Liquidity provider utxo management

Liquidity provider utxo management

Original Postby remyers

Posted on: March 20, 2024 09:50 UTC

The discussion revolves around optimizing the coin selection process in cryptocurrency transactions, particularly focusing on how to handle parameters effectively without altering the core mechanics of coin selection.

The conversation highlights the limited benefits of manipulating the min_change parameter due to its dependency on the fluctuating feerate, which is influenced by the general mempool situation. This suggests that adjusting min_change may offer restricted advantages in optimizing coin selection.

A notable strategy mentioned involves tailoring the type of outputs created during a transaction based on the current feerate environment. Specifically, it is suggested to create P2WPKH (Pay to Witness Public Key Hash) and P2TR (Pay to Taproot) outputs selectively. At lower feerates, generating bucketed change outputs as P2TR might be more advantageous, whereas, at higher feerates, opting for non-bucketed P2WPKH change outputs could be preferable. This approach represents an optimization technique that does not interfere with the internal workings of coin selection but rather adjusts the parameters fed into the system and modifies the transaction output based on the prevailing fee conditions.

The idea of pre/post-processing in this context is clarified as an adjustment of input parameters to the coin selection algorithm and the modification of the resulting transaction, rather than altering the coin selection mechanism itself. The correspondence underscores the importance of considering the external fee environment when deciding on the specifics of transaction outputs, presenting it as a viable method to enhance the efficiency of coin selections without fundamental changes to the selection process itself.