Everything You Need To Know About Bitcoin Addresses

A bitcoin address is a part of a bitcoin wallet. It is a string of characters that may include various alphanumeric characters and is between 26 and 35 symbols long. An address by itself does not carry any balance. It is also not a wallet or an account.

 

No “From” Concept

You can only use an address to receive funds. You can’t use an address to send funds. In bitcoin, there is no such concept as “from” address or payment. The creators of the network wanted to avoid using the word “from” because in English the word “from” frequently associates with the word “where” and people start thinking in terms of “from where” as a place. For example, when you get on a bus or subway, you are thinking about a route that goes from point A to point B. In bitcoin, there is no “from where” because the network is de-centralized and in bitcoin there is only “from whom.” Once someone send you a payment, the transaction is complete.

Today when people see a field “from” in a message, be it an email or a regular snail mail envelope, they assume that they can reply to that message. This is another reason why the creators of bitcoin chose to stay away from the concept of “from.” In bitcoin, once you receive a payment, you can only send it back if you contact the user directly and get an address that you can use to send a payment to. Once a transaction starts, there is no way to change it or cancel it. This is why when a merchant uses bitcoin as a method of payment, the merchant can be sure that there will be no chargebacks. At the same time, if you are a sender of a payment, you need to be very careful with whom you are sending a payment to because a transaction on the bitcoin network can’t be undone.

 

Properties of Bitcoin addresses

All bitcoin addresses are case sensitive. Because of their length, you want to try to copy and paste them whenever possible to avoid mistakes in spelling. If you type in a bitcoin address manually, you need to make sure that you get all the symbols correctly, including capitalization where necessary. If you do enter an incorrect address, it will most likely be rejected because the probability that a mistyped address will go through the system is about 1 in 4 billion.

Bitcoin users can generate new addresses at no cost. For example, in the Bitcoin Core software, users can click a button to generate a new address and create a new address that will be assigned to them. It is also possible to get a new address if you have an account with a Bitcoin exchange or an online wallet platform.

As of 2017, there are two formats of addresses. The first one begins with 1 and the second one, a newer one, begins with 3.

Similarities between bitcoin addresses and email

A bitcoin address is similar to an email in that you can use the address to receive bitcoins. However, unlike with email, where you have one email handle per email mailbox, you can have multiple addresses associated with one bitcoin wallet. Ideally, for safety purposes you want to use one address per one transaction. When it’s time for another transaction, you can generate a new address for free. Many software products in the bitcoin network generate brand new addresses automatically each time you perform a new transaction.

Technically, there is nothing that’s preventing users using the same address for receiving funds multiple times. However, doing so makes your privacy vulnerable because it will be possible to see multiple transactions associated with the address in the bitcoin blockchain. When there is one transaction per address, the level of privacy is much higher. For this reason, another useful analogy is to think about bitcoin addresses as invoices for payments. Just like you send different invoices to different people, you would send different bitcoin addresses to different people. This way, there is no need for senders to retain addresses.

 

Creating new bitcoin addresses

You can create a new address even if you are not connected to the Internet. Creation of a new address also does not require any registration with the Bitcoin network, which is why there is software available that you can use to generate batches of addresses. This can be very useful if you run an ecommerce store or an online business where some customers choose bitcoin as a method of payment. In this case, you can generate a large batch of addresses before you start selling and when you need to sell, you can be using one address per customer. Newer types of wallets can generate a seed token that you can later use to create large batches of addresses even with untrusted websites and software.

Add a Comment