New Bitcoin Core algorithm seeks to ‘tidy up’ coin selection code

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Coin selection, one of the key technical processes for facilitating Segwit-Coin BTC payments, looks set for a major overhaul, as part of ongoing attempts to reduce transaction fees.

On Monday, CoinDesk reported that a new algorithm called “Branch and Bound” (BnB) is being developed to take coin selection’s place, resulting in improved transaction times and reduce fees from their current levels.

However, concerns were raised over the new model’s impact on BTC fungibility, with Bitcoin Cash (BCH) already offering more effective mechanics than the new algorithm could deliver.

At present, coin selection is regarded as overly ‘convoluted’, pulling together packets of blockchain data to make up nominal transaction amounts.

The process is similar to overpaying in cash and receiving change, with the algorithm pooling several smaller ‘chunks’ of Bitcoin to total the amount of any transaction, rather than simply sending payments in a single chunk.

This can also lead to scenarios where a transaction of 0.05 BTC is comprised of 0.06 BTC, with 0.01 BTC given as ‘change’. While the algorithm works in its current form, most experts agree it is far from optimal.

Andrew Chow, a contributor to Bitcoin Core, described the inefficiencies of the current algorithm in an interview with CoinDesk: “Bitcoin Core’s original coin selection algorithm actually needs a lot of reworking, especially with regards to transaction fees. It’s inefficient and it ends up doing a weird loop to try to guess the amount of transaction fees that are needed.”

Unnecessary change outputs are problematic, both in terms of transactional inefficiencies, as well as occupying unnecessary space on the blockchain. The Branch and Bound algorithm aims to eliminate the need for change outputs, by looking for exact match chunks first. According to Chow, this will make for smaller transactions, thereby saving on fees.

“Transactions where an exact match was found, will generally be smaller than ones where there is change, so this will also save on transaction fees for the user and free up a few more bytes of block space to fit in other transactions,” Chow told the news outlet.

However, Bitcoin Core’s proposed algorithm is aimed at correcting a problem that only applies to BTC—the issue, after all, has already been resolved by BCH, which currently offers faster transaction times and lower fees, without the need for this kind of structural overhaul.

It remains to be seen where Branch and Bound will deliver any significant improvement, in light of the more fundamental issues with the BTC blockchain.