Bitcoin Forum

Hello,

I have some questions about bitcoin addresses, which are used to transfer money from/to (wallet?):

1. What exactly is a bitcoin address, without having to look at source code, what is the concept behind it ? Does it perhaps hash my ip address as part of the calculation of generating a new one ?

2. How does bitcoin prevent multiple people/persons/clients/computers from accidently generating the same bitcoin address ? (Perhaps it's checked against transactions in the blockchain to scout for duplicates ? But this does not protect against transactions already underway but not yet in the blockchain...)

3. I read somewhere that after receiving bitcoin into my wallet, a new address would be generated to improve privacy/stay anonymous... is this indeed true ? This would be a little bit problematic for people wanting to sell a lot of products to different people ?!? Because each time their receiving address would change ?!? (I guess some software for merchants/product sellers would need to be created which automatically updates these addresses so people can transfer money correctly... ?!?)

Bye,
  Skybuck.

1. No.  Bitcoin uses a public/private key system.  To generate a new address your comptuer first picks a totally random private key (2^256 bit number).  It then uses ECDSA algorithm to generate a cryptographically linked public key for that private key (the public/private key pair).   Bitcoin then takes that public key and created an address from it (the address is shorter and adds error checking to reduce chance of entering a wrong address).

2.   Nothing prevents it but the address space is 2^160.  The odds of creating an address which already exists is so improbable as to be considered ~0%.

3. While the Bitcoin wallet will produce a new address you can continue to re-use existing addresses forever.   When a new address is made it doesn't invalidate any prior addresses.  Once created an address is forever valid in the Bitcoin network. The "new" address is merely a suggestion for your next transaction is you want to retain psuedo-anonymity.   An example of that in action.  Say you use an address for donations on this forum.  Sometime in the future a post w/ your real world info is created.  That address is now linked to your meatpace identity.  You wouldn't want to for example use that address to accept payments for drugs as you have now broken your own pseudo-anonymity.  This goes beyond just illegal activity.  Some people feel their economic activity should be private.  Using new address for each distinct activity helps to retain that anonymity.  On the other hand there is no purpose in using a new address for each similar payment (i.e. using new address every time your mining pool pays you).

As long as you retain the private key which is stored in the wallet.dat file you can access funds send to any "old" address in the future.  If you lose the private key then people can still send funds to an address but those funds are lost forever as you will be unable to move/spend them.  So be sure to make regular backups of your wallet.dat file.

For comparison, the number of atoms in the universe is somewhere on the order of 2^80. link (http://www.universetoday.com/36302/atoms-in-the-universe/)

If all the people on the entire planet had a fancy videocard, and all of them started generating random addresses, and kept doing that for 100 years, the chance they would at some point hit your address is:
0.00000000000000000002%

good info, happy to know about that . ;D

While both are huge, the difference is not trivial.

(FYI, the number of atoms in the Earth are about 10^50 or 2^166 which is close to the size of the RIPEMD-160 public key hash space)

Whoops, thanks!