There's a lot to gain from consolidating UTXOs if you're into bitcoin. It cuts down on the number of inputs in your transactions since you’re merging multiple outputs into one, leading to lower fees and better privacy. Plus, it makes portfolio management way easier.
When we talk about BTC segregated witness (segwit) which starts with bc1q and BTC taproot that kicks off with bc1p, they have their own perks. For example, if you’re sending funds to a bunch of addresses at once, segwit is the way to go for saving on fees. But if you’re moving funds from several addresses to just one, taproot shines. So I’m curious, does both the sender and the receiver need to use the same address type to get those lower transaction fees?
You will achieve the less fee if the sender and receiver use Segwit address or P2TR.
But what matters most is number of inputs from which kind of address (higher if it's legacy, lesser of it's Segwit or Taproot) and number of outputs.
With consolidating your UTXOs when the fees are low, you can make your next transactions cheaper, but you don't increase your privacy and you may even decrease your privacy.
Take note that with using multiple UTXOs in the same transaction, everyone can conclude they are owned by the same person and that may harm your privacy.
Note that taproot addresses are also segwit.
Bech32 addresses (those that start with bc1q) are segwit version 0 and taproot addresses (those that start with bc1p) are segwit version 1.
No.
Do not bother about this, segwit version 0 and pay-to-taproot fees are cheap. If the transaction input will be more, use pay-to-taproot to send. If the outputs will be more, you can use segwit version 0 for sending.
If you want to compare the input and output, you can use this bitcoin transaction virtual size calculator: https://bitcoinops.org/en/tools/calc-size/
It doesn't matter.
Each output will be counted as one UTXO whether you sent it through the same address or not;
And those UTXO will always count as one input when used to generate a transaction whether it's received through the same address.
Just take note that addresses are just a way for your wallet to show balances and receive Bitcoins.
In the blockchain, your transactions create/spend UTXOs that has their own locking/unlocking scripts and their respective amounts.
So, for example: for ten inbound transactions that your wallet shows that received by 'bc1pxxx', those will be spent as ten separate inputs when you consolidate.
You'll get the same result if you received those 10 transactions with ten different 'bc1p' addresses.
Sending from Taproot (bc1p...) address to SegWit (bc1q....) address should achieve lowest possible transaction size which lead to lower total TX fee. But difference of each possible combination is negligible and IMO you better use your effort to check mempool condition before determining TX fee rate for transaction you're going to make.
Realistically since it is about consolidating you cant change the sender address but the recipient address is where the fee reduction comes In for consolidation. Both the segwit versions 0 (bc1q) and version 1(bc1p) actually saves or reduce transaction fee by just moving the witness data or signature data separately there by reducing the the weight of the transaction and not the size. The reduction of fees then occurs since the fee rate is now calculated based on virtual size (weight).
But in general the saving of fees actually comes from the input address, because the outputs address (both old legacy and the segwit) have just 3vbytes difference while the inputs differs is around 80vbytes.
Agreed, taproot inputs are much smaller than SegWit inputs but the as for the outputs then Segwit is better, if is even a case of 1-input and many outputs then SegWit version 0 edges the version 1
Thank you all for your responses!
After consolidating and one still wants to have a reduced or higher transaction fee for the transaction, is it still permissible or possible to modify the transaction fee before sending?
The process depends on the wallet, some have back button to return to the step where the fee is selected, some haven't.
But in any case, you can just cancel the transaction with undesirable fee that you're creating (haven't broadcasted yet) and you can make another with the preferred fee.
Anyways, the phrases "after consolidating" and "before sending" made me read your question twice.
One tool that i like to calcualte the stimate fee:
It have only few options but they explain the size of the headers and each input and output
Page: https://bitcoinops.org/en/tools/calc-size/
You can edit the fee of the transaction before signing, depending on what wallet you are using. You can edit it after sending too but only to "bump" up the fee, not to reduce it.
Since you are consolidating, you should be looking to reduce the fee and not to increase it. You are sending to yourself, so just border around the minimum feerate at the time.
- Jay -
Yes. Why not?
Consolidation your UTXOs is like any other bitcoin transaction and you can set the fee rate by yourself. After consolidation your UTXOs, you will have a single UTXO and whenever you want to spend that, you must make a new transaction and again you can set the fee rate by yourself.
If I get your question right you are asking if after consolidating all the transactions and the wallet suggests a transaction fee for you, you wish to customize that fee?
Yes it is possible but it depends on the wallet youre using, my guess is currently almost all HD wallets allow customization of transactions fee and as such you can edit it. But before doing that you need to check the mempool for fees and if the transaction fee is quite high I.e the pool is congested then it is best to leave the consolidation till it goes down. Just as un_rank said you can set the fee low and wait but if you grow impatient then you can bump it using either RBF method or CPFP.
Check for transactions fee from;
https://mempool.space/
https://jochen-hoenicke.de/queue/#BTC%20(default%20mempool),24h,weight
Consolidating your inputs first if you have many inputs in your wallets when mempools are clear and give your perfect fee rate like 1 satoshi/vbyte or 2 satoshi/vbyte for consolidation with cheap transaction fee.
Do it first as consolidation is your preparation for future on-chain transactions when mempools are no longer clear.
I have two topics about Bitcoin Taproot but I have to update those image links.
Bitcoin Taproot (Bech32m - bc1p) adoption
Create Taproot address for your Bitcoin
Bitcoin transaction size calculator
https://jlopp.github.io/bitcoin-transaction-size-calculator/
https://bitcoindata.science/plot-your-transaction-in-mempool.html
https://bitcoinops.org/en/tools/calc-size/
Usually you can not control what receivers do so don't mind about it too much.