Bitcoin is an internet-based money and payment system that has become one of the most popular cryptocurrencies to date. Exchanges using Bitcoin can remain completely anonymous through the use of numerical addresses that represent a destination for the currency. A new address can be created at any time through Bitcoin’s official application, Bitcoin Core.
Your bitcoin wallet can have as many addresses as you want, and you do not have to change addresses every time you make a transaction. You can have multiple transactions sent to and from one address. Although you can use the same address more than once, it is not recommended for the sake of security and maintaining anonymity.
Bitcoin has become the most prominent cryptocurrency in use to date, and it has been increasing in popularity every year since its creation. If you are planning to start diving into the world of cryptocurrency, it is crucial to understand how Bitcoin’s address system works, and why they recommend using a new address for every new transaction being made.
Using the Same Bitcoin Address Twice
So what really happens if you use the same Bitcoin address more than once? In short, nothing significantly different than if you create a new address for every transaction you make, but many sources recommend always changing your Bitcoin address for the sake of anonymity.
Bitcoin is a cryptocurrency, which is a global money system that was created as a way to send and receive currency over the internet without the use of some kind of centralized bank. This allows users of this currency to have complete control over their online transactions without the intervention of a third-party system.
It also allows users to create multiple, disposable addresses to maintain an anonymous status by not having to link any sort of real-world identity to it. Using the same bitcoin address more than once, or only using one bitcoin address, is essentially like releasing your bank records to the entire Blockchain.
Since all transactions are listed on the blockchain (bitcoin public ledger), everyone in the blockchain will be able to see all of the transactions being sent or received at this address. This reduces users’ privacy and anonymity because it makes transactions easier to track. It also risks exposing the private key of the address reused, which can end up with stolen funds.
Avoid confusing using more than one address for more than one wallet. Most wallets are designed to create a new address for every transaction that is processed, so there is generally no need to use more than one wallet.
What is Bitcoin and How Does It Work?
Bitcoin is the preeminent form of cryptocurrency being used today. What this means is that it is a digital asset used for exchange that protects these financial transactions using cryptography. It uses a form of public ledger called a Blockchain to ensure that users are not engaging in double spending while exchanging bitcoin.
Bitcoin also uses addresses as virtual locations for users to send and receive bitcoin. Using addresses protects user’s privacy and anonymity. All of these aspects allow users to retain ownership over their assets by eliminating third-party money management entities. The decentralized network is maintained by global nodes running the bitcoin protocol, called miners. We cover this in several articles here. Be sure to check out the bitcoin halving post.
What Is a Bitcoin Address?
A bitcoin address is a series of 26-35 alphanumeric characters, which is associated with a user’s private key. Addresses are unique identifiers that are associated with a virtual location where other users can send currency. Addresses are not intended to be permanent. Users can hold balances in their bitcoin wallet or in random bitcoin addresses in or outside of a wallet. Some feel keeping bitcoin in a random address and stowing away the private key on paper is the safest way.
But you still have to move it to a wallet to spend. I use hardware wallets for security and the convenience of sending and receiving bitcoin whenever I want, rather than going through the steps of generating random addresses, importing them into a wallet, and then sending.
The Purpose of Multiple Bitcoin Addresses
Multiple bitcoin addresses are used for the sake of privacy during transactions. Bitcoin creates the ability for users to maintain anonymity while they are making cash-like transactions over the internet. The originator of bitcoin wanted users to be able to make global money transactions without having to interact with a third-party entity that has ultimate control over the money system being used.
Originally, users would send and receive currency through IP address, but since IP addresses can be linked to real-world identities, the creator of bitcoin created a new system of bitcoin addresses. This address system allows users to generate and use a new address for every transaction.
Bitcoin keeps tracks of addresses where money is sent and received instead of keeping track of users themselves, which protects users’ identities. All users have a public key and a private key, and as long as a user’s private key is kept confidential, then they have full control over the Bitcoin associated with their public key.
What About Anonymity?
So why should you refrain from using the same bitcoin address more than once? Two words: security and anonymity. One of the main differentiators of bitcoin from other online money exchange systems is the high prioritization of anonymity. Here are a few reasons why anonymity on the internet can be beneficial:
- Helps protect sensitive information
- Gives the user more ownership over their time and resources
- Prevents third parties from accessing personal data
- Remove the need for a third-party middle man
Using a new address for every bitcoin transaction prevents users from tracking transactions through the Blockchain. This helps to maintain anonymity, which helps to protect users on both ends of Bitcoin transactions.
It also helps with security, as anyone trying to follow your exchanges around won’t be able to get the new private key to the new bitcoin address. You may have to expose your private key to make a transaction, and that could expose that bitcoin address to hackers and thieves.
Read more in How to Find Out Who Owns a Bitcoin Address.
Getting New Bitcoin Addresses
The simplest way to get a new bitcoin address is to access Bitcoin’s application called Bitcoin Core, which can be downloaded through this website. This is a desktop app that serves as your bitcoin wallet, where you can generate a new address at any time.
Beyond Bitcoin Core, there are several other desktop wallets that you can research through bitcoin’s official website. Some of these wallets include:
- Bitcoin Knots
There are also several other mobile wallets that you can research, including these options:
All of these wallet options are able to generate new bitcoin addresses, and they are all listed on bitcoin’s website with information about their different features and attributes.
How Many Bitcoin Addresses Are There?
There are currently around 500 million bitcoin addresses that have been generated. These addresses are being used by a large variety of people, companies, and entities. Although there are 500 million addresses already generated, there is no limit on the number of addresses that can be created by a single user.
Is There an Infinite Amount of Bitcoin Addresses?
Theoretically, the number of bitcoin addresses that can be created is not technically unlimited, but many sources state that the number is not reachable in the real world where people are making real transactions.
According to one source, there are 1,461,501,637,330,902,918,203,684,832,716,283,019,655,932,542,976 possible Bitcoin addresses, which means that each person on Earth would be allowed to generate 196,385,600,286,334,710,857,791,565,804,391,698,421 addresses (source).
In the real world, this number is incomprehensible, which is part of what makes bitcoin function so well as a system that enables users to make private exchanges and protect their assets without the help of a third-party money management system.
Essentially, these enormous numbers mean that there should be no need to use a bitcoin address more than one time. There are a lot of pros associated with using a new address every time you make an exchange with bitcoin, and with numbers like these, there are not a lot of cons.
When in doubt, it is always best for all parties involved in a bitcoin transaction to have new addresses created with every new exchange. This helps to protect both the sender and receiver’s personal data in the transaction and helps to maintain the anonymity that has become the foundation of bitcoin’s system, so get out there and generate those addresses!