Bitcoin remains the most popular and expensive cryptocurrency. According to CoinMarketCap, BTC’s capitalization today exceeds $500 million.
To use Bitcoin, you need to create your personal Bitcoin address. It’s a unique identifier that helps you store and receive Bitcoin. In this article, we will look in detail at what a Bitcoin address is, and how to create and use it correctly.
What is a Bitcoin address
A Bitcoin address looks like a unique sequence of Latin letters and numbers. It helps to identify the unique recipient of the transaction and indicates where exactly the coins should be transferred.
Each address is generated based on a private key with a specific algorithm and corresponds to one Bitcoin wallet. Generation occurs using cryptographic methods based on a private key. Only the owner of the wallet knows it.
Examples of Bitcoin addresses:
In hexadecimal, all addresses are the same size: 160 bits, which is 20 bytes.
To get your first Bitcoin address, go to any popular wallet generation service: Electrum, Blockchain.info, Coinomi, or generate it through a crypto exchange. These services allow you to generate a pair of keys – private and public. The public key is converted into an address using an irreversible one-way hashing function, which you can use to receive transactions.
Types of Bitcoin addresses
There are three main formats for Bitcoin addresses:
Legacy (beginning with the number 1) is the oldest and most common address format. They can be recognized by the first digit 1. For example:
These addresses have been created by default wallet programs since 2013. They are easier to use but vulnerable to hacker attacks, hacking, etc.
P2SH (begins with the number 3). These multi-signature addresses allow you to ask several participants to authorize the transaction. Examples:
Such addresses provide additional flexibility and a higher level of security but require additional knowledge from the owner about managing private keys. This type of address was introduced in 2012.
Bech32 (starting with bc1) is a new type of address suggested by Bitcoin developers in 2017. It is highly reliable because it uses an error correction code. Examples:
These addresses have additional security due to their resistance to user errors but are not yet so widespread and not supported by some older services.
Why do you need to change Bitcoin addresses?
Many experienced Bitcoin users recommend changing addresses periodically. There are several reasons for this.
- First, it improves privacy by making it difficult for outside observers and intelligence agencies to track all your blockchain transactions. It’s safer to use each address only once.
- Secondly, periodically changing addresses increases the overall level of security. Even if one of the addresses is compromised, attackers will not be able to get to the entire balance of funds.
- Thirdly, new addresses can be helpful for better structuring of transactions in the wallet, for example, dividing funds for storage, exchange, and investment.
Ideally, we recommend generating a new address for each transaction, especially when working through unverified services. But you can also change addresses after 5-10 transactions or at least every month.
How to create a Bitcoin address
There are several ways to obtain a Bitcoin address. Let’s look at the simplest and safest methods.
- Online address generator. It is the easiest way to get a Bitcoin address. Just go to a website, for example, BitAddress, generate an address, and copy it to the clipboard. However, this method is not safe for storing large amounts due to low security.
- Crypto exchange generator. It is the most popular method, suitable for beginners. It is enough to finish a quick registration and verification on the platform. The disadvantage is obvious: the cryptocurrency stored on the exchange is not yours. This method of storing Bitcoin is not safe, since the site may suddenly stop operating or restrict access in your specific region. After this, it will be not easy to regain access to your funds.
- Local wallet. You can generate a key on a computer, laptop, or mobile phone. This method is safe, provided that precautions and backups are taken. To generate an address, install a wallet application, launch it, and follow the instructions. Popular Bitcoin wallets that you can use are Electrum, Exodus, and Mycelium.
- Hardware wallet. Crypto wallets based on electronic devices provide the maximum protection of keys. These are flash drive-like devices that generate and store keys. We recommend Ledger, Trezor, and Keepkey.
How to buy Bitcoin and receive it to your address
There are several main options:
Purchase it through a crypto exchange. Register and pass through verification on any convenient platform, such as Binance. Then deposit crypto or fiat in any way convenient for you. Go to the spot market and change the currency you entered into the exchange into BTC. Next, go to the spot balance and choose Bitcoin. The exchange itself generates an address for you in different formats and networks. The fact is that on sites BTC can be stored not only on a Bitcoin address but also on popular blockchains. On Binance, it is BEP-20. After this, you can store, receive, and send Bitcoin using your wallets.
Mining. You need special hardware (ASIC) that performs complex mathematical tasks to process transactions on the network. You can mine Bitcoins at the pool address or directly into your wallet.
P2P exchange. You can also buy Bitcoin directly from another user. Go to the P2P section of any exchange platform that supports trading in your local currency. Select the offer you like. In the order window, carefully read the terms and conditions. Then transfer money to the seller. After confirmation from the seller, you will receive Bitcoin. Everything else is the same as the first option.
You can quickly find a profitable offer on P2P platforms using Monetory. It’s simple!
- Go to the main page.
- Choose what you want to give and get. In our example it’s BTC.
- Get a list of offers sorted by price.
- Choose an option and make an exchange.
This way, you can buy Bitcoin at the best possible offer on the market. Using the “Hide problematic ads” checkbox, we filter out potentially dangerous P2P traders. It is impossible to insure yourself 100% against them. But you can minimize the risk with Monetory!
How to Archive Used Bitcoin Addresses
To ensure additional security, it is worth regularly archiving previously used wallets and addresses, especially those where significant amounts were stored.
Archiving is the storage of used addresses and their corresponding private keys in a secure, encrypted form in several places. It will allow you, if necessary, to restore access to funds even if you lose access to the copy of the wallet.
How to do is:
- Export private keys and addresses from the wallet you are using in encrypted form.
- Print a paper copy of the keys and address QR codes, place them in an envelope, and keep them in a safe place.
- Save an encrypted electronic copy of the keys on external media or in cloud storage.
- Transfer the remaining coins from archived addresses to a new address in the “hot” wallet.
- Remove old keys from regularly used wallets.
We advise you to store the archive in several geographically dispersed places for reliability.
Bitcoin, despite its popularity, remains a rather complex and unusual instrument for beginners. We advise you not to rely only on online services and always have backup copies and several ways to restore access. Also, regularly update your wallet software, use strong passwords, and do not store all funds in one place.
By following these basic rules, you can enjoy the benefits of Bitcoin without worrying about the safety of your funds. The main thing is to always remember that safety primarily depends on you!