Consolidate them when fees are low. If you want to spend from your balance later in a high fee environment, some of the "dust" UTXOs can become economically unspendable (fees are higher than the amount of BTC you're sending).
I don't understand the privacy part because technically speaking, sending ALL Bitcoin from all UTXO's/wallet addresses to a new single address does not necessarily mean it belongs to the same person. Isn't that exactly what someone would do if they gained access to your wallet to steal all the Bitcoin? They would just send it out to a new address. So the privacy argument doesn't make much sense. You can even claim that's exactly what happened - someone stole the Bitcoin to a new address you don't control. In either scenarios, no 3rd party would be able to deduce whether you control the new address or not, unless it's a custodial KYC wallet. What am I missing here?
Lets say you want to use the consolidated BTC to buy a house or convert it to fiat, the IRS could see that you just acquired some real state at the same time you sent your UTXOs. Now, I don't know the details on how the IRS could potentially prove you own that BTC.
I think you also reduce your privacy for another reason: if you go to spend a huge UTXO in the future, won’t the recipient get to also see the “change” that you get back, and better understand how much bitcoin you have?
I think so. But if you are using a cold wallet, and you protect your seed, I don't know if it would matter. I "think" it is more of a problem on exchanges where there is a KYC requirement (Know Your Client.)
Does it makes a diffrence in case of vbytes needed for a tx to have multiple addresses with one utxo or one address with many utxo? Of couse not in the point of privacy.
If I have many small UTXO’s on an exchange and I then transfer a larger amount to cold storage does that 1 transaction then end up being 1 larger UTXO (of the transacted amount) on my cold storage?
@@ThePostmillennialthat depends on your own wealth and your planning, you want pieces of how much of your wealth on the blockchain, pieces of 10% , 20%, 30%, how much pieces do you want, the pieces for long term saving, and pieces for regular use. That totally depends on you, I always say plan your utxo ahead
Agreed, it shows how early we still are. Interacting with the main chain won't be for the everyday user one day, and all this stuff will probably be abstracted away.
Once mass adoption is reached, society will not be using the base layer for everyday payments. On-chain transactions will still be used but instead for larger, more important store of value transactions mostly. Plus, on-chain transaction fees will be too large due to network usage and congestion, making most small transactions dust. Everyday payments will be made using a Layer 2 solution, such as Lightning.
@@Joe99 "abstracted away" that's a good way to put it. Unfortunately most people won't self custody their BTC and will use custodial solutions *hopefully not* run but mega corps.
Electromagnetism is a hard subject, but you not understanding it hasn't prevented you from having appliances at home, or using digital radio communication.
If you’re not doing anything wrong with your bitcoins, then you shouln’t mind the potential "reduction" in privacy? What could the adversary do with that information?
It depends. Maybe not, or maybe so. Even if you haven’t done anything WRONG, would you feel comfortable with anyone looking up a list of every place you’ve ever bought anything, every place you’ve ever received money from, or everything you’ve ever bought?
The puzzle representation of UTXOs is genius. Also love the "ethics free" t-shirt lol. These videos get better and better
UTXO Alliance. The future is in unity.
Now i finally understand, thank you.
Wow, this really explained it well. More graphics like this in future videos please!
"KYC scheme" Well said
Great explanation, thanks for the video
@aantonop --- I'm thinking of buying BTC fractions and putting them into cold storage/self custody, do I need to consolidate them? When should I?
Consolidate them when fees are low. If you want to spend from your balance later in a high fee environment, some of the "dust" UTXOs can become economically unspendable (fees are higher than the amount of BTC you're sending).
I don't understand the privacy part because technically speaking, sending ALL Bitcoin from all UTXO's/wallet addresses to a new single address does not necessarily mean it belongs to the same person. Isn't that exactly what someone would do if they gained access to your wallet to steal all the Bitcoin? They would just send it out to a new address. So the privacy argument doesn't make much sense. You can even claim that's exactly what happened - someone stole the Bitcoin to a new address you don't control. In either scenarios, no 3rd party would be able to deduce whether you control the new address or not, unless it's a custodial KYC wallet.
What am I missing here?
Lets say you want to use the consolidated BTC to buy a house or convert it to fiat, the IRS could see that you just acquired some real state at the same time you sent your UTXOs. Now, I don't know the details on how the IRS could potentially prove you own that BTC.
It links all of your UTXOs together, as if you'd used the same receive address for them all
I think you also reduce your privacy for another reason: if you go to spend a huge UTXO in the future, won’t the recipient get to also see the “change” that you get back, and better understand how much bitcoin you have?
I think so. But if you are using a cold wallet, and you protect your seed, I don't know if it would matter. I "think" it is more of a problem on exchanges where there is a KYC requirement (Know Your Client.)
CKB ticks both privacy and low fee boxes.
Does it makes a diffrence in case of vbytes needed for a tx to have multiple addresses with one utxo or one address with many utxo? Of couse not in the point of privacy.
No, the number of addresses does not matter, only the number of inputs (UTXOs being spent).
If I have many small UTXO’s on an exchange and I then transfer a larger amount to cold storage does that 1 transaction then end up being 1 larger UTXO (of the transacted amount) on my cold storage?
You won't have utxos on an exchange, you'll just have a balance. When you withdraw from the exchange, you will get a single utxo per withdrawal.
@@d4tis gotcha, thank you.
How big do you think your single UTXO’s should be (at a minimum) to avoid any major issues down the track?
@@ThePostmillennialthat depends on your own wealth and your planning, you want pieces of how much of your wealth on the blockchain, pieces of 10% , 20%, 30%, how much pieces do you want, the pieces for long term saving, and pieces for regular use. That totally depends on you, I always say plan your utxo ahead
I want to be like you, my friend.
I love Bitcoin, but this is why mass adoption isn't happening. Way too complicated for the vast majority of people.
Agreed, it shows how early we still are. Interacting with the main chain won't be for the everyday user one day, and all this stuff will probably be abstracted away.
Once mass adoption is reached, society will not be using the base layer for everyday payments. On-chain transactions will still be used but instead for larger, more important store of value transactions mostly. Plus, on-chain transaction fees will be too large due to network usage and congestion, making most small transactions dust.
Everyday payments will be made using a Layer 2 solution, such as Lightning.
@@Joe99 "abstracted away" that's a good way to put it. Unfortunately most people won't self custody their BTC and will use custodial solutions *hopefully not* run but mega corps.
Electromagnetism is a hard subject, but you not understanding it hasn't prevented you from having appliances at home, or using digital radio communication.
@@homemdosaco2000 true but only because corporations simplified the “product” or solution.
No security is are risk do you work for fink
Shouldn't this be fixed in an update? This needs to be fixed
All purchases have to be made from KYC exchanges, so why are you worried about privacy from UTXO consolidation?
@aantonop do you trust ledger? can we trust ledger?
If you’re not doing anything wrong with your bitcoins, then you shouln’t mind the potential "reduction" in privacy? What could the adversary do with that information?
It depends. Maybe not, or maybe so.
Even if you haven’t done anything WRONG, would you feel comfortable with anyone looking up a list of every place you’ve ever bought anything, every place you’ve ever received money from, or everything you’ve ever bought?
define "anything wrong"?
Yes its possible with $CKB
Pay fees and find out...
Cardano for more privacy and freedom from regulators!
Perhaps you can answer my question. How does proof-of-stake allow for more freedom from regulators?
He can't, just shilling.