Have a UTXO consolidation plan. Put a plan in place now so that your future self can avoid unfortunate situations that can hinder business operations.
In case you missed it, it looks like Binance executed a large UTXO consolidation over the weekend, which has provided us with a great learning experience. For those of you freaks who may be unaware, when you custody your bitcoin what you're really taking care of are unspent transaction outputs, or UTXOs. When you "spend bitcoin" you're really using a UTXO or a combination of UTXOs as an input in a new transaction. Once UTXOs are consumed as inputs in transactions new UTXOs are created in the form of change. It is unlikely that you'll have perfectly sized outputs for the transactions you want to make, so it is probably wise to learn how change is created, what it means for your future spending, and how you can consolidate "dust" outputs into fewer UTXOs so that they are spendable in the future.
The "in the wild" use case that Binance has provided us seems to have emanated from their use of Tether. As our friend Sergej points out, each tether transaction creates a new dust output of 546 sats, which is currently worth about four cents. An abysmally small amount of money to justify a transaction if fees are above a certain point. Noticing this, Binance took the chance to consolidate about one million of these dust outputs into batches of 70,000 sats (and potentially other batch amounts, I could only scroll through the transactions for so long) at a 1.8 sats/byte fee rate. Essentially setting a very low bid for block space during a period they knew people would be less likely to transact (the weekend) and, therefore, more likely to have their transactions included in blocks by miners. A very wise, strategic move by Binance as they attempt to manage their blockchain costs and footprint.
Let this be a lesson to any of you freaks out there who may be thinking about accepting bitcoin as payment or building a business around Bitcoin. Have a UTXO consolidation plan. Put a plan in place now so that your future self can avoid unfortunate situations that can hinder business operations. And, more importantly, have a plan in place because it helps Bitcoin become more efficient and helps stunt the barrier to entry for other potential full node operators. Binance's consolidation reduced Bitcoin's UTXO set by about 600,000 UTXOs. Pretty impressive.
Another great thing about this consolidation is that it, again, highlights that the prospect of a healthy fee market developing in Bitcoin seems promising at this point. Bitcoin is still so so small at the moment. The established exchanges that have an immense amount of information asymmetry when compared to the world outside of Bitcoin's bubble are STILL getting their shit together. Trying to develop best practices and learn how to interact with Bitcoin in the most economically efficient way. Imagine what happens when all of these players develop well thought out UTXO consolidation strategies that execute as soon as a wallet hits x amount of sats or the average accepted fee from a miner hits y sats/byte. Imagine what happens when more and more people and companies start building on Bitcoin. There will be entire cottage industries built around the science of UTXO consolidation.
The future is bright!
Built a zip line with my friends when we lived in Charleston. Kids need more zip lines these days. Zip lines are dope.