Proposal: Unlocking Dust UTXOs as Miner Transaction Fees

In a recent exchange on the Bitcoin Development Mailing List, several critical points were raised concerning a proposal related to spending Unspent Transaction Outputs (UTXOs) via OP_RETURN. The discussion opens with inquiries about the rationale behind setting the limit at 546 satoshis for UTXO spending and questions the exclusion of UTXOs owned by scripts, such as those in multisig arrangements, from this method. These initial queries highlight the need for clarity on the decision-making process regarding these specific limitations and the potential oversight of script-owned "dust" UTXOs.

Further examination reveals technical and economic concerns associated with the size of the OP_RETURN output. Technically, there's apprehension that the metadata required for this operation might exceed the current 80-byte standardness limit set for OP_RETURN outputs. This situation raises questions about whether an increase in the standardness limit is necessary or if users will have to find alternative ways to bypass this limitation, such as using tools like Libre Relay. Economically, the feasibility of miners claiming dust UTXOs through this method is questioned. Specifically, the discussion points out that given certain market fee rates, the value reclaimed from dust UTXOs might not be economically viable for miners, making the inclusion of such transactions in their blocks unattractive.

The dialogue culminates in a broader reflection on the overall merit of the proposal. Doubts are cast on whether this approach to spending UTXOs via OP_RETURN presents any real improvement over existing methods. There's skepticism regarding the potential on-chain byte savings this method might offer and whether such savings justify the efforts required for a soft fork and wallet updates. Especially under scenarios where high transaction fees could negate any economic advantage of reclaiming dust UTXOs, questioning the practicality of permanently adopting this method. This comprehensive analysis underscores the necessity of weighing the technical feasibility and economic viability against the benefits of enabling more flexible UTXO spending mechanisms within the Bitcoin network.