Change address. Why some exchanges provide change address, some don't. Reasons?

[SquirrelJulietGarden]

As I read, change addresses can help to protect privacy leaks from transaction traces but not all exchanges provide change addresses for their customers.

Why they don't?

Are technology requirements or computation power to provide change addresses are expensive so some exchanges don't provide it?

Will they provide in the future?

[jackg]

I think there was a benefit in non hardened keys that meant using change addresses weren't findable from the master public key of non change.
assuming change was m/0/0/1 and main was m/0/0/0

I don't know if it helps with anything other than that but centralised exchanges want to make transactions as easy to follow without arising public suspicion.

[hosseinimr93]

As I read, change addresses can help to protect privacy leaks from transaction traces but not all exchanges provide change addresses for their customers.

When you withdraw your coins from an exchange, they send the coins from their own hot wallet, not your wallet. So, if you withdraw your coins to an address which hasn't been used before, your privacy is protected. Since there are numerous withdrawals made from the exchange, no one can know addresses belong to you.

When you withdraw your coins from your own wallet, it's better to send the remaining balance to a change address. But when it comes to withdrawing from an exchange, it doesn't make sense to have a change address.

[o_e_l_e_o]

As I read, change addresses can help to protect privacy leaks from transaction traces but not all exchanges provide change addresses for their customers.

Where did you read that? Change addresses do not automatically provide additional privacy per se, but they do allow you to avoid address reuse if you use them properly. Exchanges use a main central wallet in which all their customers' deposits are combined, and so the concept of providing individual change addresses for each customer doesn't make sense.

Are technology requirements or computation power to provide change addresses are expensive so some exchanges don't provide it?

No. It is trivial to generate change addresses.

Will they provide in the future?

Also no. Individual change addresses do not work with the central wallet model that exchanges use. If you want to use a personal address, change or otherwise, you should withdraw you coins to your own wallet.

[Charles-Tim]

Also no. Individual change addresses do not work with the central wallet model that exchanges use.

I am trading on an exchange, I can change my address after any transaction made, that means it does not even mean at all to change the address? Like, the changing address is just not necessary?

[hulla]

Change addresses do not automatically provide additional privacy per se, but they do allow you to avoid address reuse if you use them properly. Exchanges use a main central wallet in which all their customers' deposits are combined, and so the concept of providing individual change addresses for each customer doesn't make sense.

Individual change address dont provided privacy but it does make sense cause it will make it hard for some people to track your holding at a point.
I guess that what brought the OP question.

As I read, change addresses can help to protect privacy leaks from transaction traces but not all exchanges provide change addresses for their customers.

Where did you read that?

I believe he read it on bitcoin.org site

Bitcoin is not anonymous
Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once. Always remember that it is your responsibility to adopt good practices in order to protect your privacy.

[Charles-Tim]

Individual change address dont provided privacy but it does make sense cause it will make it hard for some people to track your holding at a point.

What I read about change addresses is to provide privacy. If the wallet owner uses it appropriately, hackers will not be able to track all transactions from the person's wallet, only the ones with individual address can be seen on blockchain explorer, but if the person uses one address, then, the whole transaction the person has been making can be tracked. This is still privacy.

But in this case, we are not talking about wallet but exchanges, that is why I even asked the question above from o_e_l_e_o because I believe custodial wallets and exchanges are using API key but I could be wrong.

If custodial wallets and exchanges both use API key, then check what I read from coinbase

https://help.coinbase.com/en/coinbase/privacy-and-security/data-privacy/why-did-my-wallet-address-change

We automatically generate a new address for you after every transaction you make or when funds are moved between your wallet and our storage system. This is done to protect your privacy, so that a third-party cannot view all other transactions associated with your account simply by using a blockchain explorer.

All addresses that have been generated for your account will remain associated with your account forever. They are safe to re-use to receive future payments, but for the prior stated reasons, we recommend using a unique address for all transactions. You can view your complete list of crypto addresses at any time

I will like this too be clear to because so far coinbase that is using API key to have such review, that means exchanges too will make use of it to maximize someone's exchange account not to be tracked with just single address. Although, I could be wrong.

