protos.com
OKX is one of the world’s 10 largest crypto exchanges and processes over $100 billion in spot bitcoin transactions annually. However, despite its size and seven-year operating history, its employees made a rookie mistake that hints at only a basic understanding of the Bitcoin network and managing unspent transaction outputs (UTXO).
The exchange recently repeated an embarrassing mistake that it first made in October 2023: bidding against itself. Specifically, it broadcast UTXO-consolidating bitcoin transactions at average fee rates but then, incredibly, started bidding against its own transactions.
Because of poor safeguards while dealing with the Bitcoin network, OKX wound up paying six-fold the fee rate than it would have otherwise paid had it not bid against itself.
In the end, OKX bid over 350 satoshis per virtual byte of data (s/vb) after a starting bid of just 53 s/vb to consolidate its UTXOs.
What are bitcoin UTXO consolidations?
Bitcoin wallets that receive and send many transactions end up with a lot of UTXOs. These are commonly known as simply ‘bitcoin,’ the unspent coins in a wallet.
Unlike account-based blockchains like Ethereum which automatically consolidate assets into a single balance, each bitcoin UTXO requires bidding a separate transaction fee so that miners include that particular UTXO within a valid block of data.
When transaction fees are high on Bitcoin, large wallets usually allow their UTXO sets to proliferate. After a few months have passed and fee rates have declined, large wallets take the opportunity to consolidate their UTXOs.
Read more: Ordinals break bitcoin: Transaction fees exceed rewards as congestion rises
Rather than paying over 1,250 bitcoins in daily fees to store data blocks on Bitcoin’s ledger on April 19, for example, bitcoin users who waited until today can pay less than 15 for the same amount of data storage.
Patience for UTXO consolidations certainly allows Bitcoiners to save on their transaction fees — unless, of course, they insist on bidding against themselves.
Protos reached out to OKX for comment but had not received a response by press time.