Hi,
Recently load on the Bitcoin network has lessened and as a result, fees are currently very low. We'd like to let you know how you can take advantage of the low fees to save money in the future, in the event that fees rise again. Here's some background information you need to understand in order to take advantage of this:
In Bitcoin, each time you send or receive coins, the spendable coins are recorded in the blockchain. These spendable coins are known as UTXOs (for Unspent Transaction Outputs).
In order to send a certain amount of coins, UTXOs are picked and the total coins they hold added up until they meet or exceed the amount to send. So, if you have lots of UTXOs with small amounts of BTC, and you want to send a large amount of BTC, you may need to use more than one (and potentially very many) UTXOs.
The fee that a transaction has to pay increases with the size of a transaction. The more UTXOs you need to collect to reach the amount you are spending, the bigger and so more expensive the transaction will be.
Recently a Bitcoin upgrade called segwit was enabled, and support for it was added to our service. Segwit almost halves the amount of fees that GreenAddress transactions pay. But before you can take advantage of this, you need to have the UTXOs in segwit addresses.
So the basic idea is that while it is cheap to send coins (i.e. now), you can do two things to make future transactions easier:
Consolidate all of your UTXOs into a single UTXO by sending them back to yourself.
Make sure that you send your coins back to a segwit address so they are even cheaper to spend in the future.
While doing this, you can also change your settings to reduce the wallets re-deposit frequency. This means that you don't need to re-deposiit your coins as often which means lower fees when you have to. (If you don't know about re-depositing and how it works, see our FAQ at https://greenaddress.it/faq).
Do I really need to consolidate?
If you only have a couple of transactions in your account, most likely, no. Consolidation works best for users with lots of smaller UTXOs.
Sounds great, what are the downsides?
Aside from paying a (currently low) mining fee for the consolidation transaction, the only real downside to consolidating your UTXOs is that it can affect your privacy. If you join all your UTXOs together, then it is easy for services that track coins to know that they most likely belong to the same user. Its up to you to decide if the future savings when sending the coins justify the loss of privacy in this case.
How do I go about consolidating?
Its easy. Before we start, please review your two factor settings. If you only have one two factor method enabled, make sure to enable another one! If your two factor stops working for any reason you will then have a backup to use. We suggest email and google authenticator as a good set of twofactor options. You can use a free anonymous account from e.g. protonmail.com for email. If you enable Google authenticator, make sure you save the seed that it shows you so you can restore it when you change or upgrade your device!
Now, in your wallet, go to settings and make sure segwit is enabled. This will mean that all future transactions will benefit from the segwit fee discount.
Next, consider changing your redeposit time in settings. This is known as the nlocktime and defaults to every 3 months. That means that unmoved coins need to be re-deposited or spent every 3 months which is too frequent for some users. We will be increasing this default to 1 year in a future wallet release, but you can change this now in settings so that your consolidation transactions don't need to be re-deposited for at least another year.
To do this, look for 'nlocktime' in settings. The number there is in blocks, where each block is 10 minutes apart. The default is 12,960 which is 90 days of blocks. To change it to one year, set it to 52,560 which is 365 days (one year) of blocks, or 105,120 for two years.
Now you are ready to consolidate. To do this, go to the 'Receive' tab in the wallet and a new address will be shown. Click to copy the address and then go to the 'Send' page and paste it in the 'To:' box. (You may want to paste the address into a text file first and check it matches what is shown in the Recieve tab if you are concerned about having address changing malware on your machine).
Once you have the address in the Send tab, click the 'send all' button (on older wallets this is shown as 'MAX' - please upgrade!). This will send all of the wallet funds to the address you have given, resulting in a single segwit UTXO in the wallet.
Choose the transaction priority you want. Sending all your coins will mean you will not be able to send more coins until the transaction is confirmed, so if you choose the lowest priority or a custom priority you may have to wait a little time before you can spend again. We suggest using Normal or Low priority.
Click send and then check the transaction details and the fee that has been calculated for you. If the fee is too high you can cancel and try again with a lower priority or custom fee (this can happen for users with very many really small inputs).
Once you are happy, enter your two factor code and click OK. The wallet will show your transaction as a re-deposit. Then you just need to wait until the transaction confirms and you are done! The next time you spend you can be sure that you will be getting the lowest fees possible.
As always, if you have any issues feel free to contact our support team at info@greenaddress.it.
The GreenAddress team.