Bitcoin addresses. Technical background

A Bitcoin address is based primarily on the 160-bit hash representation of the public key of an ECDSA public-private keypair. Using public-key cryptography, you can “sign” data with your private key and anyone who knows your public key can verify that the signature is valid.

For the private key of the ECDSA keypair, using applicable public-key cryptography solutions, one can “sign” data (e.g. details of a Bitcoin SV Transaction) with their private key. Any interested party who knows the public key can verify that the signature is valid (i.e. the private key used to generate the digital signature is the unique private key that corresponds to the public key).

It is highly recommended that a new address is generated for each instance one is to receive funds.; each new address corresponds to a new keypair (with HD wallets this is done deterministically). The public keys and their associated private keys (or the seed needed to generate them in the case of HD wallets) are stored in the wallet data file. This is the only file users should need to backup.

A “send” transaction to a specific BitcoinSV address requires that the corresponding (receiving) wallet knows the private key implementing that address. This has the implication that, if using a non-HD wallet, if the receiving wallet had created an address and coins were sent to that address, but a restoration of the wallet from an earlier backup becomes necessary, but the receiving address of interest had not as yet been generated, then the coins sent to that address are permanently lost. This is not an issue for HD wallets where all addresses are generated from a single seed. Addresses are added to an address key pool prior to being used for receiving coins. Bear in mind however that if you lose your wallet ‘entirely’, all of your coins are lost and can never be recovered.

Bitcoin SV has no restrictions on the number of addresses one may create or utilise. Not only can one use a new address for every transaction, it is highly recommended that this be done. There is no “master address”; the “Your Bitcoin address” area sometimes seen in wallet UIs has no special importance. Such an inclusion is only there for your convenience, and it should change automatically when used.

The inclusion of the checksum value in the Bitcoin addresses is to remove, or at least drastically reduce the possibility of sending Bitcoins to a mistyped address. However, note that it is entirely possible that an address is well-formed (valid format, checksum etc.) but no one owns it (or the owner lost their wallet.dat, private key), resulting in coins sent to that correctly-formed address being lost forever.

Along with the prefix, the 160-bit hash of the public key, and the checksum data are, as a concatenated string, converted to an alpha-numeric representation using a custom scheme—the Base58Check encoding scheme. Under Base58Check, addresses can contain all alphanumeric characters except 0, O, I, and l. Bitcoin SV addresses currently always begin with the prefix 1. Testnet addresses usually start with m or n. Mainline addresses can be 25-34 characters in length, and Testnet addresses can be 26-34 characters in length. Most addresses are 33 or 34 characters long.

Collisions (lack thereof)

Given that Bitcoin SV addresses are basically random numbers it is possible, although extremely unlikely, for two people to independently generate the same address. This is where the 160-bit hashes of their respective ECDSA public keys result in the same output. This is called a collision. If this happens, then both the original owner of the address and the colliding owner could spend the money sent to that address even if the address hashes had been created using different private keys. Despite this, it would however not be possible for one of the parties to spend the other’s entire wallet.

Due to the fact that the space of possible addresses is so astronomically large, it is more likely that the Earth is destroyed in the next 5 seconds than for a collision occur in the next millennium.

How to create an Address

While it is theoretically possible to manually create a BitcoinSV address, the correct or recommended way to create an address is to use well-tested, open source, peer-reviewed wallet software. Manually handling keys has historically resulted in loss of funds. This is particularly problematic given that, unlike centralized systems, losses in Bitcoin are usually unrecoverable.

For informational purposes, the steps in the generation of a BitcoinSV from an ECDSA private key are shown:

0 – Having a private ECDSA key

   18e14a7b6a307f426a94f8114701e7c8e774e7f9a47e2c2035db29a206321725

1 – Take the corresponding public key generated with it (33 bytes, 1 byte 0x02 (y-coord is even), and 32 bytes corresponding to X coordinate)

   0250863ad64a87ae8a2fe83c1af1a8403cb53f53e486d8511dad8a04887e5b2352

2 – Perform SHA-256 hashing on the public key

   0b7c28c9b7290c98d7438e70b3d3f7c848fbd7d1dc194ff83f4f7cc9b1378e98

3 – Perform RIPEMD-160 hashing on the result of SHA-256

   f54a5851e9372b87810a8e60cdd2e7cfd80b6e31

4 – Add version byte in front of RIPEMD-160 hash (0x00 for Main Network)

   00f54a5851e9372b87810a8e60cdd2e7cfd80b6e31

(note that below steps are the Base58Check encoding, which has multiple library options available implementing it)
5 – Perform SHA-256 hash on the extended RIPEMD-160 result

   ad3c854da227c7e99c4abfad4ea41d71311160df2e415e713318c70d67c6b41c

6 – Perform SHA-256 hash on the result of the previous SHA-256 hash

   c7f18fe8fcbed6396741e58ad259b5cb16b7fd7f041904147ba1dcffabf747fd

7 – Take the first 4 bytes of the second SHA-256 hash. This is the address checksum

   c7f18fe8

8 – Add the 4 checksum bytes from stage 7 at the end of extended RIPEMD-160 hash from stage 4. This is the 25-byte binary Bitcoin Address.

   00f54a5851e9372b87810a8e60cdd2e7cfd80b6e31c7f18fe8

9 – Convert the result from a byte string into a base58 string using Base58Check encoding. This is the most commonly used Bitcoin Address format

   1PMycacnJaSqwwJqjawXBErnLsZ7RkXUAs

See Also

Attribution

This content is based on content sourced from https://en.bitcoin.it/wiki/Technical_background_of_version_1_Bitcoin_addresses under Creative Commons Attribution 3.0. Although it may have been extensively revised and updated we acknowledge the original authors.

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Written by Ramon Quesada

Passionate about Blockchain & Bitcoin technology since 2013, Co- Founder of https://avalbit.org, Team Manager in the CoinTelegraph Spain franchise (2016-2017 years) Co. Organizer of the Blockchain Boot camp Valencia 2018, Co. Organizer of the mini Hackathon BitcoinSV Barcelona, in August 2019, current coordinator of the BSV Valencia Meetup. https://telegra.ph/Ramon-Quesada---Links-01-10

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