What is a bitcoin address?

The importance of bitcoin addresses

The bitcoin address identifier consists of an alphanumeric string. Like an email address or bank account number, the address is unique to that person and the bitcoin transaction. Anyone who knows the string can send bitcoin to the address owner, which is why bitcoin addresses are foundational for both sending and receiving bitcoin.

Since the address specifies a particular user, it ensures that funds are sent to the correct bitcoin wallet. Also, since the address is unique to a transaction, it ensures that transactions are routed and executed correctly within the blockchain network.

When bitcoin first started, people could send the currency to an Internet Protocol address. While this was a convenient method for users, it quickly became apparent that it is also convenient for anyone wanting to launch a man-in-the-middle attack -- to steal private keys and bitcoin. This method was discontinued, and the bitcoin address was devised as a more secure alternative.

The bitcoin address is a user-friendly version of a bitcoin public key. Each address uses hashing algorithms and asymmetric encryption to safeguard bitcoin transactions. In asymmetric encryption, two keys are used to secure digital transactions: a public key for encryption and a private key for decryption. This system enables bitcoin transaction participants to engage in secure transactions without having to worry about unauthorized or malicious parties eavesdropping or stealing bitcoin. The hashing algorithm garbles input data into a fixed-length output, making it almost impossible for anyone to deduce the transaction's private key for malicious or nefarious purposes.

Anatomy of a bitcoin address

A bitcoin address consists of 26-35 alphanumeric characters. Most of these addresses start with 1, 3 or bc1, followed by a longer alphanumeric string. This string is the public half of an asymmetric key pair.

One of the standard formats used for a bitcoin address is Pay to Public Key Hash. P2PKH is secured by Secure Hash Algorithm-256 (SHA-256) encryption, which enhances the security of bitcoin transactions. Other popular formats include Pay to Script Hash (P2SH), Pay to Witness Public Key Hash (P2WPKH), Pay to Witness Script Hash (P2WSH) and Pay to Taproot (P2TR).

Examples of bitcoin addresses

Here are some examples of bitcoin addresses:

• 1LMcKyPmwebfygoeZP8E9jAMS2BcgH3Yip
• 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2
• 1DvZR59DJXGT2fYbzhqVVWod5PSC986sqt
• 3E13MQrZvPHqSSTsdQaZzZiYPzjEDT5VKE
• 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
• bc1qsr03qya584vkdqztxyat3d5s63pjfddy8vwrue
• bc1p5d7rjq7g6rdk2yhzks9smlaqtedr4dekq08ge8ztwac72sfr9rusxg3297
• bc1qzyda53xqwkqruex3mzwvpja04x23r572mygpgfc90qckdw2cwwaqr2h70u
• bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq

Private-public key pairs play an important role in the generation and security of bitcoin addresses. Like bitcoin addresses, public and private keys are also long strings of alphanumeric characters.

A bitcoin public key may look like this:

042E6EFFCA888036CE13D7201AB58F567AE8C6E4A334835B70E6979B9B886AB0EBDB248474B6952A3ECECFAB6C8940ADC695BC54E0C8AEC33E5AB735F182F1BDD

A bitcoin private key may look like this:

DA46B559F21B3E955BB1925C964AC5C3B3D72FE1BF37476A104B0E7396027B65

Or it may look like this:

L1Cj6g23micNcWrmR5bMCMWvCfmhYk6TxnGT77K7hhbufsoCChhb

Bitcoin address types

There are different types or formats of bitcoin addresses. These include the following:

• Pay to Public Key. P2PK, the original method for receiving bitcoin, is not an address type. Rather, bitcoin are sent directly to an exposed public key, making the method less secure and, therefore, considered obsolete.
• P2PKH. P2PKH, which uses bitcoin addresses, is more secure than the P2PK method. In this method, a public key hash is created, which is a shorter representation of the recipient's public key. Since the addresses are generated from the public key hash, P2PKH is a straightforward way to send and receive bitcoin. However, transaction costs can be high, so it is not frequently used -- although it is by no means obsolete. Bitcoin addresses generated with this method contain 26-34 letters, are encoded in the Base58 format and begin with the number 1.
• P2SH. P2SH is a script type in which bitcoin addresses are 34 characters long, start with 3 and use Base58 encoding. The format is typically used when additional rules and functionality are attached to the address to specify conditions for spending the funds and to secure bitcoin transactions. In addition, P2SH is useful for generating multisignature addresses -- in which authorizing a transaction or accessing funds requires signatures from several different keys.
• P2WPKH. P2WPKH is an efficient format for bitcoin addresses. These addresses, which start with bc1q and contain 42 characters, use error-correcting codes and are case-insensitive -- unlike most other formats -- making them more resistant to input errors. Transaction fees are also lower with this format.
• P2WSH. P2WSH, a variant of the P2SH format, creates bitcoin addresses that start with a prefix of bc1q. The address character length is 62. P2WSH addresses are created using the SHA-256 hashing function for additional protection of bitcoin transactions. The format can also lower transaction fees and can accommodate multisignature arrangements.
• P2TR. P2TR is one of the newest and most advanced types of bitcoin address formats. The addresses are 62 characters long and use the prefix bc1p. The advantages of P2TR include lower transaction fees, enhanced security and privacy, and support for flexible multikey transactions. This method also enables complex smart contracts to be built on bitcoin.

How to generate a bitcoin address

Digital wallets or bitcoin clients generate addresses through cryptographic operations: An address-generating software or hardware wallet generates a private key through an asymmetric signature algorithm and then derives the public key from the private one. The user signs with the private key and verifies that signature with the public key.

The public key creates a unique bitcoin address. The private key acts like a secure passcode and allows the user to access the bitcoin associated with that bitcoin address.

It's easy to create a bitcoin address using either a custodial wallet, like Coinbase, or a noncustodial wallet, like Komodo Wallet. With a custodial wallet, a third-party service maintains the keys -- not so with a noncustodial wallet. With a noncustodial wallet, the user maintains the keys, making it less secure.

Typically, only a password is required to generate a bitcoin address using software. Users can also use a site like BitAddress.org to generate a bitcoin address. All the user must do is move the mouse around or type random characters -- numbers and letters -- into the provided text box. The site continuously generates a long string and stops when it reaches 100%.

When this point is achieved, a randomly generated bitcoin address using BitAddress.org may look like this.

The user can share the bitcoin address with the other participant in a bitcoin transaction. However, they should keep the private key secret to protect their bitcoin from loss and theft. It's advisable to create a backup copy of the private key and store it to keep it safe.

How to use a bitcoin address

A bitcoin address can be used to send or receive bitcoins into a cryptocurrency wallet. In fact, a user can share the bitcoin address with others to receive funds from those parties. Users can send the cryptocurrency to bitcoin addresses similarly to the way fiat currencies can be sent to email addresses.

For a bitcoin transaction involving User A and User B

User A is the sender, and User B is the recipient:

• User B provides their bitcoin address to User A.
• User A then sends bitcoin to User B's bitcoin address.

User B is the sender, and User A is the recipient:

• User A provides their bitcoin address to User B.
• User B then sends bitcoin to User A's bitcoin address.

Best practices

When using bitcoin addresses to facilitate bitcoin transactions, follow these best practices:

• Always use a new bitcoin address for each transaction. Avoid reusing old addresses to prevent unauthorized parties from finding and exploiting these addresses to steal bitcoin.
• Check that the bitcoin address is correct before sharing it with another party. Sharing an address with even a single wrong character can result in bitcoin getting transferred to the wrong recipient. It's almost always impossible to recover incorrectly transferred funds.
• Use a hardware wallet to confirm the address.
• Conduct a small test transaction to further confirm address accuracy.

Bitcoin address lookup

A bitcoin address lookup enables users to view and verify the funds in their cryptocurrency wallet. They can also view any unconfirmed or pending bitcoin transactions -- incoming and outgoing.

Many free online tools are available to perform lookups, including the following:

• CoinTracker.
• BitRef.
• Blockonomics.

To conduct an address lookup using the above tools, there's no need for a user login or password. Simply insert the bitcoin address in the provided address bar, and click on Search or Check.

The tool displays the bitcoin balance associated with that address. It may also display additional information like the following:

• Trаnѕасtіоnѕ аѕѕосіаtеd with that bitcoin address.
• Confirmation status of each transaction.
• Date of each transaction.
• Fee rate.
• Flat value of еасh trаnѕасtіоn, e.g., in U.S. dollars.

Reliable lookup tools pull only publicly available blockchain information. They do not store the user's information or share it with third parties, thus ensuring information security and user privacy.

Learn more about bitcoin security and how to secure bitcoin wallets, and read our ultimate enterprise guide to blockchain.