[Pffrt]

Where did you read that? Change addresses do not automatically provide additional privacy per se,

OP didn't refer to change address of a wallet where we receive the CHANGE. It seems he is talking about address getting changed each time they use the exchange which most exchanges doesn't allow. In fact. I can't remember an exchange which offer new address each time. Unless exchange wallet gets updated, they never change the deposit address too.

[hulla]

Individual change address dont provided privacy but it does make sense cause it will make it hard for some people to track your holding at a point.

What I read about change addresses is to provide privacy. If the wallet owner uses it appropriately, hackers will not be able to track all transactions from the person's wallet, only the ones with individual address can be seen on blockchain explorer, but if the person uses one address, then, the whole transaction the person has been making can be tracked.

Then you totally misunderstand my message because we are actually on the same page here. Nonetheless, change of address still don't provided totally privacy cause bitcoin network procedure are semi-privacy and change will only hide your totally holding at some point.

This is still privacy.

Thats still not privacy cause some effort of genuine bitcoin tumbler the privacy aspect is guarantee.

[JeromeTash]

As I read, change addresses can help to protect privacy leaks from transaction traces but not all exchanges provide change addresses for their customers.

1. The change addresses can still be linked to your account if Law enforcement Authorities ask for information from them
2. Certain chainalysis tools can also link up all your addresses that are found in one HD wallet so long as you use the address for transactions.
So It's not the privacy you seek mate.

May try privacy/anonymity leaning coins like Monero and decentralized P2p exchanges like bisq.

[o_e_l_e_o]

It seems he is talking about address getting changed each time they use the exchange which most exchanges doesn't allow.

In which case, exchanges should offer this functionality. It is good for users' privacy from any external third party performing blockchain analysis (although obviously the exchange can still link all your addresses together), and it is simple and straightforward to implement. If your exchange doesn't offer this, then you should email them and ask them to do so.

Certain chainalysis tools can also link up all your addresses that are found in one HD wallet so long as you use the address for transactions.

Just because addresses are part of the same wallet doesn't mean they can automatically be linked to each other unless you link them by using them in the same transaction, linking them via change addresses, etc. If you craft your transactions properly, then all your addresses can remain separate and unlinked.

[Husires]

Fees are the reason.

keep in mind that more bitcoin address = more inputs = more fees.

Centralized exchanges are for profit, not privacy protection. Why do they lose more fees when they decide to move currencies from a hot wallet to a cold storage?
So instead of wasting more money on fees, they give you a single address.

example of  3 address with change address and without it:

Change address: Each transaction contains a minimum of 79 vbytes. a total of 237 vbytes
Without Change address:one set of 79 vbytes and save up to 45%.

https://bitcointechtalk.com/saving-up-to-80-on-bitcoin-transaction-fees-by-batching-payments-4147ab7009fb

[o_e_l_e_o]

keep in mind that more bitcoin address = more inputs = more fees.

This is not accurate. More outputs = more inputs = more fees. Whether or not the outputs are on different addresses or the same address is irrelevant.

If I have three outputs of 0.1 BTC on three different address, or three outputs of 0.1 BTC on the same address, if I spend all three in the same transaction then the transaction size will be identical.

So instead of wasting more money on fees, they give you a single address.

The only way an exchange can save on these fees is if customers make fewer deposits of larger sums, rather than splitting their deposits up in to smaller sums. It makes absolutely no difference how many different addresses each customer deposits to.

[SquirrelJulietGarden]

Thanks all. Your comments enlighten me and now I know reasons why exchanges don't want to provide change addresses the will create more complex problems on their systems. And if they provide change addresses, it is not a thing to protect customers' privacy at the ends and in all situations and requests from governments.

[HCP]

Just to clarify (for the users who just skip to the end and don't read the whole thread and for the sake of keeping the terminology somewhat correct)... by "Change addresses"... the OP appears to actually mean "a new address every time you want to deposit"... as opposed to actual change addresses which are used for receiving change outputs from a bitcoin transaction.