TL; DR
Full story
Late last week, BTC transaction fees started skyrocketing out of nowhere.
That made us wonder… was this because of Gamestop? Had Runes suddenly had a massive outbreak? Or something else?
It turned out to be something else.
The third largest crypto exchange in the world – OKX – just consolidated a whole bunch of unused transaction outputs (UTXOs).
This is what that means:
Imagine if Seb wanted to send Chevy 5.1 BTC.
Chances are Seb didn’t precisely 5.1 BTC in his wallet (especially if he has made some BTC transactions in the past).
So instead of transferring exactly 5.1 BTC, Seb could transfer 5.2 BTC because currently in Seb’s wallet there are 5BTC and 0.2 BTC (see the header image or Watch this video for better understanding).
The ‘change’ Seb receives (0.1 BTC minus any fees) would become the UTXO.
Now this becomes a huge problem for a crypto exchange that processes thousands of transactions per day, most of which result in some amount of UTXO.
And every now and then, an exchange may consolidate its major portfolios to reduce UTXOs – all in the plan to lower the cost of future transactions and reduce congestion on the Bitcoin network for future transactions.
And that’s exactly what happened on Friday.
The good news is that this isn’t that common on exchanges (they might do it once or twice a year), but it do feeling like something needs to be improved.
The Runic Protocol has come a long way to solving this and other solutions are likely being worked on as we speak.
Reason #4283 why we love crypto: constant innovation.