Pros and cons of using new Bitcoin addresses for each transaction?

[Hal]

I used to have trouble managing payments to a service that used a new address every time. Seems to conflict with the idea of an address book. Imagine if everyone's phone number changed every call. Not too convenient.

Here's what I do now:

1. Copy the payment address.
2. Choose Send Coins in the client.
3. Choose Address Book in the popup.
4. Choose New Address.
5. Enter a name for this payee, and paste in the Bitcoin address. Use the same name for all payments to this payee. For example, I use MBC for all transfers to my mybitcoin.com account.
6. Click OK in the New Address window.
7. Click OK in the Address Book window.
8. The Pay To field now holds the payment address. Enter the amount and click Send.

This way the transaction in your wallet will show who it's for. It does add some extra steps though. I wish sites would give customers the option to reuse a persistent address.

[ksd5]

I think the number of addresses is like 33^62 (26+26+10?) that's over 10^94. If a trillion people each have a trillion addresses that's 10^24. The odds of picking a taken addy even after all that is so vanishing it's absurd. And no 10^24/10^94 is not 1/4.

Wouldn't it actually be 62^33? I think you got the order wrong.

[Jim Hyslop]

I used to have trouble managing payments to a service that used a new address every time. Seems to conflict with the idea of an address book. Imagine if everyone's phone number changed every call. Not too convenient.

Yeah, if it's basically a publicly available service, then it makes sense to reuse the same address.

But on the other hand, it might make anonymous donations/payments to that service a little more difficult.

As always, privacy and security trade off against simplicity and ease-of-use

[ctoon6]

you are only ever anonymous on your 1st trade if you actually generated the BTC, after that you are always able to be tracked, but why do you care, and it only makes trading more difficult.

[gigabytecoin]

I think the number of addresses is like 33^62 (26+26+10?) that's over 10^94. If a trillion people each have a trillion addresses that's 10^24. The odds of picking a taken addy even after all that is so vanishing it's absurd. And no 10^24/10^94 is not 1/4.

Wouldn't it actually be 62^33? I think you got the order wrong.

Yes. Yes it would.

[Pieter Wuille]

There are 2^160 addresses, not all characters in the base58 representation are significant, as it also contains a version number and an error detection code.

[Veldy]

The addresses are valid forever unless you lose your wallet.  The only disadvantage is that the address receiving a transaction is visible to all nodes.  It is easy to automatically generate a new address each time a page is refreshed on a donation page using the JSON RPC interface.

Managing all those addresses in your wallet is a real PITA though.  I wish there was some sorting ability in the address book as well as a method to "hide" addresses that you don't actively use. 

I really should tear apart the client code and write a new app [I would use WPF, but it would target Windows only AND it would steal a little from the GPU if you are running the app on a machine that you are also doing mining on.

[eMansipater]

Could this topic be folded into the list at the end of the Introduction to BitCoin?  If so, can someone provide a good summary of the important things it contains?  I think for usability's sake having as few stickied topics as possible is desirable.

Is anything missed by linking to it via the question:

"What are the pros and cons of using new bitcoin addresses for each transaction?"

[Lurk]

So if you're not doing anything wrong why are people so worried about being anonymous?  i guess i've never worried about it yet. Why is it such a major part of bitcoin?  just curious.

[Aahzman]

So, i use about 8 addresses (one for pool mining, one for free-btc-website-scraping, one for "friends", one for Bitcoinary, and a couple others).  basically helps me keep track of what came from where.

[PeteChad]

Pros:

• Secure
• Higher Anonymity

Cons:

• Can be time consuming

Several of my clients prefer that I use a new address per transaction. It can be a little more time consuming, but it does improve anonymity.

[giszmo]

Necroposting, yeah!!!! … cause it's cool to resurrect 2 years old threads!!!!

How difficult would to associate one address with your other addresses? What precautions should be taken to protect against this?

It's not totally easy, but it's possible.  For example, a node could listen on the network and see that you are using the same IP when sending from two of your different addresses, and thus associate those addresses.  To prevent this, you should mask your IP using Tor or similar.

There's also a more fundamental risk in that the chain of ownership of each bitcoin is public knowledge.  So, if you, say, purchased the bitcoin from an exchange and gave your name during that, then the exchange can associate your name with that bitcoin.  There's a really really nice post by Theymos on that here, and the following thread proposes some great solutions (mainly, a "scrambler"):

http://bitcointalk.org/index.php?topic=241.0

Even besides these two things, there are some other things that need to be handled.  For example, you should find a way to encrypt your traffic so your ISP can't read your addresses.  Also, you should send out identical traffic regularly, so that your ISP cant associate your addresses using timing alone.

If all of these things are accounted for, I believe you are very close to 100% safe from technical address association.

