Liquidity provider utxo management

Liquidity provider utxo management

Original Postby remyers

Posted on: March 20, 2024 09:12 UTC

The discussion revolves around optimizing the process of refilling depleted buckets in transaction systems, particularly focusing on the strategy to use when fee rates are low.

The proposal emphasizes the importance of proactive measures for creating change outputs to replenish these buckets effectively. A central suggestion involves selecting the largest unassigned Unspent Transaction Output (UTXO) as an additional input during the transaction creation phase. This approach aims to streamline the refilling process by leveraging large, non-bucketed UTXOs to generate multiple change outputs specifically tailored to the needs of the bucket intended for refill.

Further clarification is provided on the methodology for selecting inputs under varying fee rate conditions. In situations where the fee rate is sufficiently low, the strategy advocates for summing up the amounts of several or all desired UTXOs. This consolidation enables the creation of numerous UTXOs alongside the primary liquidity transaction output, thereby facilitating comprehensive bucket refilling through the selection of multiple significant non-bucketed UTXOs as necessary.

An enhancement to this strategy includes refining the selection process of non-bucketed UTXOs as inputs, with a focus on targeting those UTXOs that directly contribute to the refill needs of depleted buckets. The improvement proposes a more focused approach by limiting the attempt to refill buckets to the availability of spendable non-bucketed UTXOs. This refined strategy underscores the commitment to efficient management and replenishment of buckets, ensuring optimal utilization of resources while maintaining transaction efficacy.