Draft BIP: DustSweep – policy-only UTXO dust compaction

The discussion revolves around the intricacies of handling "dust-class" Unspent Transaction Outputs (UTXOs) within the Bitcoin network, focusing on how these small-value transactions are managed and proposed changes to their treatment. The term "dust-class" UTXOs is clarified as referring to amounts smaller than the dust limit set by Bitcoin Core, which are essentially small-value transactions that may not be economical to spend due to the high transaction fees relative to their value. The conversation touches upon the types of scripts considered standard for these transactions, specifically mentioning Pay-to-PubKeyHash (P2PKH), Pay-to-Witness-PubKeyHash (P2WPKH), and Pay-to-Taproot (P2TR), with an inquiry about the inclusion of both Key Path (KP) and Script Path (SP) inputs under the P2TR designation.

A significant portion of the dialogue addresses a proposal to segregate dust-class UTXOs into a separate sub-mempool. This sub-mempool would operate under specific conditions: it would accept transactions only when the main mempool's occupancy falls below 50% and would evict them if the main mempool reaches 95% capacity. This approach aims to manage the blockchain's bandwidth more efficiently by prioritizing higher fee transactions during times of congestion while still allowing for the inclusion of low-value transactions during less busy periods. However, concerns are raised regarding the practicality and necessity of a separate sub-mempool, given that transactions with lower fees naturally tend to be processed later or rejected in favor of higher-fee transactions under existing mechanisms.

Furthermore, the email debates the likelihood of miners including these dust-class transactions in blocks. A suggestion is made for miners to allocate a small fraction of a block's weight (around 5%) to such transactions, but only after filling the block with regular, fee-paying transactions. This approach is scrutinized based on recent mining behavior and mempool statistics, suggesting that blocks are rarely not full, except during a specific period observed in the past months. It also raises the question of whether the minimal savings in transaction fees for users would indeed incentivize the consolidation of dust-class UTXOs, given the relatively low cost of executing such transactions under the proposed new minimum fee rate.

Overall, the exchange highlights the complex balance between optimizing network resources and accommodating low-value transactions on the Bitcoin blockchain. While the intent to improve bandwidth usage and provide avenues for dust consolidation is evident, skepticism exists regarding the effectiveness and implementation feasibility of the proposed measures.