Change

[Twinsborg]

Hi, been in bitcoin for about three weeks now. I am running two R-Box rockminers with cgminer on an old desktop with windows 7- Getting about 70 ghs. I bought half a bitcoin at coinbase and about $20.00 USD on Mycileum on my android phone.  I can follow instructions on how to do anything. I will be creating cold storage very soon. But what I don’t understand is….I keep coming across stories about people “losing” bitcoins while paying for something because of change addresses. I don’t even know how to ask my questions about this.
If I don’t use all of my bitcoins in a web or online wallet, after I pay for something, where does my “change” end up? Does it go to a new public address with my private Key? Or does it have a new private key? Does it stay in my wallet, or is something else going on?
 

[franky1]

Hi, been in bitcoin for about three weeks now. I am running two R-Box rockminers with cgminer on an old desktop with windows 7- Getting about 70 ghs. I bought half a bitcoin at coinbase and about $20.00 USD on Mycileum on my android phone.  I can follow instructions on how to do anything. I will be creating cold storage very soon. But what I don’t understand is….I keep coming across stories about people “losing” bitcoins while paying for something because of change addresses. I don’t even know how to ask my questions about this.
If I don’t use all of my bitcoins in a web or online wallet, after I pay for something, where does my “change” end up? Does it go to a new public address with my private Key? Or does it have a new private key? Does it stay in my wallet, or is something else going on?
 

with coinbase..
basically all coins sit in 1 pot, so you dont need to worry. coinbase works as a sql database balance and they control the actual bitcoin. they just change your balance on their database as you spend. so relax

with wallets programs..
when you send 0.1btc of your 0.5btc the whole value of your address goes out and 0.4btc usually goes into a new address that sits in your wallet. this means it usually is no longer in the old address (the private key).

the mistake people make is that they do not backup the entire wallet, they just back up the address(private key) and dont bother telling the transaction to send funds back to the original address.

so when they delete the wallet thinking funds are on the old address, they are not. and the wallet has now been deleted so its too late to get the other address (private key).

a few wallets are set up so that in the 0.1 send example. the transaction actually mentions that 0.4 should go back to source address (multisend)

i personally when sending funds use the multisend process to ensure both the destinations of the spending amount and the change go to where they should. this is because i store most of my coins from paperwallets.

but for a new person, dont just save the address(private key) backup entire wallet, every time you do something where change is involved, back up the entire wallet

[colinistheman]

Is this correct:

This is sort of a bug/inconvenience and ideally/eventually (with future Bitcoin implementations) it should be made simpler and fixed so that the change goes back to the original private key address?

[Tron]

The issue is that the qt client will, by design, send "the change" back to a different address.  The reason for this design decision is that it helps obscure the amount of the payment.

The reason there is change is that inside each address are little 'nuggets' of bitcoin that can be traced all the way back to the block where it was 'mined' into existence.  Those 'nuggets' are the input to a transaction and an entire 'nugget' must be spent at once.   You can think of this as having only $10 and $20 bills in your pocket, so when you buy something for $6, you will get change.

The change CAN go back to the original address, and some software and online wallets, like blockchain.info do this.  The downside, is that it is easier to track.  Anyone can look at the blockchain, and say 'He spent $6.00 on something'.   If the change goes back to a different address and the 'nugget' contained $20.00 in value, then all you can say, 'He spent $6.00 or $14.00 on something.'  There is no way to tell which was the payment and which was the change.

The loss usually comes when someone doesn't back up their wallet.dat often enough, and then the qt client exceeds the number of pre-generated addresses that are used to accept the change.  The QT client creates more addresses, which are not backed up, and the change goes to those addresses.   The user loses their wallet.net, and the old backup will not have the newly generated private keys backed up, and the change is lost forever.

We have developed an online accounting system for Bitcoin (and other alts) called CoinCPA, and this behavior makes our job very difficult.

I hope this explanation helps someone.

[joshraban76]

How often are you all backing up your wallet.dat files? Not how long as in time but how many transactions I should say? I am using electrum for my btc but I use qt for some alt coins.

[justusranvier]

This is the right way to do cold storage, which is the right way to store significant amounts of Bitcoin, or any amount that might become significant if the exchange rate goes up an order of magnitude or two:

http://falkvinge.net/2014/02/10/placing-your-crypto-wealth-in-cold-storage-installing-armory-on-ubuntu/

Just do this, and forget about paper wallets and other duct tape-and-bailing wire solutions.

