Tom Honzik on Nostr: To help protect yourself from high #bitcoin txn fees on a relative basis, a common ...
To help protect yourself from high #bitcoin txn fees on a relative basis, a common recommendation is to deposit to your wallet in 1M+ sat increments (for legacy wallets and script multisig wallets, the number should be higher).
Ordinals and non-economic transactions change the math.
The assumption was, that as fee rates rise, smaller UTXOs would be priced out of being spent, because it would make no economic sense (they would approach “operative dust”).
This creates an equilibrium effect, where fee rates can’t go beyond a certain level for a sustained period of time. Blockspace is scarce, but so is bitcoin itself, and large value UTXOs even more so.
However, if people find value in paying higher fees to move a UTXO than what it’s actually worth, such as for inscription trading and similar things, the earlier assumption is incorrect.
This means fee rates could go “higher for longer” than what some people were anticipating. 1M sat UTXOs could be insufficient for the fee protection you’re looking for.
What’s the right number, then? It depends on an individual’s preferences and predictions, but in the linked article, I provide the math to help you calculate it.
unchained.com/blog/small-utx…
If people begin to need to make wallet deposits of, say, 2M+ sats to protect themselves from fees, that’s already $800+ per deposit. If the price of bitcoin goes above $100k, we could be talking thousands of dollars to simply make a reasonably sized deposit to on-chain self custody.
This consideration exists regardless of non-economic transactions, but they certainly speed up the relevancy.
We may be approaching a point where even most middle class people in the western world become priced out of using bitcoin on-chain. This was expected to happen but I’m not sure people are expecting it as soon as it could happen (next bull cycle?).
Do we currently have 2nd layer tools to use bitcoin off-chain, that provide adequate UX, trust minimization, and security?
Ordinals and non-economic transactions change the math.
The assumption was, that as fee rates rise, smaller UTXOs would be priced out of being spent, because it would make no economic sense (they would approach “operative dust”).
This creates an equilibrium effect, where fee rates can’t go beyond a certain level for a sustained period of time. Blockspace is scarce, but so is bitcoin itself, and large value UTXOs even more so.
However, if people find value in paying higher fees to move a UTXO than what it’s actually worth, such as for inscription trading and similar things, the earlier assumption is incorrect.
This means fee rates could go “higher for longer” than what some people were anticipating. 1M sat UTXOs could be insufficient for the fee protection you’re looking for.
What’s the right number, then? It depends on an individual’s preferences and predictions, but in the linked article, I provide the math to help you calculate it.
unchained.com/blog/small-utx…
If people begin to need to make wallet deposits of, say, 2M+ sats to protect themselves from fees, that’s already $800+ per deposit. If the price of bitcoin goes above $100k, we could be talking thousands of dollars to simply make a reasonably sized deposit to on-chain self custody.
This consideration exists regardless of non-economic transactions, but they certainly speed up the relevancy.
We may be approaching a point where even most middle class people in the western world become priced out of using bitcoin on-chain. This was expected to happen but I’m not sure people are expecting it as soon as it could happen (next bull cycle?).
Do we currently have 2nd layer tools to use bitcoin off-chain, that provide adequate UX, trust minimization, and security?