Bitcoin is this year’s buzzword and people have some questions. Among these questions is one of the most frequently asked questions, “What are Bitcoin addresses?” A Bitcoin Address is a vital piece of software that allow the digital currency and blockchain to work. There are two parts to the Bitcoin address, the public key and private key. The main difference between these keys is that you don’t use the same address to send digital currencies as you do to receive bitcoins.
Three important things to know about Bitcoin Addresses:
- Private Key – It is a 64 character long code which uses any combination of letters from A to F and numbers 1 to 9. One example of a private key is 16abc34de7D777aabbC. This is used to send money out of the Bitcoin wallet.
- Public key: A unique identifier for digital currency wallet which is known to the public. This public key operates in the background unless the user wants to dig into the records.
- Address: It is another identifier, but it is derived from the public key. This is the identifier which people will enter while sending Bitcoins. An address is a single-use identifier which will be automatically generated for every transaction.
Sending money to certain Bitcoin addresses is a similar process to that of sending emails to particular inboxes, however it differs in a big way. Bitcoin addresses are all single-use tokens. A new address is used for each and every Bitcoin transaction, unlike sending emails to a certain email.
The Bitcoin Wallet automatically generates an address for the Bitcoin user. This seamless process allows for smooth transactions.
Here is an example of Bitcoin Address in action:
Bitcoin User A, uses his private key to send 1BTC ( one Bitcoin) to Bitcoin User B’s Bitcoin address, Bitcoin User B now has one new Bitcoin stored in his wallet. To clarify even more, User A will use his private key to access his personal digital wallet and send 1BTC to User B’s address to store in his digital wallet. The private key is similar to an email address and the digital wallet is the server that your email data is securely stored.
Many digital wallets allow you to buy, send, store, and receive bitcoins as simply as you would use your online bank account.
Bitcoin Address: Interesting Facts
- Bitcoin addresses are case sensitive. Whenever you’re entering the address, be sure to be aware of your upper and lower case usage.
- Sometimes an invalid address can be accepted as a recipient. However, this only occurs once every 4.29 billion transactions.
- If you enjoy privacy be sure to use a different Bitcoin address for each transaction of you can. There is nothing wrong with using the same Bitcoin address more than once, but by creating a new address each time you add an additional layer of protection.
- Each Bitcoin Address is a specific invoice for any transaction. Once the payment has been received there is no reason for the sender to retain any data. However, if for whatever reason your wallet is lost or compromised, any future transactions send to this address will be sent to a “black hole” and will be lost forever to the original owner. That is another reason that new Bitcoin addresses are recommended for each and every transaction. A trick to use if you want to avoid potential loss.