[Coef]

Is this correct:

This is sort of a bug/inconvenience and ideally/eventually (with future Bitcoin implementations) it should be made simpler and fixed so that the change goes back to the original private key address?

I don't think so. Change addresses are there for a good reason.

https://bitcoin.org/en/protect-your-privacy

Use change addresses when you send payments

You can use a Bitcoin client like Bitcoin Core that makes it difficult to track your transactions by creating a new change address each time you send a payment. For example, if you receive 5 BTC on address A, and you later send 2 BTC to address B, the remaining change must be sent back to you. Some Bitcoin clients are designed to send the change to a new address C in such a way that it becomes difficult to know if you own Bitcoin address B or C.

[colinistheman]

The issue is that the qt client will, by design, send "the change" back to a different address.  The reason for this design decision is that it helps obscure the amount of the payment.

The reason there is change is that inside each address are little 'nuggets' of bitcoin that can be traced all the way back to the block where it was 'mined' into existence.  Those 'nuggets' are the input to a transaction and an entire 'nugget' must be spent at once.   You can think of this as having only $10 and $20 bills in your pocket, so when you buy something for $6, you will get change.

The change CAN go back to the original address, and some software and online wallets, like blockchain.info do this.  The downside, is that it is easier to track.  Anyone can look at the blockchain, and say 'He spent $6.00 on something'.   If the change goes back to a different address and the 'nugget' contained $20.00 in value, then all you can say, 'He spent $6.00 or $14.00 on something.'  There is no way to tell which was the payment and which was the change.

The loss usually comes when someone doesn't back up their wallet.dat often enough, and then the qt client exceeds the number of pre-generated addresses that are used to accept the change.  The QT client creates more addresses, which are not backed up, and the change goes to those addresses.   The user loses their wallet.net, and the old backup will not have the newly generated private keys backed up, and the change is lost forever.

We have developed an online accounting system for Bitcoin (and other alts) called CoinCPA, and this behavior makes our job very difficult.

I hope this explanation helps someone.

Thanks, it did help me gain a better understanding. Thanks for putting it very simply

[Abdussamad]

Hi, been in bitcoin for about three weeks now. I am running two R-Box rockminers with cgminer on an old desktop with windows 7- Getting about 70 ghs. I bought half a bitcoin at coinbase and about $20.00 USD on Mycileum on my android phone.  I can follow instructions on how to do anything. I will be creating cold storage very soon. But what I don’t understand is….I keep coming across stories about people “losing” bitcoins while paying for something because of change addresses. I don’t even know how to ask my questions about this.
If I don’t use all of my bitcoins in a web or online wallet, after I pay for something, where does my “change” end up? Does it go to a new public address with my private Key? Or does it have a new private key? Does it stay in my wallet, or is something else going on?
 

Change is something you only have to worry about if you are going to use a paper wallet. All other wallets implemented in software or hardware take care of change automatically and you don't need to worry about it.

I suggest you hold off on cold storage for now. Get  electrum and install it on your desktop and move the coins from coinbase there. When you've gotten the hang of using electrum on an online computer you can explore the offline wallet option. Avoid paper wallets at all costs.

[colinistheman]

Hi, been in bitcoin for about three weeks now. I am running two R-Box rockminers with cgminer on an old desktop with windows 7- Getting about 70 ghs. I bought half a bitcoin at coinbase and about $20.00 USD on Mycileum on my android phone.  I can follow instructions on how to do anything. I will be creating cold storage very soon. But what I don’t understand is….I keep coming across stories about people “losing” bitcoins while paying for something because of change addresses. I don’t even know how to ask my questions about this.
If I don’t use all of my bitcoins in a web or online wallet, after I pay for something, where does my “change” end up? Does it go to a new public address with my private Key? Or does it have a new private key? Does it stay in my wallet, or is something else going on?
 

Change is something you only have to worry about if you are going to use a paper wallet. All other wallets implemented in software or hardware take care of change automatically and you don't need to worry about it.

I suggest you hold off on cold storage for now. Get  electrum and install it on your desktop and move the coins from coinbase there. When you've gotten the hang of using electrum on an online computer you can explore the offline wallet option. Avoid paper wallets at all costs.

I use only paper wallets. I have yet to import one, but I plan on doing so in the near future.

