Technical background of Bitcoin addresses

This article may be too technical for some users. The more basic article on Bitcoin Addresses may be more appropriate.

A Bitcoin addressis based primarily on the160-bit hash representation of the public key of an ECDSA public-private keypair. Using public-key cryptography, you can "sign" data with your private key and anyone who knows your public key can verify that the signature is valid.

For the private key of the ECDSA keypair, using applicable public-key cryptography solutions, one can "sign" data (e.g. details of a Bitcoin SV Transaction) with their private key. Any interested party who knows the public key can verify that the signature is valid (i.e. the private key used to generate the digital signature is the unique private key that corresponds to the public key). It is highly recommended that a new address is generated for each instance one is to receive funds.; each new address corresponds to a new keypair (with HD wallets this is done deterministically). The public keys and their associated private keys (or the seed needed to generate them in the case of HD wallets) are stored in the wallet data file. This is the only file users should need to backup.

A new keypair is generated for each receiving address (with newer HD wallets, this is done deterministically). The public key and their associated private keys (or the seed needed to generate them) are stored in the wallet data file. This is the only file users should need to backup. A "send" transaction to a specific Bitcoin address requires that the corresponding wallet knows the private key implementing it. This has the implication that if you create an address and receive coins to that address, then restore the wallet from an earlier backup, before the address was generated, then the coins received with that address are lost; this is not an issue for HD wallets where all addresses are generated from a single seed. Addresses are added to an address key pool prior to being used for receiving coins. If you lose your wallet entirely, all of your coins are lost and can never be recovered.

Bitcoin allows you to create as many addresses as you want, and use a new one for every transaction. There is no "master address": the "Your Bitcoin address" area in some wallet UIs has no special importance. It's only there for your convenience, and it should change automatically when used.

Bitcoin addresses contain a built-in check code, so it's generally not possible to send Bitcoins to a mistyped address. However, if the address is well-formed but no one owns it (or the owner lost their wallet.dat), any coins sent to that address will be lost forever.

Hash values and the checksum data are converted to an alpha-numeric representation using a custom scheme: the Base58Check encoding scheme. Under Base58Check, addresses can contain all alphanumeric characters except 0, O, I, and l. Normal addresses currently always start with 1 (addresses from script hashes use 3), though this might change in a future version. Testnet addresses usually start with m or n. Mainline addresses can be 25-34 characters in length, and testnet addresses can be 26-34 characters in length. Most addresses are 33 or 34 characters long.

Collisions (lack thereof)

Since Bitcoin addresses are basically random numbers, it is possible, although extremely unlikely, for two people to independently generate the same address. This is called a collision. If this happens, then both the original owner of the address and the colliding owner could spend money sent to that address. It would not be possible for the colliding person to spend the original owner's entire wallet (or vice versa).

But because the space of possible addresses is so astronomically large it is more likely that the Earth is destroyed in the next 5 seconds, than that a collision occur in the next millenium.

How to create Bitcoin Address

The correct way to create a Bitcoin address is to use well tested, open source, peer reviewed wallet software. Manually handling keys has resulted in funds loss over and over again. Unlike other centralized systems losses in Bitcoin are usually unrecoverable.

Here is a brief overview of how address generation works, for informational purposes:

0 - Having a private ECDSA key

   18e14a7b6a307f426a94f8114701e7c8e774e7f9a47e2c2035db29a206321725

1 - Take the corresponding public key generated with it (33 bytes, 1 byte 0x02 (y-coord is even), and 32 bytes corresponding to X coordinate)

   0250863ad64a87ae8a2fe83c1af1a8403cb53f53e486d8511dad8a04887e5b2352

2 - Perform SHA-256 hashing on the public key

   0b7c28c9b7290c98d7438e70b3d3f7c848fbd7d1dc194ff83f4f7cc9b1378e98

3 - Perform RIPEMD-160 hashing on the result of SHA-256

   f54a5851e9372b87810a8e60cdd2e7cfd80b6e31

4 - Add version byte in front of RIPEMD-160 hash (0x00 for Main Network)

   00f54a5851e9372b87810a8e60cdd2e7cfd80b6e31

(note that below steps are the Base58Check encoding, which has multiple library options available implementing it)
5 - Perform SHA-256 hash on the extended RIPEMD-160 result

   ad3c854da227c7e99c4abfad4ea41d71311160df2e415e713318c70d67c6b41c

6 - Perform SHA-256 hash on the result of the previous SHA-256 hash

   c7f18fe8fcbed6396741e58ad259b5cb16b7fd7f041904147ba1dcffabf747fd

7 - Take the first 4 bytes of the second SHA-256 hash. This is the address checksum

   c7f18fe8

8 - Add the 4 checksum bytes from stage 7 at the end of extended RIPEMD-160 hash from stage 4. This is the 25-byte binary Bitcoin Address.

   00f54a5851e9372b87810a8e60cdd2e7cfd80b6e31c7f18fe8

9 - Convert the result from a byte string into a base58 string using Base58Check encoding. This is the most commonly used Bitcoin Address format

   1PMycacnJaSqwwJqjawXBErnLsZ7RkXUAs

See Also

• Address
• Base58Check encoding
• Address testing suite
• Online Address Validator and Base58 Encoder/Decoder