Token Fragmentation

VyFinance
3 min readAug 3, 2023

What is unFracking a wallet?

To unfrack means to unfractionalise the UTxOs’ (unspent transaction output) in a Cardano wallet. This is done to improve transaction cost and performance when dealing with wallets that contain a large number of UTxOs’.

Why do Cardano wallets need to be unfracked?

Here we provide a simple overview as to why wallets need to be unfracked:

As wallets on Cardano receive multiple transactions, very often the receiving wallet creates a new UTxO to hold the incoming asset. This is a result of the extended UTxO model. As a wallet grows in the amount of UTxOs it contains, tokens required for a transaction can be held in any of the UTxOs in the wallet. Whilst your wallet balance may be 100 $ADA, that could be composted of 10 different UTxOs of 10 $ADA each, or 50 UTxOs at 2 $ADA. Every time a transaction takes place, a wallet is sending a portion of its contents to another UTxO. With the above wallet as an example, if a user wants to send 50 $ADA, and the sending wallet has 10 UTxOs with 10$ ADA each, the transaction builder must decide which UTxO draw the $ADA from to a sum of 50 $ADA. Whenever a UTxO is chosen to be used in a transaction, we call this spending the UTxO.

Each UTxO that is spent is used in the transaction, the transaction cost increases, and the likelihood of an error grows. There are multiple approaches to improve wallet performance based on UTxO selection.

We will also release an article describing changes to UTxO selection shortly.

The other approach that can be taken is to improve the structure of UTxOs in the wallet with each transaction taking place. This is where a unfrac’ing function is used.

If this is all new to you as a user, you can find more information about unspent transaction outputs here: https://www.investopedia.com/terms/u/utxo.asp

What wallets are most impacted by fractured UTxOs?

Any wallet on Cardano is susceptible to this problem.Those most prone to this issue are wallets that send and receive large numbers of transactions, or hold multiple different assets are most at risk of having fractionalised UTxOs.

How do users turn on unfracking on VyFinance?

When conducting a swap on the DEx, we added a feature in settings which is required to be turned on. This feature will unfrack your wallet with every transaction on the DEx.

We recommend all users that make a lot of transactions, or hold a lot of assets in their wallet to toggle this feature on.

How will this improve user experience?

Users that turn on this setting should experience a lower rate of errors when interacting with our DEx, and in general when interacting with the Cardano ecosystem as your wallets UTxOs are being maintained by the token fragmentation feature.

Please note that this function does not fix all errors but reduces the chances of bad UTxOs being selected for transactions or small UTxOs being generated from transactions.

For anymore questions, feel free to reach out on our socials:

Twitter: https://twitter.com/VyFiOfficial

Telegram: https://t.me/vyfinance

Discord: https://discord.gg/ed4SeUzmmW

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