Consolidation of 4 Million Utxos at Xapo

Following the last few months of low transaction fees, many have used the opportunity to consolidate their UTXOs . Xapo, a company that makes an online bitcoin wallet, recently published a report on their experience consolidating millions of UTXOs.

The idea behind UTXO consolidation is essentially this: when your average outgoing payment is larger than your average incoming payment (or when they’re the same, but you’re batching outgoing payments), you’ll often have to combine many UTXOs in order to fund an outgoing transaction, which increases the size of your transactions and hence the fees you pay. By consolidating UTXOs in advance, you can combine inputs ahead of time, giving you more control over when most of those costs are incurred. If you can do it when fees are low, that lets you reduce those costs pretty substantially.

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