- Jan 17, 2015
- 5,263
- 4,956
After some days researching about BTC. I've drawn some good conclusions to play with it comfortably, without throwing your money away to the bin like a monkey:
1. To play with BTC microtransactions, always do it from a Wallet, never from a CeX. From the wallets, you can configure the transaction fees according to the urgency you have for the transaction. If you have done your homework, fees will always be minimal.
2. Consider that the more BTC incoming transactions make to your wallet, the higher will be the cost to withdraw it to another place because more outputs should be included in the transaction. Each output has vBytes, and the transaction fees are calculated based on the total number of vBytes you are trying to move. So having a ton of transactions it's also called UTXO dust. Each income transaction generates an UTXO, which means extra vBytes, which translate in higher transaction fees for the future. So ideally, the strategy with BTC is to try to keep the most BTC possible in your preferred exchange, and 1–4 times a year, you transfer to your Wallet. The experts suggest that, as a rule of thumb, never move less than 0.01 BTC to your wallet, to keep your UTXO minimal. And also make sure that your CeX isn't too expensive because, for example, Binance transfer costs are 10K sat per transaction, with current BTC fees, is quite a lot. Not only incoming transactions generate UTXO, but also when you pay with your current balance, the "spare change" generate another UTXO. But if you happen to pay with 5 input transactions, you will end with only 1 output transaction (the spare change), so you will end reducing your total UTXO, but in exchange, you will be paying fees for each UTXO in the transaction at the current fees of the BTC, which sometimes could be seriously expensive and inconvenient. So think on UTXO as dollar bills. A big UTXO, say 0.01 BTC, its like holding a $500 bill in your pocket. Imagine that you had to pay a fee for each bill you give to a cashier when buying your groceries. Ideally, you will always go to the grocery with $100 bills. You may get a lot of spare, but also consider that a big spare is not bad, because it generates a bit value UTXO, which could be also spent by itself in the future.
3. If you happen to store a ton of UTXO (as I said, each incoming transaction to your BTC holds an UTXO) in your wallet, then ideally, you should be starting to look for low fee rates periods and do what is called a UTXO consolidation. This is like opening your piggy bank and going to the bank to change all those million coins into a couple big $100 bills. Basically, this is simply done, by sending ALL your BTC to another wallet timely when BTC are very low. Ideally you should be doing this selectively with a wallet that helps you doing this, like Electrum. For example, with Ledger, you can use Coin Control feature to select which UTXO you are willing to "merge" into only one. This way, you will be sure that you have the minimum UTXO per wallet. You can monitor fees with tools like https://mempool.space to see when its the best time to consolidate, if you happen to have too many UTXO. If you do Dollar-cost Average (DCA), you will probably end with a zillion of UTXO in no-time, so be aware of this and do as many consolidations as you can, regularly. As a rule of thumb, never hold in one BTC wallet more than 100 UTXO.
4. If you have any crypto like USDT and you need BTC in your wallet, use something like rocketx.exchange. It has multiple options for each coin trade, like a DeX aggregator. The best part is that instead of using Bridging fees in your origin network which can be extremely high, you simply do a regular transaction to the exchange and they calculate the transaction fees for your incoming crypto. This is not always ideal, but generally using a DeX aggregator is the best (if you dont want to deal with p2p transactions and the risk they have, obviously).
