When Bitcoin (BTC) was introduced in 2009 as the first cryptocurrency in the world, the main thing that was so innovative about it at the time were the fast transactions of funds (5 to 10 minutes) between users anywhere in the world. Compared to classic fiat money bank transfers that take hours or sometimes even days, this was lightning fast, and it still is, even though many cryptocurrencies today offer much faster transfers.
Bitcoin transactions are facilitated through the Bitcoin blockchain network, which is the first such implementation of blockchain technology. This network relies on miners to verify transactions and process them to their final destinations. BTC never leaves its blockchain network, it just changes virtual locations within it. In order to differentiate ownership of bitcoins, along with these virtual locations, Bitcoin addresses were invented as
an integral part of the blockchain.
Let’s take a look at what exactly BTC addresses are, how they operate, and how long a Bitcoin address is.
Bitcoin Addresses: What Are They?
A Bitcoin address is a sequence of numbers and letters that serves as an identifier for a specific virtual location on the blockchain, where a user is storing their BTC. Because BTC is always confined to its native blockchain, Satoshi Nakamoto, the developer behind BTC had to create a reliable method for identifying separate locations on the Bitcoin network and a distinctive method for proving ownership over a certain amount of BTC.
For this reason, BTC addresses were created. They are also referred to as public addresses or public keys (pubkeys), because they are meant to be shared with Bitcoin senders so that they can initiate a Bitcoin payment towards that address.
There’s no possibility of receiving some Bitcoin if you don’t have a BTC address. Whenever you’re buying Bitcoin on a cryptocurrency exchange platform or receiving it from another party, you need to provide a BTC wallet address associated with your crypto wallet so that you can receive the coins.
On the other hand, when you want to initiate a transaction as a sender, you need to have a private address, also called a private key in order to send funds. A private key is used as a form of a password that verifies that a certain amount of BTC is actually yours. Bitcoins aren’t tied to personal information such as ID. The only way to prove ownership over BTC is to have a private key to a set amount of coins.
An important aspect of Bitcoin addresses is asymmetric encryption. This means that a private key can help you reveal a public address but you can’t reveal the private address if you just have the public one.
The standard length of a BTC address is 26 to 35 alphanumeric characters, depending on the type of address.
BTC Address Types
Since BTC addresses are so long and consist of randomized characters, it really isn’t safe to copy them manually when receiving assets. This is why they are always convertible to scannable QR codes to avoid unnecessary typing mistakes that could lead to a loss of funds because once you send some BTC and the transfer is processed, it can’t be reversed.
In order to avoid such stressful situations, it’s best to always scan and copy the address QR code. There are three types of BTC addresses which all have different prefixes and characteristics
These are the longest Bitcoin addresses and are generally supported by a far lower number of cryptocurrency wallets and exchanges. A BEch32 address is capable of facilitating a SegWit transaction. SegWit transfers have lower transaction fees because of the software improvements made by the SegWit BTC fork that enabled the inclusion of more transactions in a single block of the blockchain by eliminating some unnecessary parts of the transfer data.
When sending or receiving funds to a BEch32, you should check to make sure that both the sender and receiver use compatible software since these addresses aren’t as widely supported as the other two types of Bitcoin addresses.
BEch32 addresses always begin with Bc1. Here’s an example: Bc1qar0srmr7xfivy5l417lbdnw9re59gtzzwf5mdq
P2PKH Bitcoin addresses work well with BEch32 and the abbreviation stands for Pay-to-Public key-Hash address. These addresses aren’t compatible with P2SH BTC addresses. A P2PKH works by paying the transferred coins directly to the receiver’s public address hash. It’s important to note that these addresses incur higher transaction fees since the transaction data is larger and doesn’t use SegWit technology to shorten the transfer data.
Pay-to-Public key-Hash addresses are the original Bitcoin addresses and they start with a 1. Here’s an example: 1bvbmseystwetqtfn5au4m4gfg7xjanvn2
These addresses are very common. P2SH is the abbreviation for Pay-to-script-hash. It uses SegWit technology to decrease the amount of transaction data in blockchain blocks, thus reducing the transfer fees. A Pay-to-script-hash address works well with both the other two BTC address formats.
A P2SH always starts with a 3. Here’s an example: 3j98t1wpez73cnmqviecrnyiwrnqrhwnly
Creating a Bitcoin Address
Creating a Bitcoin address is very simple. Personally, you don’t have to manually create a new Bitcoin address, because the software process is handled by Bitcoin wallets. If you want to receive some BTC, you need to generate a public address with your crypto wallet. There are two kinds of crypto wallets and both generate BTC addresses easily.
Hot wallets are all crypto wallets that have a constant internet connection and depend on the internet. Web wallets are accessed through an internet browser and they store public and private keys on company servers. Desktop wallets need to be installed on your PC or laptop computer and they keep all of your keys stored on your computer, while mobile wallets work as Android and iOS compatible mobile apps that store keys on your mobile device.
All of these wallet types instantly generate Bitcoin addresses when you need to receive some coins. All you need to do is send your BTC address to the sending party and wait for your coins to arrive.
Cold wallets are crypto wallets that don’t have an internet connection. They store your public and private keys offline and they can’t be hacked thanks to the lack of internet connection. Paper wallets are an old-fashioned storage type, where you simply print your public and private key on a piece of paper and keep it stashed somewhere safe in that form.
Hardware wallets are a much more popular type of cold wallet. These wallets are specialized USB devices with advanced encryption and top-notch security like the Trezor and Ledger Nano hardware devices. Hardware wallets are managed by specialized firmware which is compatible with various cryptocurrencies and generates BTC addresses on demand when you need to receive some bitcoins.
A Few Ending Words…
Without Bitcoin addresses, it wouldn’t be possible to prove ownership over bitcoins on the blockchain and people wouldn’t be able to send any BTC either. Generating BTC addresses isn’t something you need to worry about when transferring coins because crypto wallets do that for you, but it’s important for all Bitcoin users to understand the overall process of BTC transfers and the role Bitcoin addresses play.