The proposal titled "Keep the Change," which introduces the concept of "OP_KEEPCHANGE," aims to address these issues by crediting small residual Unspent Transaction Outputs (UTXOs) to the primary recipient’s address instead of generating new change outputs. This innovative approach is expected to mitigate inefficiencies associated with dust outputs by reducing blockchain bloat and simplifying transaction construction. By doing so, it also enhances privacy by making it more difficult to identify change outputs and preserves the overall Bitcoin money supply by preventing the accumulation of economically unspendable UTXOs.

The mechanism behind "OP_KEEPCHANGE" involves configuring a dust threshold and selecting inputs for transactions in such a way that minimizes the creation of change, thereby fostering a more equitable system. Transactions falling below this threshold would be marked with "OP_KEEPCHANGE," allowing any excess change to be added to the primary output. This method not only promises backward compatibility with existing systems but also aims at improving Bitcoin network efficiency, lowering transaction costs, enhancing privacy, and maintaining a stable money supply. Secondary benefits include preventing value erosion when transferring funds between wallets owned by the same entity and providing a slight revenue uplift for recipients such as merchants or fiat exchange users without imposing additional costs on the sender.

Bitcoin operates based on a unique model that relies heavily on Unspent Transaction Outputs (UTXOs) rather than conventional account balances. This methodology, which fundamentally differs from traditional financial systems, calculates an address's balance by summing the values of UTXOs that can be spent by the address in question. Proposals aiming to credit an address directly face significant challenges due to Bitcoin's foundational design, which is built to enhance privacy and operational efficiency. The current model intentionally obscures whether outputs are payments to recipients or change being returned to the sender, thus providing a significant privacy advantage. Adapting Bitcoin to a direct balance model would require a complete overhaul of the protocol and could potentially undermine the privacy benefits inherent in the UTXO model. As such, while addressing inefficiencies like dust accumulation is crucial, any modifications must carefully consider the fundamental principles and trade-offs embedded within the Bitcoin protocol.