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Date: Sat, 8 Mar 2025 10:23:28 -0800 (PST)
From: Nighttime Satoshi <nighttimesatoshi@gmail.com>
To: Bitcoin Development Mailing List <bitcoindev@googlegroups.com>
Message-Id: <62b454f8-56be-4eae-ba3e-57c53d493f3dn@googlegroups.com>
Subject: [bitcoindev] Proposal: Unlocking Dust UTXOs as Miner Transaction Fees
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Dear fellow Bitcoin developers,

I'm excited to share a proposal addressing a long-standing Bitcoin 
challenge: economically unviable dust UTXOs.

As Bitcoin's value and transaction fees increase, more UTXOs become 
effectively unspendable because the cost to move them exceeds their value. 
This creates a growing dust horizon - small amounts of BTC permanently 
stranded from circulation, weakening fungibility and bloating the UTXO set.

I'm proposing a solution that enables users to voluntarily designate their 
dust UTXOs as transaction fees through cryptographic authorization, 
allowing miners to claim them directly without requiring traditional 
spending. This is a win-win-win solution for users (reclaiming otherwise 
stranded value), miners (additional fee income), and the network (reduced 
UTXO set size).
Key Features:
   
   1. *Entirely Voluntary* - Users must explicitly authorize any dust UTXO 
   transfer with cryptographic signatures proving ownership
   2. *Implementation as Soft Fork* - Backward-compatible with non-upgraded 
   nodes
   3. *Simple Security Model* - Uses familiar signature verification 
   without exposing private keys
   4. *Clearly Defined Dust Threshold* - Fixed at 546 satoshis, matching 
   Bitcoin Core's existing dust limit
   5. *Race Condition Prevention* - Comprehensive safeguards against 
   double-spend and miner race conditions
   6. *Minimal Consensus Impact* - Carefully designed to introduce minimal 
   complexity to Bitcoin's validation logic

Economic Benefits:
   
   1. *UTXO Set Cleanup* - Removing millions of dust UTXOs could 
   significantly reduce the UTXO set size
   2. *Enhanced Fungibility* - Provides a pathway for stranded satoshis to 
   rejoin economic circulation
   3. *Long-term Miner Incentive* - Creates an additional fee source as 
   block rewards diminish
   4. *Complementary to Existing Solutions* - Works alongside batching, 
   consolidation, and Lightning Network

Technical Implementation:

The proposal uses a special OP_RETURN output format in transactions to 
designate dust UTXOs for miner claiming:

OP_RETURN <DUST_FEE_PREFIX> <dust_utxo_txid> <dust_utxo_vout> <signature>

Miners can claim these UTXOs in their coinbase transaction if and only if 
the corresponding designation transaction is included in the same block.
Historical Context & Contributions:

It seems that previous discussions on dust UTXOs have considered many 
approaches, including forced reclamation. This proposal avoids those 
controversies by requiring explicit user authorization while still 
providing an economically rational path for dust cleanup.

You can read the full proposal draft here: 
https://github.com/satoshinotebook/BIPs/blob/main/unlocking-dust-utxos-as-transaction-fees.md

I'd appreciate feedback on:

   1. Technical feasibility of the soft fork implementation
   2. Security considerations and potential edge cases
   3. Economic incentive alignment
   4. User experience concerns for wallet implementations

Thank you for any feedback! I believe it offers a practical solution to a 
growing challenge that will only become more significant as Bitcoin 
continues to mature and evolve.

