difficult for you to check the address that is being pasted against the address that you were trying to copy?

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. 

If you think its a necessity, then it would be good if you could open a PR with your modifications in your desired wallet.

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

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.

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.

[ranochigo]

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. 

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.

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.

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.

[pawanjain]

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.

[franky1]

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

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

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

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?

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

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

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?

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

[larry_vw_1955]

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;

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

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.

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.

[ranochigo]

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.

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.

[larry_vw_1955]

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.

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!

[vjudeu]

1) Everytime you consolidate your UTXOs, your total balance in BTC goes down.

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.

2) The chances of fees going up or down at any point in time is pretty much 50/50.

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.

3) Miners love it when people consolidate their inputs since that's how they get paid by people submitting transactions.

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.

4) Consolidating inputs carries a risk of loss from either making a mistake and sending the bitcoin to the wrong address or being hacked.

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

why would you be so worried about the future?

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?

isn't the point of having money to not have to worry about the future?

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.

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

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.

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??

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.

but maybe that's their problem?

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.

[ABCbits]

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??

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!

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.

1) Everytime you consolidate your UTXOs, your total balance in BTC goes down.

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

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.