Couple of questions:

1. Why are you saying to avoid paper wallets at all costs?

2. Could you give an example of using a paper wallet where there might be an issue? I want to make sure I don't do something stupid with my paper wallets and lose bitcoins.

There would be no issue with importing the entire contents of a private key to say, blockchain.info, right? There would be no change since the entire amount is being imported. So this would be safe, correct? It would be used to spend immediately in my case.

[Shogen]

After you imported your paper wallet in a online computer, you should no longer considered that a cold storage, and IMHO you should create a new offline wallet to hold the change.

[Abdussamad]

I use only paper wallets. I have yet to import one, but I plan on doing so in the near future.

Well see two people in this thread i.e. I and justusranvier have advised you against using paper wallets. Perhaps you should reconsider your actions.

Couple of questions:

1. Why are you saying to avoid paper wallets at all costs?

I've already explained above. Paper wallets are dumb and primitive. Software (and perhaps future hardware) wallets are smart. With paper wallets you have to worry about change. With software wallets the computer does the work.

2. Could you give an example of using a paper wallet where there might be an issue? I want to make sure I don't do something stupid with my paper wallets and lose bitcoins.

Yes you import the private key into blockchain.info. You spend money and think the private key is now empty. You make the private key public because it's empty, right? Later on blockchain.info sends change back to that key and someone steals your bitcoins. This sort of thing has happened to people.

There would be no issue with importing the entire contents of a private key to say, blockchain.info, right? There would be no change since the entire amount is being imported. So this would be safe, correct? It would be used to spend immediately in my case.

Never *import* a paper wallet private key. Instead *sweep* the contents. That is an option available in blockchain.info and armory. Maybe mycellium as well. Other wallets don't have that option.

With sweeping the entire private key's coins are sent to another address in your wallet. It's an on-chain transaction. The private key is not imported into the wallet so change can't be inadvertently sent to it.

Anyway since people here are really, really interested in change I'll point out this article I wrote last year about how various wallets handle change:

https://bitcoinspakistan.com/blog/all-about-change-and-change-addresses/

[colinistheman]

Ok thanks. I understand what you are saying now.  

I will use the "sweep" feature when importing my paper wallets through blockchain.info. This way the money is transferred completely to a different address. Then I will be fine.

I have to disagree that paper wallets are a bad idea. They are an ingenous way of storing bitcoin SAFELY long term. You can't have a hardware failure of your paper (unless it burns but then you're an idiot for not storing it safely-- but the same storage safety applies to your flash drive or laptop)

Flash drives and hard drives can fail. This is why I don't use them for my storage. I want to count on my bitcoin to be around in 20 years. God knows if the flash drives would work in 20 years. It would probably work, but then again, there's a chance the hardware would fail. And yes, you can have multiple flash drive backups, but again, I can see letters on a written piece of paper in sealed protective plastic. That is about as fool-proof as you can get.

I am also very meticulous about checking the addresses after I have spent the funds and I watch all present and past keys. I don't get rid of them.

I can see how paper wallets would be a bad idea for an uninformed user who doesn't understand how bitcoin handles the change in a transaction. It's all about education and asking questions.

[Abdussamad]

Flash drives and hard drives can fail. This is why I don't use them for my storage. I want to count on my bitcoin to be around in 20 years. God knows if the flash drives would work in 20 years. It would probably work, but then again, there's a chance the hardware would fail. And yes, you can have multiple flash drive backups, but again, I can see letters on a written piece of paper in sealed protective plastic. That is about as fool-proof as you can get.

You can make paper backups of deterministic wallets like Armory and Electrum. In the case of electrum you make the backup as part of the wallet creation process. The backups are good for life for all addresses generated from the seed i.e. all addresses in your wallet except imported private keys.

[colinistheman]

You can make paper backups of deterministic wallets like Armory and Electrum. In the case of electrum you make the backup as part of the wallet creation process. The backups are good for life for all addresses generated from the seed i.e. all addresses in your wallet except imported private keys.

Cool. Sounds good

[eddy888]

Just simply. I use paper wallett. (expl Without transfer fees)
I have address F 100 coins. I want send 50 to friend address X.

I import this F. private key to wallett. now wallett show 100 balance.
I send 50 to address X
Next  send 50 to my cold (virgin) address G.
(these cold address private keys are never  in internet connected computer exept when use address all coins)
Wallett show now zero balance.I can destroy computer wallet or keep and my coins are safe.
never keep coins in wallett internal hidden addresses. if follow this no need back up.