With respect,

Nighttime Satoshi

nighttimesatoshi@gmail.com

https://satoshinotebook.com

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Dear fellow Bitcoin developers,<div><span style=3D"caret-color: rgb(0, 0, 0=
); color: rgb(0, 0, 0);"><br /></span></div><div><span style=3D"caret-color=
: rgb(0, 0, 0); color: rgb(0, 0, 0);">I'm excited to share a proposal addre=
ssing a long-standing Bitcoin challenge: economically unviable dust UTXOs.<=
/span><div><p style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">As =
Bitcoin's value and transaction fees increase, more UTXOs become effectivel=
y unspendable because the cost to move them exceeds their value. This creat=
es a growing dust horizon - small amounts of BTC permanently stranded from =
circulation, weakening fungibility and bloating the UTXO set.</p><p style=
=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">I'm proposing a soluti=
on that enables users to voluntarily designate their dust UTXOs as transact=
ion fees through cryptographic authorization, allowing miners to claim them=
 directly without requiring traditional spending. This is a win-win-win sol=
ution for users (reclaiming otherwise stranded value), miners (additional f=
ee income), and the network (reduced UTXO set size).</p><span style=3D"care=
t-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">Key Features:</span><ol style=
=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);"><li><strong>Entirely V=
oluntary</strong>=C2=A0- Users must explicitly authorize any dust UTXO tran=
sfer with cryptographic signatures proving ownership</li><li><strong>Implem=
entation as Soft Fork</strong>=C2=A0- Backward-compatible with non-upgraded=
 nodes</li><li><strong>Simple Security Model</strong>=C2=A0- Uses familiar =
signature verification without exposing private keys</li><li><strong>Clearl=
y Defined Dust Threshold</strong>=C2=A0- Fixed at 546 satoshis, matching Bi=
tcoin Core's existing dust limit</li><li><strong>Race Condition Prevention<=
/strong>=C2=A0- Comprehensive safeguards against double-spend and miner rac=
e conditions</li><li><strong>Minimal Consensus Impact</strong>=C2=A0- Caref=
ully designed to introduce minimal complexity to Bitcoin's validation logic=
</li></ol><span style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">E=
conomic Benefits:</span><ol style=3D"caret-color: rgb(0, 0, 0); color: rgb(=
0, 0, 0);"><li><strong>UTXO Set Cleanup</strong>=C2=A0- Removing millions o=
f dust UTXOs could significantly reduce the UTXO set size</li><li><strong>E=
nhanced Fungibility</strong>=C2=A0- Provides a pathway for stranded satoshi=
s to rejoin economic circulation</li><li><strong>Long-term Miner Incentive<=
/strong>=C2=A0- Creates an additional fee source as block rewards diminish<=
/li><li><strong>Complementary to Existing Solutions</strong>=C2=A0- Works a=
longside batching, consolidation, and Lightning Network</li></ol><span styl=
e=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">Technical Implementat=
ion:</span><p style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">The=
 proposal uses a special OP_RETURN output format in transactions to designa=
te dust UTXOs for miner claiming:</p><p style=3D"caret-color: rgb(0, 0, 0);=
"><font color=3D"#ffffff" style=3D"background-color: black;">OP_RETURN &lt;=
DUST_FEE_PREFIX&gt; &lt;dust_utxo_txid&gt; &lt;dust_utxo_vout&gt; &lt;signa=
ture&gt;<br /></font></p><p style=3D"caret-color: rgb(0, 0, 0); color: rgb(=
0, 0, 0);">Miners can claim these UTXOs in their coinbase transaction if an=
d only if the corresponding designation transaction is included in the same=
 block.</p><span style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">=
Historical Context &amp; Contributions:</span><p style=3D"caret-color: rgb(=
0, 0, 0); color: rgb(0, 0, 0);">It seems that previous discussions on dust =
UTXOs have considered many approaches, including forced reclamation. This p=
roposal avoids those controversies by requiring explicit user authorization=
 while still providing an economically rational path for dust cleanup.</p><=
p style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);">You can read th=
e full proposal draft here:=C2=A0<a href=3D"https://github.com/satoshinoteb=
ook/BIPs/blob/main/unlocking-dust-utxos-as-transaction-fees.md">https://git=
hub.com/satoshinotebook/BIPs/blob/main/unlocking-dust-utxos-as-transaction-=
fees.md</a></p><p style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);"=
>I'd appreciate feedback on:</p><ol style=3D"caret-color: rgb(0, 0, 0); col=
or: rgb(0, 0, 0);"><li>Technical feasibility of the soft fork implementatio=
n</li><li>Security considerations and potential edge cases</li><li>Economic=
 incentive alignment</li><li>User experience concerns for wallet implementa=
tions</li></ol><p style=3D"caret-color: rgb(0, 0, 0); color: rgb(0, 0, 0);"=
>Thank you for any feedback! I believe it offers a practical solution to a =
growing challenge that will only become more significant as Bitcoin continu=
es to mature and evolve.</p><p style=3D"caret-color: rgb(0, 0, 0); color: r=
gb(0, 0, 0);">With respect,</p><p style=3D"caret-color: rgb(0, 0, 0); color=
: rgb(0, 0, 0);">Nighttime Satoshi</p><p style=3D"caret-color: rgb(0, 0, 0)=
; color: rgb(0, 0, 0);">nighttimesatoshi@gmail.com</p><p style=3D"caret-col=
or: rgb(0, 0, 0); color: rgb(0, 0, 0);"><a href=3D"https://satoshinotebook.=
com">https://satoshinotebook.com</a><br /></p></div></div>

<p></p>

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bitcoindev/62b454f8-56be-4eae-ba3e-57c53d493f3dn%40googlegroups.com?utm_med=
ium=3Demail&utm_source=3Dfooter">https://groups.google.com/d/msgid/bitcoind=
ev/62b454f8-56be-4eae-ba3e-57c53d493f3dn%40googlegroups.com</a>.<br />

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