UTXO transaction consolidation?

Question

As a relatively new user, I have only generated a handful of public addresses. Usually, to move to a newly discovered and preferred wallet.

I’ve only recently learned that a single seed phrase can generate multiple key pairs, And each private key can generate multiple public addresses.

Nonetheless, I’ve heard the old wisdom of generating a new address for each transaction, but have no idea how to sensibly put this into practice, or why.

As new users, should we be learning about utilizing many public addresses for our transactions, or is it just fine to use one?

Answer 1

You should avoid reusing addresses. Bitcoin works on a UTXO model where each payment is one UTXO. 100 payments to 100 different addresses produces 100 UTXOs, as does 100 payments to 1 address. There is no different in UTXO consolidation with reusing the same address.

Using different addresses provides more privacy, and potentially, more security. You should not be reusing addresses and instead generating a new one for each and every payment that you receive. Modern wallets will give you a new address when you click "receive" in whatever wallet (there's usually a receive button) so just use the addresses it gives you instead of reusing the same one.