Let's compare 3 scenarios to explain this:
Scenario 1: Doing this in a CeX. Ideally this is one of the best options for very big transactions, because, generally big CeX like Binance hold, by far the best rate. If you are an investor then definitely this is your best bet, exchange in the CeX a big amount and then send it to your wallet, say for example 0.1 BTC at a time. with minimum fees. But for micro transactions this is terrible, because the transaction fees from CeX are terribly high (could even be higher than the microtransaction itself)
Scenario 2: Doing this with a Bridged exchange (for example using Changelly, Exodus or Moonpay). Problem here is that you must be paying the Bridged fee in your current network, which happens to be very high sometimes. For example if you do this via TRC20, you could be paying like 10+ TRON which is a massive waste + transaction rates in this exchanges are generally feeble, way worse than big CeX like Binance, Coinbase or Kraken
Scenario 3: This is something in between. Using a DeX like Thorchain, or even better, a DeX aggregator like RocketX or Trocador, that may include Thorchain among many other DeX and see which is the most favourable in that moment. The exchange rates will almost never be as good as big CeX, but not as terrible as Bridged Exchanges. But there is a big catch that make this scenario best for microtransactions: You send the exact amount to an address, so for example, if you are using USDT over Solana or Polygon, or you have stacked some TRON, then your transaction fees will be literally 0, receiving, by far, the highest amount of BTC possible on the transaction.
5. Finally, remember that for any exchange you do, this will generate an incoming transaction, so it will generate an UTXO. Hence, the less exchanges you do directly into your wallet, the better. If you want to have some spare BTC for microtransactions, try to have an individual wallet just for this, and try to spend all the balance, before doing another new exchange, and ideally select the UTXO individually (with a wallet like Electrum), to keep spending them and avoid leaving UTXO with very low balances unspent. So basically the idea here is to have at least two BTC wallets (or more), one for investment with significant balances, and one only for microtransactions. Also, it will improve your privacy and avoid traceability.
Final conclusions
BTC for transactions are used exclusively by Old Ball Club members
Do you think that an old ball club guy, can worry about all this shit? Still, they are so crypto-tards they keep using them, and we have to bear with it. You arrive at that service you want to pay for, and it asks you for fricking BTC exclusively, no other options. Some are so adventurous, that has added ETH. I will research about ETH in a future.
Use your wallet wisely (ideally use something like Electrum, not those shitty Chrome extension Wallets unless you are planning to work with an exchange, like xDefi), check your UTXO regularly, consolidate and if you have a good clean wallet you will be paying minimum fees. Obviously, nothing compared to really intelligent crypto for transactions options like LTC, Monero, or even most forms of USDT or USDC.
Probably there are some other interesting things I'm forgetting, but more or less this is all you need to play with BTC like a PRO.
1. To play with BTC microtransactions, always do it from a Wallet, never from a CeX. From the wallets, you can configure the transaction fees according to the urgency you have for the transaction. If you have done your homework, fees will always be minimal.
2. Consider that the more BTC incoming transactions make to your wallet, the higher will be the cost to withdraw it to another place because more outputs should be included in the transaction. Each output has vBytes, and the transaction fees are calculated based on the total number of vBytes you are trying to move. So having a ton of transactions it's also called UTXO dust. Each income transaction generates an UTXO, which means extra vBytes, which translate in higher transaction fees for the future. So ideally, the strategy with BTC is to try to keep the most BTC possible in your preferred exchange, and 1–4 times a year, you transfer to your Wallet. The experts suggest that, as a rule of thumb, never move less than 0.01 BTC to your wallet, to keep your UTXO minimal. And also make sure that your CeX isn't too expensive because, for example, Binance transfer costs are 10K sat per transaction, with current BTC fees, is quite a lot. Not only incoming transactions generate UTXO, but also when you pay with your current balance, the "spare change" generate another UTXO. But if you happen to pay with 5 input transactions, you will end with only 1 output transaction (the spare change), so you will end reducing your total UTXO, but in exchange, you will be paying fees for each UTXO in the transaction at the current fees of the BTC, which sometimes could be seriously expensive and inconvenient. So think on UTXO as dollar bills. A big UTXO, say 0.01 BTC, its like holding a $500 bill in your pocket. Imagine that you had to pay a fee for each bill you give to a cashier when buying your groceries. Ideally, you will always go to the grocery with $100 bills. You may get a lot of spare, but also consider that a big spare is not bad, because it generates a bit value UTXO, which could be also spent by itself in the future.
