Why Do Bitcoin Wallets Have Multiple Addresses?

Depending on the bitcoin wallet you’re using, you might have noticed that your address changes from time to time. A bitcoin address is supposed to be unique and you might be wondering how it’s possible to have multiple addresses for the same wallet.

Bitcoin wallets have multiple addresses to protect the privacy of users. Using a blockchain explorer, your address can be used to access a record of your transactions, which is possible since all bitcoin transactions are recorded in a publicly available ledger. 

Even with access to a record of your transactions through an address, attackers can’t access your account and transfer Bitcoin. Attackers can only access your account if they have access to your private key, in addition to your public key. Keep reading if you want to learn more about Bitcoin addresses and why they change so often.

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Using Multiple Bitcoin Addresses

Usually, the wallet you’re using will cover this for you by automatically generating a new address after every transaction. Coin exchange platforms that double up as wallets, such as Coinbase, also automatically generate addresses. 

Apart from automatic generation by your wallet, you can come up with a bitcoin address by using installed bitcoin software. This process doesn’t need an internet connection. You want to use a wallet that has the automatic address generation feature. 

Doing it manually can be difficult to do. 

Additionally, you should check to make sure that your wallet isn’t tainting addresses. Address tainting is using two addresses simultaneously in a transaction in a way that shows that they belong to one person. 

In addition to increasing your privacy, using multiple addresses also helps prepare for unforeseen circumstances. For example, if you lost your wallet, or if it was compromised, and someone used an address you had given them in the past to send you bitcoin, you won’t receive it. 

What Is a Bitcoin Address? 

A bitcoin address allows you to receive money into your wallet. But how can you have multiple addresses for the same wallet? 

A bitcoin address is a code that represents a bitcoin wallet, which is generated from the public key of a particular wallet. The public key is passed through a hashing process, the result being a string of characters that can only be associated with that public key and therefore that wallet. 

Once an address is generated through the hashing process, it’ll forever be associated with the wallet whose public key was used to create the address. The address can be freely reused to receive payments into that Bitcoin wallet in the future. 

You can choose to use the same bitcoin address. But as we’ve already established, a record of your transactions using a certain address can be accessed through a blockchain explorer. 

But what exactly can someone discover about your Bitcoin transactions if they have your address?

BlockChain Explorer Can Expose Your Transactions

Sharing your bitcoin address is inevitable if you’re receiving bitcoin payments. Every transaction on the bitcoin blockchain is recorded on a public ledger, which is fundamental to the integrity of bitcoin transactions. 

If multiple copies of the complete history of transactions are publicly available, it becomes much more difficult to fake a transaction. However, the public access system also comes with a privacy compromise. 

Feeding an address into a blockchain explorer reveals the following information: 

  • The total number of transactions carried out on that address.
  • The amount of bitcoin received by the address.
  • The amount of bitcoin sent by the address.
  • The current value of the address in the bitcoin.
  • The details of each transaction, including the time, fees, and hash value. 

Using a different address for every transaction ensures that even with a blockchain explorer, only the details of one transaction can be revealed. If you’ve been using the same address throughout, anybody can get an accurate picture of your transactions. 

Usually, this wouldn’t be a big deal. If I just got random bitcoin addresses and looked them up on a blockchain explorer, there’s nothing much I could do with that information. 

However, if I am sending bitcoin to you, I may have additional information about you. I may even know your identity or be able to determine your identity with relative ease. And if I look up your address and see that you have a lot of bitcoin, you might become an attractive cybercrime target. 

Such privacy and security concerns are the reason why it’s advisable to use multiple addresses.

How Does a Blockchain Explorer Work?

Now that you know blockchain explorers can be used against you, it might help to know how they work. 

A blockchain explorer uses an application programming interface (API) to connect to a node on the blockchain. The API uses the node to access the record of transactions on that blockchain, then organizes this data into a database and provides search functionality to users. 

A user can search for information by keying in a transaction ID or an address. The program will search the database and return all information linked to the input search term. 

If you input a transaction ID, you will see details of that transaction, such as the sender and recipient address. The user can then use the address to get further records about the sender or recipient. 

In addition to providing data related to transactions and addresses, a blockchain explorer also enables users to perform the following: 

  • Explore transactions on a blockchain that are yet to be confirmed. 
  • Explore orphaned blocks whose parent blockchains are unknown. 
  • Explore stale blocks that are detached from parent blockchains. 
  • Discover the largest transaction in a certain time period.
  • Discover double-spend transactions.

Frequently Asked Questions on Bitcoin Wallets and Addresses

Can a Bitcoin Address Be Used Twice?

While it’s inadvisable to use the same bitcoin address over and over for security and privacy reasons, it’s possible. 

A bitcoin address can be used twice. Once your wallet generates a bitcoin address from the public key, that address will always be associated with that wallet. You can use it to receive bitcoin payments in the future. 

There’s no limit to the number of times that you can use a bitcoin address to receive payments. 

What Can You Tell From a Bitcoin Address?

A bitcoin address can tell how many transactions you’ve had, the total value of both incoming and outgoing bitcoin, and the current value of bitcoin on the address. All anyone needs to do is run it through a blockchain explorer that can access the bitcoin blockchain. 

To maintain your privacy, it’s advisable to regularly change your bitcoin address.

Can You Trace the Owner of a Bitcoin Address?

There’s a lot of information that you can learn from looking up a bitcoin address. However, the information is limited. 

You can’t trace the owner of a bitcoin address simply by having the address. You’d have to have additional information that’s personally identifiable. By running a bitcoin address through a blockchain explorer, you can determine the transactional history of the address. 

However, none of that information will be personally identifiable. 

Conclusion 

Bitcoins have multiple addresses to protect the privacy of users. Crypto professionals consider it best practice to change addresses often because an address can be used to retrieve a record of your bitcoin transactions through a blockchain explorer. 

The amount of information that a blockchain explorer reveals about you will be much less if you keep changing addresses with every transaction. 

Wallets and exchanges can handle automatic address generation for every transaction. 

Sources 

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