Cryptocurrency addresses are used to send and receive digital assets. They typically consist of a long string of characters and maybe case-sensitive. Depending on the asset used, cryptocurrency addresses can be generated using different algorithms. For example, Bitcoin uses a specific algorithm called “Base58Check” to encode its addresses, while Ethereum uses “keccak-256”.
The sender must provide the recipient’s cryptocurrency address when sending or receiving an asset. It is essential to double-check that the address is correct before sending, as transactions on the blockchain are irreversible.
What are Cryptocurrency Addresses?
A cryptocurrency address is a unique identifier that allows users to send and receive digital currency. Addresses are composed of a long string of alphanumeric characters, usually starting with a “1” or “3”. While most addresses can be generated randomly, some wallets allow users to generate “vanity” addresses that contain a custom message or logo.
In addition to being used as a means of payment, cryptocurrency addresses can also be used to store data on the blockchain. For example, the Bitcoin blockchain can store up to 80 bytes of data per transaction. This data is typically used to encode messages or smart contracts. However, it can also store other data, such as memorabilia or digital signatures. Cryptocurrency addresses are an essential part of the digital currency ecosystem, and they will likely play a significant role in the future of the internet.
Think of a cryptocurrency address as a personal address, much like your home. However, instead of using one address per household, you have one per person.
Different Types of Cryptocurrency Address
Cryptocurrency wallet addresses can be divided into two main types: public and private.
- Public key addresses are visible on the blockchain and can be used by anyone to send digital assets.
- Private key addresses, on the other hand, are only known to the owner of the address and are used to receive assets.
There are a few different types of cryptocurrency addresses that have been developed over time. The most common type is the “pay-to-public-key-hash” (P2PKH) address, which Bitcoin originally used. This type of address is generated using a public key and hash algorithm. Other types of cryptocurrency addresses include “pay-to-script-hash” (P2SH) and “wrapped SegWit” (Bech32) addresses.
Cryptocurrency addresses are an essential part of how blockchain technology works. You can better use them to send and receive digital assets by understanding how they work.
Examples of Cryptocurrency Addresses
Of course, there are far too many currencies and blockchains for us to talk about all of them in this article, and especially in much detail. However, we will run through some of the most common types, how to identify them, and what algorithm they use.
When choosing a bitcoin address, it is essential to consider which type of address will best suit your needs. For example, a Segwit or Bech32 address may be the best option if you are concerned about replay attacks. However, a Legacy address may be better if you need compatibility with all software.
P2PKH (Pay to PubKey Hash – Legacy Addresses)
Legacy (P2PKH) addresses were the first BTC addresses and were a hash of the public key and your private key. P2PKH, although created in 2009 with the inception of BTC (hence the name Legacy), is still compatible with Bitcoin (not SegWit). However, they are much larger in size, thus the most expensive to use.
All Bitcoin P2PKH addresses start with a “1”.
P2WPKH (Native SegWit Cryptocurrency Addresses)
Bech32 is an address format (starts with bc1) used to pay Native SegWit (P2WPKH). P2WPKH is an improvement over P2PKH as it uses a smaller transaction size, thus reducing fees.
Wrapped SegWit (P2WSH)
P2WSH is an improvement over P2SH as it uses a smaller transaction size, thus reducing fees. Wrapped SegWit addresses start with a “3”.
P2SH (Pay to Script Hash)
Starts with a 3. P2SH addresses were created to help increase bitcoin’s fungibility by allowing multiple parties to agree on the same transaction output.
P2TR is a new type of address that allows for increased privacy and security. All software does not yet support P2TR addresses, but they are gaining traction and may eventually become the standard.
Other Cryptocurrency Addresses
Bitcoin Cash Addresses
Bitcoin Cash (BCH) uses a different address format than Bitcoin (BTC). BCH addresses start with a “q” or “p,” while BTC addresses start with a “1”.
Dogecoin (DOGE) uses the same address format as Bitcoin (BTC). DOGE addresses start with a “D” or “9”.
As Litecoin (LTC) is a Bitcoin fork, it used the same wallet addresses. However, that created a problem where transactions were sent to the wrong wallet type and lost. So now, Litecoin uses P2PKH addresses where the starting character “1” of BTC is changed to an “L”.
Litecoin also started to issue P2SH addresses starting with a “3” or “M”, and P2WPKH addresses prefixed with “ltc1” using Bech32 format.
Ethereum addresses are similar to Bitcoin addresses in that they are composed of a long sequence of alphanumeric characters. However, Ethereum addresses do not start with a “1” or “3”. Instead, they begin with a “0x” which is appended to the front of the final 20 bytes of the Keccak-256 hash from the public key.
Ripple (XRP) uses Base58 encoded format addresses derived from the master public key, derived from a secret key represented by a JSON string.
XRP addresses start with an “r”.
EOS addresses are chosen by the account creator using 12 characters from a-z, 1-5, and a period (.). The Base32 algorithm then changes it to a string that starts with an “EOS.”
Tron (TRX) uses two formats for addresses; Base58 and Hex. Hex is the foundation string using an SHA-3 (Secure Hash Algorithm 3) for encryption. Base58 then uses a basecheck calculation of the Hex address to create an address that starts with a “T”.
Avalanche (AVAX) uses a similar addressing system to the Ethereum VM system with a secp256k1 keypair (public and private) and the keccak256 hashing function with bech32 encoding.
Elrond (Egld) uses the bech32 type encoding for SegWit addresses, originally created on Bitcoin in BIP 0173, and they start with an “erd.”
Did you know?
- Cryptocurrency addresses are often longer than 35 characters. Therefore, ensure you copy and paste the address correctly to avoid losing your assets.
- Most cryptocurrency wallets will allow you to generate as many addresses as you need. Some wallets will even generate a new address for each transaction to help increase your privacy.
- Always double-check the address when sending or receiving cryptocurrency to ensure it is correct. Many software wallets will show you a confirmation screen before sending funds, which can help reduce the risk of sending to the wrong address.
- When in doubt, reach out to the recipient or sender and confirm the address before sending any cryptocurrency. Cryptocurrency addresses are typically case-sensitive, so check for any discrepancies.
There are many variables to consider when it comes to cryptocurrency addresses. The most important thing is to ensure you use the correct address for the corresponding blockchain. With so many types of addresses, it’s easy to make mistakes. Be sure to take your time and double-check everything before sending or receiving funds.
Cryptocurrency addresses are created in various ways, depending on the blockchain. There is no “right” way to create an address, as each blockchain has its specific formula, making it difficult to know which type of address to use when transferring funds. Therefore, always check before sending funds.