Bitcoin Evolution: Why Separate Change Addresses have been entered
Being the largest cryptocurrency in the world by market capitalization, Bitcoin has undergone significant changes over the years. One of the key innovations that has improved the user experience for both the sender and the beneficiaries of the Bitcoin transactions is the implementation of separate change addresses.
For those who are not familiar with this concept, let us sink into details.
Traditional approach: A single address
When creating a wallet, it usually creates a bitcoin address. This unique address is used to receive funds from other users. When you send Bitcoin all your funds are sent to this unique address, and the recipient’s change (any remaining funds) is also sent to the same address.
However, this approach has some limitations:
- Security risks : With a single address used to receive funds, there is a higher risk of hacking in your wallet or stealing your funds.
- Loss of control : Because all transactions are related back to the original referral address, you have limited control over your own funds.
Solution: Separate change addresses
To alleviate these risks and provide more flexibility, Bitcoin developers have entered separate change addresses (also known as “expenses”) in 2016. These new addresses are used to send funds, allowing the recipients to receive their share to have access to the sender’s main address.
When you send Bitcoin, your wallet creates a specific expense address that is not connected to the initial receipt address. The beneficiary can then use this spending address to receive the appropriate change in the transaction.
How separate change addresses works
Here is an example of how it works:
- You have a Bitcoin wallet with a primary reception address (for example,
BC1 ...).
- When submitting funds, your wallet creates a new spending address (eg
BCS ...).
- The beneficiary uses the
BCSspending address to receive their part of the transaction.
- The sender’s balance sheet remains unchanged; Only the recipient’s balance is updated.
Benefits of separate change addresses
Entering separate change addresses has many benefits including:
- Improved security : By separating the funds from receiving and sending transactions, it is less likely to encounter security risks associated with single use addresses.
- Increased control : With a main address for receiving funds and a separate expense address, you have more control over your own assets.
- Improved user experience
: Separate change addresses facilitate users to manage their Bitcoin portfolios and receive or send funds without worrying about security issues.
In conclusion, the introduction of separate change addresses in Bitcoin revolutionized how we interact with this cryptocurrency. By providing a safe and flexible mechanism for sending and receiving funds, these new addresses have become an essential part of the Bitcoin ecosystem.