Noob question: Is it a good idea to consolidate a bunch of UTXO's, or not?
2534 sats \ 18 comments \ @moel 14 Jun 2022 bitcoin
Right now, fees are at 1 sat/vbyte, so very cheap. [1]
I've got a bunch of different wallets (some of which support "coin selection") and I would like to consolidate all these UTXO's to make future spending cheaper....
BUT, now I'm thinking that combining all these UTXO's from different exchanges and transactions, will maybe hurt my privacy more?
I don't like the idea of mixing for fear it will be flagged.
What can I do?
Put all my coins in Liquid BTC and then cash out back into BTC (and consolidate)? Or do this, but with lightning? Or do this, but with XMR and back to Bitcoin?
Or any other options?
Comments please 🙏
[1] https://mempool.space/
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117 sats \ 7 replies \ @sethforprivacy 14 Jun 2022
No, UTXO consolidation is absolutely the worst thing you can do on-chain for privacy as it proves beyond a shadow of a doubt that all UTXOs are owned by the same entity, and all future moves will be easily linked back to the source of all of those UTXOs.
Avoid it if at all possible, and if you do need to consolidate or decide to do it anyways, please please please mix funds via Whirlpool/Samourai Wallet/Sparrow Wallet afterwards so at least you re-gain forward privacy.
Mixing via Samourai Wallet has not been blacklisted/flagged by CEXs so far, and no signs of that changing.
Edit: Lots of excellent info here: https://bitcoiner.guide/privacy/
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21 sats \ 1 reply \ @kilianbuhn 14 Jun 2022
it proves beyond a shadow of a doubt that all UTXOs are owned by the same entity
First of all, is this true? Isn't that obvious anyway cryptographically?
Second, is that relevant? Due to Kerkhoffs principle is should only depend on the key anyways and not on how the technology is used. Achieving privacy is a matter of 2nd layer.
That's the same as achieving encryption on https instead on tcp/ip. How tcp/ip is used shouldn't matter anyway and if it does that means that there is a major design flaw.
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22 sats \ 0 replies \ @sethforprivacy 14 Jun 2022
  1. It's not obvious unless you've reused addresses that they're owned by the same entity (barring other slipups), but once you combine them you make the only possibility that they're owned by the same entity.
  2. Idk what Kerkhoffs principle is but privacy on the base-layer works like this, 2nd layer etc. doesn't factor in to UTXO consolidation. Not sure what that has to do with the current convo.
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10 sats \ 4 replies \ @bitgould 14 Jun 2022 freebie
Seth's right.
There's good record on CoinJoin flagging here: too https://6102bitcoin.com/coinjoin-flagging/
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1 sat \ 3 replies \ @sethforprivacy 14 Jun 2022
More here as well, but notice the almost complete dearth of Samourai instances of flagging because it actually works:
https://sethforprivacy.com/posts/fungibility-graveyard/
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0 sats \ 2 replies \ @bitgould 14 Jun 2022 freebie
Since CoinJoin is overt on chain, I wonder if the certain services are more or less represented because of KYC-free culture, or just based on their volumes, or something else
27 sats \ 2 replies \ @bitgould 14 Jun 2022 freebie
Spending coins together in the same transaction creates a permanent link between them on the public ledger.
next block fees are in fact relatively expensive right now. I see at least 4 blocks waiting to be mined.
Existing CoinJoin and Swap services are not foolproof. You will end up with more (Toxic!) change you won't be able to consolidate. Wait and study the pitfalls so you can transact privately. No need to merge coins now while everyone is panic trading.
I'm working on something that will let you queue coins to consolidate over time. If you're patient you may even earn non-custodial yield. Kind of like lightning routing fees. Those who need to make a private transfer quickly pay. Those who wait earn.
Toxic change explained: https://chaincase.app/words/unlink-bitcoin
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6 sats \ 1 reply \ @LaserStack 14 Jun 2022
Will your app work kinda like Joinmarket? What are the similarities? What about the differences? When do you think it will be published? How does it work, and can I contribute to its' development?
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12 sats \ 0 replies \ @bitgould 14 Jun 2022
I said too much too soon. I'm writing some ideas about the market dynamics of bitcoin liquidity. The supply side (node operators, JoinMarket makers, custodial lenders), and demand side (whirlpool, samourai, joinmarket takers, liquidity ad takers) are disparate. A zero-knowledge marketplace could bring them together.
I'll publish on the https://chaincase.app newsletter. stay tuned
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0 sats \ 0 replies \ @ama 28 Nov 2023
This link might be useful.
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0 sats \ 1 reply \ @lada 15 Jun 2022
Other than privacy concerns, there is another risk of holding everything in one UTXO. The risk is infinitesimal, but hear me out.
There is always a (infinitely small) chance that someone will generate a key that collides with yours. If this collision occurs with your one and only UTXO, you lose everything.
Therefore, spread it out over many UTXOs. On the teeny weeny chance you get unlucky and the universe aligned to grant someone a key collision with you, you only lose some of your sats, not all of them.
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21 sats \ 0 replies \ @anon 8 Jan
No, the collision problem is nonexistent. If consolidation of UTXO’s is the goal, there are arguments against it like having all of your eggs in one basket and losing the wallet/keys/seed words, but the collision argument isn’t even worth mentioning. People hack exchanges, but nobody hacks Bitcoin.
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0 sats \ 0 replies \ @glix 14 Jun 2022
It's always good to treat every UTXO as an individual entity. Try to spend it completely or not. If you consolidate your UTXOs you are basically telling that all the inputs belong to the same entity and that's bad. A better option would be to mix them using Samourai's coin join and again treat every UTXO as a single entity.
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0 sats \ 1 reply \ @itsrealfake 14 Jun 2022
one option is to reconceptualize "mixing" as "joining" and don't worry so much about it.
my personal approach has been to e.g. Take a $20, and break it into 1x $10, 1x $5, 4x $1, and some change.
if you 10x the current market value of your UTXO now, are you looking at values that are dangerously large?
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2 sats \ 0 replies \ @moel OP 14 Jun 2022
It was 1 sat/vB this morning, when I checked 😅 Anyways's, I'm not in any hurry, so waiting is fine.
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0 sats \ 0 replies \ @the_pecosbill 10 Jan freebie
Are there privacy concerns about consolidating coinjoined/mixed UXTOs?