Wallet boundaries are normally not identified by spying on the IP used (which might help but is not necessary) but by the fact that almost always the input of transactions does not fit exactly with the output which is why more than one input is used. Each time more than one input is used, these inputs are guaranteed to belong to the same wallet.

How fast does wallet.dat size grow with creating new addresses? It would be nice feature to physically remove entries from it if I'm pretty sure no one will send coins to that particular address. For example, if would be useful for shops which create one-time addresses to recieve payments. If it's used once it's not needed anymore so the shop engine sends coins from that address to a certain fixed address and removes keys for that temporary one. It will prevent wallet.dat from growing indefinitely. Also note that invisible address is created each time one sends the sum which isn't equal to the sum of a particular address or sum of several addresses so it's divided by two parts: one goes to the recipient and the other goes to your just transparently generated invisible address (you don't see it in your address book but it's in your wallet.dat). If you often send money you'd already have lots of such addresses and some empty ones. AFAIK no automatic garbage collection is done for now and it's right — there is no way to know which address is temporary and which is constant. Another proposal is to make a special «temporary address» flag which may be set on any of your addresses either on its creation or anytime later. Bitcoin checks this flag on transaction and if this (these) address(es) become empty AND the transaction was confirmed by the network (6 confirmations) then it's removed from the wallet. Hence this flag should be set for all «change» (invisible) addresses because they can't be used to receive payments (they aren't displayed anywhere).

In bitcoin, 2 things that take disk space do grow. Wallet and blockchain. Deterministic wallets can avoid the former and pruning can avoid the latter.
I hope that miners some day will reward transactions that allow significant pruning aka merge many addresses. Why should I pay for a transaction of 50kB if after this transaction the blockchain shrinks by 49kB?

[westkybitcoins]

So if you're not doing anything wrong why are people so worried about being anonymous?  i guess i've never worried about it yet. Why is it such a major part of bitcoin?  just curious.

Good question. Don't think of it as people worrying about being anonymous, but rather people just wanting the ability to maintain some privacy if they so choose.

Remember, Bitcoin is money. And the way the system currently works, all transactions are publicly viewable. Ask yourself, if every transaction everyone at your bank ever made with anyone else was viewable by anyone with a few clicks, wouldn't you be a bit more concerned about your privacy, possibly even total anonymity?

Also keep in mind, it doesn't have to be total anonymity. I have public addresses so people can identify spends from me, and so anyone wanting to send me money for whatever reason (debt, gift, purchase, etc.) has at least one reasonably-easy-to-find address they can send it to. And I use BitcoinSpinner, an Android app that only gives you one address that gets constantly reused. But I also have other addresses and wallets that I maintain various degrees of privacy with, for various reasons. Having that be easy to do is always a plus, no matter who you are, or how innocuous your transactions.

[jgarzik]

I hope that miners some day will reward transactions that allow significant pruning aka merge many addresses. Why should I pay for a transaction of 50kB if after this transaction the blockchain shrinks by 49kB?

Yes, there are ongoing discussions about choosing metrics which encourage shrinking the UTXO (unspent output) set.

[Elwar]

So if you're not doing anything wrong why are people so worried about being anonymous?  i guess i've never worried about it yet. Why is it such a major part of bitcoin?  just curious.

The jews were doing nothing wrong in 1930s Germany.

[BellaBitBit]

pros : More anonymous and hard to detected
cons : Hard to remember the last addresses after transaction, and hard to prove your own wallet
well that is only thing that i can think

What does this mean that it is hard to prove your own wallet and why is it important to remember the last addresses after a transaction? thanks in advance 

[Kevin77]

Using new bitcoin address for new transactions is the idea of Satoshi. He mined all the blocks to different addresses.

Using same address will mess up you, with more transactions.
Using different addresses, again mess up with managing more addresses.

Great! It is a good thing for using different addresses for different specific purposes. So we can easily know about the money transacted to our account. Different addresses are specialized for increasing the security of our funds. Do you think any problem will occur by using same address?

[fortunecrypto]

This is one of best feature of bitcoin you create as many address as you want,unlike the other payment processor where you need to confirm your email and identification before you can use a new payment email/wallet,I don't think there are disadvantages using multiple address it's just that you will be confused on where did you use one particular address

[JeWay]

The addresses are valid forever unless you lose your wallet.

oh, didn't know that.
thanks for the info!

How could a "Legedary" don't know about this???

[Erkallys]

For me :

Pros :

-anonymity. That's the only one I find.


Cons :

-messy. This will be a big mess in your transaction history. This can also don't help your customers (in my case, as a loan provider, I can no more contact my "clients". Having the same address for all the transactions is better for them, because it's in my OP, so people can find it even without an account).

-fees. If your bitcoins have to be sent from different addresses it will be more expensive.