Charlie Lee Seeks Litecoin Community Input to Resolve UTXO Dust Issue
Litecoin’s founder Charlie Lee recently conducted a Twitter poll in which he asked the community’s opinion regarding a solution for unspent dust in Litecoin’s UTXO.
What should we do about the 12M 1-litoshi outputs in Litecoin's UTXO set that represents more 50% of all UTXOs?
See this Reddit post for more details: https://t.co/gcrJVqmM1b
— Charlie Lee [LTC⚡] (@SatoshiLite) October 11, 2018
The Problem With UTXO
In his Reddit post, the Founder wrote that the issue was pointed out by Sergi Delgado Segura and Jameson Lopp, two well-known people in the cryptocurrency space. Jameson Lopp even posted a separate tweet of his own to address the matter.
The UTXO set is a set of transaction outputs that are unspent. These are coins that represent every single LTC out there. Nodes hold onto this UTXO set (very likely in RAM for quick access) so that they can validate transactions coming in. This is because each valid transaction can only be spending an output from this UTXO set. And when the output is spent, it's then dropped from the UTXO set because it won't be spendable again in the future.
If you have a large UTXO set, it becomes harder to run a full node. The full node needs to at all times keep track of this whole set. For Litecoin 52+% of this set is filled with outputs that will likely never be spent! It will cost 0.001 LTC to spend this 0.00000001 LTC output. It wouldn't make economic sense to spend them. So full nodes are carrying around this extra stuff in memory for no practical reasons.
Vitalik Buterin joined this thread to drop a suggestion. He suggested that the litoshis could be burnt. Furthermore, he stated that the Litecoin team should consider an ongoing tax where all UTXOs can lose 1 litoshi per N blocks.
Seriously though, you guys should also consider an ongoing tax where all UTXOs lose 1 litoshi per N blocks.
See last part of https://t.co/eav6Y244Ap for reasons why this is optimal.
— vitalik.eth (@VitalikButerin) October 11, 2018
Even though the transactions can be identified as unspendable, there is an extreme skepticism that twirls around the solution. This is because the community believes that Bitcoin and Litecoin were created following two principles, censorship resistance, and immutability. The softfork will prevent the dust from being spent, hence implementing and advocating for censorship.