Draft BIP: DustSweep – policy-only UTXO dust compaction

Designed for periods of low mempool and block space utilization, it offers a structured method for wallets to consolidate dust without requiring consensus changes or introducing spam vectors. The proposal specifies transactions that exclusively utilize "dust-class" UTXOs and adhere to standard scripts like P2PKH, P2WPKH, and P2TR. These transactions are distinctive, having a single output without any metadata, a minimum of five inputs to ensure substantial UTXO set reduction, and adhere to size limitations. They also apply a minimal fee policy of 1 sat per input, are stored in a separate sub-mempool to avoid competing with regular transactions, and are processed only under certain conditions.

Feedback from the community suggests modifications to make DustSweep more broadly applicable and useful. Suggestions include adjusting the strict requirement of 100% dust inputs to a majority dust requirement and revising the output/input ratio to allow better aggregation of dust outputs into economically meaningful amounts while still aiming for UTXO set size reduction. These adjustments aim to maintain the initiative's core incentives without overly complicating its implementation for wallet operators and maintaining predictability in behavior.

Queries from the developer community highlighted areas for clarification, such as the definition of "dust-class" UTXOs, whether the proposal would include specific types of P2TR scripts, and the practicality of managing a separate sub-mempool for DustSweep transactions. Concerns were raised about the feasibility of this approach given the dynamics of mempool capacity and miner practices, suggesting that the proposed mechanism might face challenges in actual deployment due to the potential for these transactions to either not be prioritized by miners or sit unprocessed due to their low fee incentive.

Defenwycke has opened up the proposal for public review and feedback on GitHub (here), encouraging input on the policy's specifics, thresholds, and alignment with node operator and wallet developer preferences. This collaborative approach aims to refine DustSweep into a balanced solution that serves the community's needs while addressing the persistent issue of dust in the Bitcoin network.