The exchange adress, also known as the return address, is what causes two receiving addresses to show up when a user does a Bitcoin transaction and then reviews it. This is a standard address that doesn’t do anything unique, but it is generated by the wallet when a transaction is made to send any leftover cryptocurrency so it can be used for other transactions in the future. That is, the money that is still available to us after a transaction.
Typically, the amount we pay in cryptocurrency is less than what is actually in our wallet when we do so. However, all of the bitcoins that are present in the sending address must be spent at the time the operation is made. To restore the difference or remaining funds to our wallet, clients’ Bitcoin or wallets create a new address known as a change address.
How does Bitcoin’s direction of change function?
To further comprehend this procedure, we can use a very straightforward example to describe it. If we visit a store and spend €79 on a goods and pay the cashier with a €100 ticket, he will give us €21 in change. This is the difference between the product’s worth and the ticket used to make the payment.
With the advent of money fiat, the cashier will now hand out change in the form of central bank-issued banknotes of authorized denominations. In our hypothetical situation, the change would probably consist of two € 10 notes and a € 1 bill. They add up to a total purchase difference of € 21. In contrast to traditional money, you have the power to create change with any denomination while using Bitcoin and other cryptocurrencies. In other words, change in the amount of € 21 can be produced directly.
Summary of Contents
Understand what a shift in direction is and why it is necessary in order to obtain the collection of cryptocurrencies and the balance of our transactions and use them in the future.
The address de change, also known as the return address, is what causes two receiving addresses to show up when a user does a Bitcoin transaction and then reviews it. This is a standard address that doesn’t do anything unique, but it is generated by the wallet when a transaction is made to send any leftover cryptocurrency so it can be used for other transactions in the future. That is, the money that is still available to us after a transaction.
Typically, the amount we pay in cryptocurrency is less than what is actually in our wallet when we do so. However, all of the bitcoins that are present in the sending address must be spent at the time the operation is made. To restore the difference or remaining funds to our wallet, clients’ Bitcoin or wallets create a new address known as a change address.
How does Bitcoin’s direction of change function?
To further comprehend this procedure, we can use a very straightforward example to describe it. If we visit a store and spend €79 on a goods and pay the cashier with a €100 ticket, he will give us €21 in change. This is the difference between the product’s worth and the ticket used to make the payment.
With the advent of money fiat, the cashier will now hand out change in the form of central bank-issued banknotes of authorized denominations. In our hypothetical situation, the change would probably consist of two € 10 notes and a € 1 bill. They add up to a total purchase difference of € 21. In contrast to traditional money, you have the power to create change with any denomination while using Bitcoin and other cryptocurrencies. In other words, change in the amount of € 21 can be produced directly.
In order to illustrate another example, but this time using a bitcoin transaction, it would seem as follows:
Bitcoin transaction indicating a change in direction
Our wallet would perform two simultaneous actions if we made a payment worth 0,00473224 BTC (transaction value) and had 0,00571224 BTC in total in our wallet (total entries). One will be transferred to the designated recipient with a value of 0,00473224 BTC, less the mining fee. The second transaction, worth 0.00020796 BTC, will be carried out at one of our addresses.
To put it another way, this second action will send a payment to our exchange address. Since the 0,00571224 BTC that were in the delivery address were completely spent, this operation is done to prevent double spending. Leaving our remaining change of 0,0002796, for which we have the private keys in our wallet, at a different address.
Evolution of the Change Directions
Users used to have to manually type in the exchange address where they wanted to receive the transaction’s difference when making a transaction in the past. A technique that had a high degree of risk because, in the event that the address of change was not set for whatever reason, the miner’s fee would be applied to any remaining funds.
The wallets then started to generate new addresses automatically for each transaction. As we’ve already mentioned, a set of public and private keys are used to generate addresses, and these keys had to be saved in a backup if you didn’t want to lose your cryptocurrency holdings due to a wallet malfunction. It became so time-consuming to do this for each transaction that few users kept updated backups.
The invention of deterministic wallets made everything easier (HD). As a result, every time a transaction is made, the full process is completed automatically without the need for backup copies or additional human input. Therefore, you won’t need to bother about manually entering addresses to get refunds or create fresh backups.
