Here's what Bitcoin is doing (and why you should not use it again)



Welcome to Hard Fork Basics, a collection of tips, tricks, guides, and tips to keep you informed of the world of encryption and exclusion.

Using Bitcoin BTC for the first time is definitely cool, but it's also a bit confused. It's one wallet? Is it a username? It is not, either.

Bitcoin addresses are not all complicated, but they are a a little strange. Let's demystify the whole thing by explaining what really happens when you interact with Bitcoin's addresses.

(Tip: You are not saving Bitcoin to an address!)

One Bitcoin address is a destination

A Bitcoin Address is a series of letters and numbers representing a destination in the Bitcoin network, nothing more.

There are a few different types of Bitcoin addresses, and all do the same thing: Note where Bitcoin should be sent.

Bitcoin addresses are really only used when download Bitcoin. Unlike our actual addresses, they are only intended to be used once. The idea is that for each Bitcoin transaction, the receivers will create a unique one-time address to provide senders.

It's much better to think of an address as a Bitcoin guidance method during a transaction instead of where you store it. Let's look at an example.

I want to send some Bitcoin to Matt, who has a reputable Bitcoin wallet application. He has asked to pay him some Bitcoin I owe.

Matt uses the Bitcoin wallet application to create a new unique address. This feature is available at almost every good Bitcoin wallet. Keep in mind, it is special for this case. Bitcoin addresses are for single use.

Matt should feel comfortable sharing the recently created Bitcoin address as it does not actually contain sensitive information (as long as you create a new one for each transaction).

Now that I have Matt's brand new Matt Bitcoin address, I just connect it mine Bitcoin wallet when prompted during the shipping process. It is worthwhile to copy the address – it must be accurate as transactions can not be recalled!

Et voila! This is the case, your transaction has been sent for confirmation and the life cycle of the Bitcoin address has been completed.

You can not return to the sender

A strange aspect of Bitcoin is that it does not track where the transactions are sent from.

Unlike a standard letter, which includes a return address, Bitcoin transactions are not such.

In Bitcoin, the closest thing to one from the address it's the last address Bitcoin was sent. But this does not always indicate the right person.

This is a design option decided by Satoshi Nakamoto to protect the privacy of Bitcoin users by removing the ability to link transactions with each other.

To explain, let's go back to the example. A week after the initial transaction, we notice that I accidentally sent Matt too much Bitcoin. Now she actually owes it my some Bitcoin.

If Matt just returns Bitcoin to the previous address that sent him (before him), believing that in fact he would lead again to the Bitcoin wallet, Matt would rely on dangerous assumptions, especially as to whether I still use the Bitcoin address.

For example, I could have lost my phone or been stolen. In this case, the Bitcoin address that sent the latter no longer belongs to me, but the thief of the telephony.

That's exactly why it's necessary to create a brand-new Bitcoin for each transaction – it eliminates dangerous assumptions and keeps Bitcoin from getting lost in cyberspace (remember, Bitcoin transactions can not be reversed!).

The smart thing would be to create mine unique Bitcoin address, just for the occasion, providing it to Matt for safe, unique use and then never again.

Remember: For Bitcoin transactions to be secure and not based on assumptions, you need to request a new, unique Bitcoin address for each transaction – especially for repeat recipients!

Published on November 5, 2018 – 16:36 UTC time