What is a consolidation transaction?

Consolidation transactions are recommended if your vault has received many deposits.

Over time, UTXOs (unspent transaction outputs) will accumulate in your vaults as you make bitcoin deposits—every deposit is a UTXO, which you can think of as a chunk of data representing a specific amount of bitcoin. You can check the number of UTXOs in your vault by clicking View details on your vault page.

If you are saving bitcoin for the long-term, you may not make many withdrawals from your vault. If you continue to make deposits, this results in UTXOs stacking up over time. A high number of UTXOs can lead to a few problems.

  1. Hardware wallets can have difficulty signing due to memory constraints.
  2. Your transaction will require high bitcoin network fees. UTXOs are data. The more data you need to move during a transaction, the more expensive the transaction will be.

To fix this, you can make occasional consolidation transactions. A consolidation transaction will take all of the UTXOs in your vault, and send them in a transaction back to yourself. By doing this, the smaller UTXOs are consolidated into one larger UTXO on a new vault address.

You can check out our articles by concierge technical director Tom Honzik, to learn more about why having a lot of UTXOs can end up costing you, and why small UTXOs in particular are best avoided.