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Litecoin Has a UTXO Problem

Litecoin
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UTXOs, also known as “dust”, are a problem faced by all Bitcoin-based blockchains. Generally, these nominal wallet balances are swept to aggregate the leftover satoshis from previous transactions into a single wallet. In the case of litecoin, however, that’s not possible for the more than 50 percent of UTXOs that measure just one ‘litoshi’ in size.

Sweeping them would cost more in transaction fees than the value of the dust itself. The issue can be traced back to a spam attack in late 2011. Litecoin creator Charlie Lee has now asked the community what should be done with the UTXOs that are lying in limbo.

So far, crypto Twitter is split between doing nothing and having them marked as unspendable. Vitalik Buterin had a different idea however: the Ethereum founder suggested that Lee “consider an ongoing tax where all UTXOs lose 1 litoshi per N blocks.”