3. If you happen to store a ton of UTXO (as I said, each incoming transaction to your BTC holds an UTXO) in your wallet, then ideally, you should be starting to look for low fee rates periods and do what is called a UTXO consolidation. This is like opening your piggy bank and going to the bank to change all those million coins into a couple big $100 bills. Basically, this is simply done, by sending ALL your BTC to another wallet timely when BTC are very low. Ideally you should be doing this selectively with a wallet that helps you doing this, like Electrum. For example, with Ledger, you can use Coin Control feature to select which UTXO you are willing to "merge" into only one. This way, you will be sure that you have the minimum UTXO per wallet. You can monitor fees with tools like https://mempool.space to see when its the best time to consolidate, if you happen to have too many UTXO. If you do Dollar-cost Average (DCA), you will probably end with a zillion of UTXO in no-time, so be aware of this and do as many consolidations as you can, regularly. As a rule of thumb, never hold in one BTC wallet more than 100 UTXO.
4. If you have any crypto like USDT and you need BTC in your wallet, use something like rocketx.exchange. It has multiple options for each coin trade, like a DeX aggregator. The best part is that instead of using Bridging fees in your origin network which can be extremely high, you simply do a regular transaction to the exchange and they calculate the transaction fees for your incoming crypto. This is not always ideal, but generally using a DeX aggregator is the best (if you dont want to deal with p2p transactions and the risk they have, obviously).
Let's compare 3 scenarios to explain this:
Scenario 1: Doing this in a CeX. Ideally this is one of the best options for very big transactions, because, generally big CeX like Binance hold, by far the best rate. If you are an investor then definitely this is your best bet, exchange in the CeX a big amount and then send it to your wallet, say for example 0.1 BTC at a time. with minimum fees. But for micro transactions this is terrible, because the transaction fees from CeX are terribly high (could even be higher than the microtransaction itself)
Scenario 2: Doing this with a Bridged exchange (for example using Changelly, Exodus or Moonpay). Problem here is that you must be paying the Bridged fee in your current network, which happens to be very high sometimes. For example if you do this via TRC20, you could be paying like 10+ TRON which is a massive waste + transaction rates in this exchanges are generally feeble, way worse than big CeX like Binance, Coinbase or Kraken
Scenario 3: This is something in between. Using a DeX like Thorchain, or even better, a DeX aggregator like RocketX or Trocador, that may include Thorchain among many other DeX and see which is the most favourable in that moment. The exchange rates will almost never be as good as big CeX, but not as terrible as Bridged Exchanges. But there is a big catch that make this scenario best for microtransactions: You send the exact amount to an address, so for example, if you are using USDT over Solana or Polygon, or you have stacked some TRON, then your transaction fees will be literally 0, receiving, by far, the highest amount of BTC possible on the transaction.
5. Finally, remember that for any exchange you do, this will generate an incoming transaction, so it will generate an UTXO. Hence, the less exchanges you do directly into your wallet, the better. If you want to have some spare BTC for microtransactions, try to have an individual wallet just for this, and try to spend all the balance, before doing another new exchange, and ideally select the UTXO individually (with a wallet like Electrum), to keep spending them and avoid leaving UTXO with very low balances unspent. So basically the idea here is to have at least two BTC wallets (or more), one for investment with significant balances, and one only for microtransactions. Also, it will improve your privacy and avoid traceability.
Final conclusions
BTC for transactions are used exclusively by Old Ball Club members
Do you think that an old ball club guy, can worry about all this shit? Still, they are so crypto-tards they keep using them, and we have to bear with it. You arrive at that service you want to pay for, and it asks you for fricking BTC exclusively, no other options. Some are so adventurous, that has added ETH. I will research about ETH in a future.
Use your wallet wisely (ideally use something like Electrum, not those shitty Chrome extension Wallets unless you are planning to work with an exchange, like xDefi), check your UTXO regularly, consolidate and if you have a good clean wallet you will be paying minimum fees. Obviously, nothing compared to really intelligent crypto for transactions options like LTC, Monero, or even most forms of USDT or USDC.
Probably there are some other interesting things I'm forgetting, but more or less this is all you need to play with BTC like a PRO.
