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Ethereum: Why does Bitcoin use separate change addresses?

Published by Terlumun Aondover on February 13th, 2025.

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Evolution of Bitcoin: Why Separate Deposit Addresses Were Introduced

As the world’s largest cryptocurrency by market capitalization, Bitcoin has undergone significant changes over the years. One of the key innovations that has improved the user experience for both senders and receivers of Bitcoin transactions is the introduction of separate drop-off addresses.

For those unfamiliar with this concept, let’s dive into the details.

Traditional approach: one address

When you create a wallet, it usually creates a single Bitcoin address. This single address is used to receive funds from other users. When you send Bitcoin, all your funds are sent to this one address, and the recipient’s withdrawal (any remaining funds) is also sent to the same address.

However, this approach has some limitations:

Security Risks

: Since only one address is used to receive funds, there is a higher risk of your wallet being hacked or your funds stolen.

Loss of Control: Since all transactions are linked to the original sending address, you have limited control over your own funds.

Solution: separate delivery addresses

To reduce these risks and provide more flexibility, Bitcoin developers introduced separate deposit addresses (also known as “spends”) in 2016. These new addresses are used when sending funds, allowing recipients to receive their share without having access to the sender’s primary address.

When you send Bitcoin, your wallet creates a specific spending address that is not linked to your original receiving address. The recipient can then use this spending address to receive the appropriate return from the transaction.

How individual delivery addresses work

Here’s an example of how it works:

You have a Bitcoin wallet with a primary receiving address (eg bc1...).

When you send funds, your wallet creates a new spending address (eg bcs...).

The receiver uses the `bcs’ spending address to receive his share of the transaction.

The sender’s balance remains unchanged; only the recipient’s balance has been updated.

Advantages of individual delivery addresses

The introduction of separate delivery addresses has many advantages, including:

Increased Security: By separating funds from receiving and sending transactions, you are less likely to encounter security risks associated with disposable addresses.

Increased Control: By having a primary receiving address and a separate spending address for sending, you get more control over your own assets.

Improved User Interface: Separate deposit addresses make it easy for users to manage their Bitcoin portfolios and receive or send funds without worrying about security issues.

In conclusion, it should be said that the introduction of separate delivery addresses in Bitcoin revolutionized the way we interact with this cryptocurrency. By providing a secure and flexible mechanism for sending and receiving funds, these new addresses have become an integral part of the Bitcoin ecosystem.

DARK SIDE CRYPTO UNDERSTANDING RISKS