How many change outputs are there in a Bitcoin transaction

Question

I have been reading the following article: https://coinmetrics.io/difficulty-estimating-chain-transaction-volume/

It mainly discusses how unreliable transaction volume on a UTXO blockchain such as Bicoin is due to factors like change outputs, exchanges making transactions and coin mixing.

My question is related to change outputs in particular. If one sends someone a 5 BTC output, from a 20 BTC input they would receive, there would be a 15 BTC change return to the address of the sender.

So what I ask is, for transactions with more than one output, can we assume that one of the outputs is always change? Wallets would not construct transactions where they split the change to multiple addresses of the sender, would they? Is the only concern then, whether the output is indeed change or it is value that is being sent over to another recipient?

Answer 1

So what I ask is, for transactions with more than one output, can we assume that one of the outputs is always change?

I think this is likely a safe assumption most of the time, but not always. For example, a transaction that pays two people, using an input that is exactly the sum of both payment (+ miner fee) would have two outputs, and no change address. Such a thing is probably rare, but possible.

As well, if you move coins around between two wallets you control, then the only real distinction between the ‘payment output’ and the ‘change output’ is in which wallet controls which key (since you own both).

Wallets would not construct transactions where they split the change to multiple addresses of the sender, would they?

Sure they could, I’ve seen wallets that are focused on user privacy advertise all sorts of unconventional spending habits, with the goal of making it hard to figure out metrics like this. As an example, check out samurai wallet.

Again though, most wallets are designed to be fee-efficient, so in most cases there will not be more than one change output.

Is the only concern then, whether the output is indeed change or it is value that is being sent over to another recipient?

That is definitely one issue with trying to estimate tx volume, but likely not the only one. Distinguishing payments between parties vs payments to oneself (eg moving you coins to a different wallet) is another. As you mentioned, off chain tx volume and coin mixers will also make it hard to figure out. Lightning network payments will similarly be difficult to quantify, since payments can be communicated off-band, and we will only see the channel opening/closing txs happen on chain.