Hello All,
I have been DCA-ing around 60-ish bucks every month on the main chain [I have my own private address] and I recently learnt that having so many transactions can lead to UTXO fragmentation which can lead to higher fees in the future.
Apparently, one of the solutions could be to DCA onto the lightning network and then later swap it with the main chain periodically. Do you think its a good idea? or is there a catch that I am not aware of?
I plan to hold it long term. Thanks!
It’s true that the Lightning Network can be a great help. That said, I don’t think what you’ve done is a bad idea. You can consolidate those UTXOs from your regular $60 purchases.
You can also stack on the Lightning Network. Sites such as ‘MostroP2P’ and ‘ROBOSATS’ are ideal for this purpose.
Reassuring, thanks. I'll keep DCA-ing on the main chain and just consolidate the UTXOs once low-fees season comes.
Hadn't really considered MostroP2P/RoboSats for stacking, and that's why I posted this, I'll check them out.
https://github.com/MostroP2P/mobile/releases/tag/v1.4.2
https://mostro.network/
I try to avoid utxos that are small (<100k sats), so I would advocate for buying sats via lightning.
With a lot of the swap services like boltz on hold at the moment it is a little more complicated to swap out of your lightning channel to an on chain utxo, but still doable. I've also seen some new swap services being teased on Ark with the Second guys.
Alternatively, you could use a lightning wallet that supports splicing and use that to get to the chain, but I haven't relied on this because I found it was more expensive. And if you aren't careful, it can mess us your channel liquidity which will lead to extra expense when trying to receive new dca sats via lightning.
Good tips, especially the <100k sats rule, that's solid. My worry is if swap services like Boltz are down, then "DCA via lightning and cash out later" kind of breaks?
Because I'd be stuck holding sats in channels when I want on the main chain for the long term. Am I right that I'd only really need it if I'm already paying fees to hold them?
Also, splicing sounds sweet but if it messes up liquidity and costs more, it seems like overkill for a $60/mo drip. Am I overcomplicating this?
If you're using swap services to get sats from lightning to chain you're going to spend more than just accumulating the weight of chain outputs, swaps have hefty middleman fees.
The honest answer is that it depends on how often you plan to spend.
DCA-ing $60/month straight to mainnet does fragment your UTXOs, but it is not a disaster. That is roughly 12 small outputs a year. The real pain comes later if you ever need to sweep them all during a high-fee period, because that consolidation transaction pays for every input.
Lightning is a reasonable fix in theory: you accumulate sats off-chain, then do fewer, larger on-chain exits. The catch is that now you hold your sats either with a Lightning custodian or on a channel you maintain yourself, and you inherit channel management, rebalancing, and a whole different set of fees. You are swapping one kind of overhead for another.
A cleaner middle path is to keep your main-chain DCA but consolidate whenever fees are low. Watch the mempool, and once or twice a year sweep your small UTXOs into one. That keeps your private-key setup, avoids trusting a node or custodian, and costs almost nothing if you time it right.
Lightning-as-a-DCA-bucket is fine if you already run a node or already hold sats there. But doing it only to avoid UTXO fragmentation is a bit like moving house because the hallway got cluttered: consolidation works, and it keeps you in the system you already understand.
1 sat/vbyte isn't going away. If anything, subsat fee rates will become more normal, so I wouldn't worry much about future fee rates.
Each UTXO will carry a little extra weight when you do consolidate, with native segwit thats ~68vb ... so 68 sats for each at 1 sat/vb... but I think you'll be able to consolidate for under 10 sats each if you're patient (sub sat fees)
Routing each payment to you incurs at least a few sats, so it may seem big increase on a percentage basis vs Lightning, but not big in absolute terms.
Other costs with Lightning you have to consider is hot wallet risk, and if you need to lease a channel to receive those sats in the first place. If you're already a running a Lightning node for other reasons, use it, then consolidate to cold storage occasionally... but I wouldn't set up one if the only use for it was DCA.