Why Little Johnny Can't Spend Bitcoin

There have been many questions lately about not being able to spend or send BTC from a given wallet. There are many answers but one that seems to be encountered often is the wallet containing a large amount of small unspent UTXOs. How does this affect your ability to move Bitcoin? I had a "shower thought" that I hope explains this problem.

Let's pretend that the Bitcoin Blockchain is a vending machine. This vending machine has chips, candy, drinks, etc. The lowest price offered by the vending machine is $0.05 USD (5 cents) for a pack of gum. So you put in a nickle and voila! You can now purchase a pack of gum. The 5 cents you spent is akin to the "Transaction Fee" on a Bitcoin transaction. The machine needs to be able to take nickels in order to be able to sell the gum at a nickel and be able to make change for coins above a nickel.

So since you like gum you make sure you have a pocket full of nickels to satisfy your gum craving.

One day you go to buy some gum and discover that the vending machine has been changed and now a pack of gum is $0.10 USD (10 cents). You figure "No Problem!" I'll just use 2 nickels! But you also see that this new machine won't take nickels. The smallest coin you can use is a dime ($0.10 USD). So what happens? You can't buy gum because all you have is nickels and the machine will only take a minimum of a dime!

Your nickels are now considered to be inadequate for performing a transaction. You can have $5 USD in nickles but no matter how many you have the machine won't take them.

This is what is happening on the blockchain as we speak. People that have many small transactions in their wallet can no longer create a transaction because the minimun transaction fee is greater than the amount of unspent Bitcoin for any given address in their wallet.

How can you help to prevent this?

Don't do lots of micro-transactions. Let the funds accumulate and send the transaction out as a single transaction.
If you are funding your wallet via Bitcoin "faucets" let the pay-outs accrue and send them to you wallet as a single transaction.
If your wallet supports it, consolidate your change addresses into a single address.
If I missed anything please let me know.

JPCrypto

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