Consolidating UTXOs

Casa App allows you to easily consolidate your UTXOs right from within the app.

A UTXO in Bitcoin refers to an "Unspent Transaction Output." Another way of saying this is that a UTXO is an amount of BTC contained in a single public/private Bitcoin address keypair. 

Your Casa wallet, like many Bitcoin wallets, generates a new BTC address with each transaction you make. If you make, for example, 10 deposits to Casa App, each deposit to different addresses, you would have 10 UTXOs in your keyset. 

What is UTXO consolidation?

Consolidating your UTXOs simply means sending your BTC from some or all of your previous addresses to a single address. In other words, you are consolidating your BTC balance from multiple addresses to a single address.

You can also accumulate UTXOs by your sending activity - each time you send a transaction from Casa App, any amount leftover in the address you're sending from is returned to your wallet in a new address as "Change." These additional change addresses can contribute to your UTXO bloat. 

Why would I consolidate UTXOs? 

The more UTXOs you have, especially in smaller amounts, the higher the mining fee to spend transactions from those UTXOs will be. This is because there is more data in the transaction that the network must process to record the transaction on the blockchain.

As Bitcoin usage grows, it can be anticipated that the mining fee paid for on-chain Bitcoin transactions will increase over time. However, there will be ups and downs - sometimes, BTC fees will be extremely high, and at other times they will be very low. This can vary from month to month, day to day, and even hour to hour.

In times that the fees are low, it can make sense to consolidate your UTXOs to avoid paying far more in the future to spend that same amount of BTC. It's highly recommended to consolidate UTXOs in times where fees are low. 

One place to monitor current fees is https://bitcoin.clarkmoody.com/dashboard/

Another reason to periodically consolidate UTXOs is a better sending experience. Especially if you are using a multisig keyset with one or more hardware wallet devices - those hardware wallet devices may take longer thank normal to compile transactions. 

When should I consolidate UTXOs?

You should consider the following when thinking about consolidating: 

  • The amount of UTXOs you have
  • The size of the UTXOs
  • The current average Bitcoin network mining fee

In general, you should think about consolidating your UTXOs if you have more than 15 addresses containing small balances. If each of those addresses contains a large balance (i.e. over 1 BTC each), then the concern is not as high, since you're less likely to send an amount over this in the future.

If you've ever replaced a key in Casa app using a key rotation, you have likely swept your full balance to a single address when doing so.

How do I consolidate UTXOs in Casa App?

You'll first get your receiving address from your Casa wallet by tapping "Receive" in the wallet interface, and copying the BTC address you see. Make sure this is a BTC receiving address from the same wallet that you want to consolidate your UTXOs in.

From the normal send flow, you'll notice a "SEND FROM" option at the top of your screen.

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Once you select "SEND FROM" dropdown menu, you'll see your UTXOs, which is another way of saying "the addresses you own and the amount contained in each address."

For lowest possible future fees, we recommend selecting "Automatic," then sending your full balance to that single address that you copied earlier.

Casa App does allow you to spend from specific UTXOs, making it possible to consolidate only your smaller balances, and leaving the addresses that contain larger amounts alone. This is an alternative to using the "Automatic" feature.

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A couple of important points to note when consolidating your UTXOs: 

  • The fee for the consolidation transaction will be far higher than a normal fee for a smaller amount. This is because you are collecting all the value in all of your addresses and making an on-blockchain transaction. The amount of data that is recorded on the blockchain for this one transaction is higher than normal, hence the higher fee. 
  • Signing may take longer than normal. Depending on the number of UTXOs, it may take over a minute to compile all the data to apply the signature after you've begun the signing process in the Casa send flow. Just note that you may need to have some patience with your hardware device(s) in the signing process. 

You can learn more about Keyset Management here.

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