The change Address Concept

[Bravut]

To what extent is this concept really necessary or implied.

In course of my research, I get to find out that there is an address referred to as a change address in a Bitcoin transaction. I am not clear on how this came to be and as someone whom have never owned or have to spend a Bitcoin before, of course I hope not to spend that much anytime with Bitcoin serving as an asset but, I would like to own that much some day.

The concept of change address simply refers to an input address which is self generated by your wallet in course of a Bitcoin transaction between two parties where, the remittance from a Bitcoin transaction is remitted.

Now, it talked about you having to issue or sign a transaction in an agreed amount but, what’s actually spent is spent as a whole in your wallet’s content and you have a balance refunded to you.
Like, you own $50 and wants to pay for a purchase that cost just $5. What would actually be spent is $50 even without you inputting that as your actual paid amount but, would have $45 refunded to your wallet.

Why the need for this back and forth concept since, Bitcoin has smaller denominations that could be spent directly.

Wouldn’t it have been more easier to just send the exact amount in the acceptable denomination and that would be all to it without having any need for a refundable balance?

Like, I have a $5 note, I make a purchase of $5, paid for it in $5 without having any balance to be refunded to me.
Do we not have such cases in Bitcoin?

I would have liked to use Bitcoin directly for my examples but, bare with me, am not really inclined with the mathematics just yet but, I’ll get there.

[Zaguru12]

Yes there are many people actually getting this whole change address thing complicated which shouldn’t be. The reason is that bitcoin doesn’t treat the your input as a dollar rate but rather they pick input as the available or selected unspent transaction output (utxo) each single input(utxo) must be spent in a single transaction, this the protocol of the blockchain technology. So if all UTXO must be spent in a single transaction as input and you have much high of it in domination to the fiat currency which means that only part of it is what you want to spend, then the idea of change address is the fact that you actually spent everything but In two outputs one with the right amount to the intended user address and the other to your own address.

The idea behind is that if you were to take the little from an exiting utxo to another address then the leave the balance like the way banks work then the script sign (signature of the original UTXO) will still be resign again when spending the remaining balance which means a single transaction having similar script signing (because you are using the details of this same utxo that was used before) which might signals double spending. But with the whole utxo used the change which is apparently a new utxo has its own different scripts though.

This utxo method is better also for privacy sake because as you use new address for every new transaction it will be hard to link the transactions together with different addresses

[Hatchy]

Why the need for this back and forth concept since, Bitcoin has smaller denominations that could be spent directly.
Wouldn’t it have been more easier to just send the exact amount in the acceptable denomination and that would be all to it without having any need for a refundable balance?

If you buy something for $5 from your wallet's unspent transaction output (UTXO), your wallet still needs to calculate the miners fee for your transaction. So, if you have a UTXO with only $5, your wallet needs to use two inputs from your available utxo to cover the cost, and then it returns the leftover amount to you as an output to a new address.It's like when you shop at a store. if your total is $5.06 and you give $6, meaning you had spent $6 completely. the cashier gives you a receipt showing your purchase as $5.06 and gives you back $0.94 as change. In the Bitcoin system, spending from two UTXOs and getting change works similarly. you spend both completely and later receive a new transaction as your change.

Like, I have a $5 note, I make a purchase of $5, paid for it in $5 without having any balance to be refunded to me.
Do we not have such cases in Bitcoin?

Yes, it's possible. If any of your UTXOs contains a total of $5 and has enough funds for your transaction fee, you can spend the entire UTXO without getting change back. However, remember that when spending the entire UTXO, your wallet includes the transaction fee along with the amount you're sending.

[franky1]

your wallet is not an account with a total in one lump
instead its a list of all unspent outputs sent to you(received).. staying in the amounts paid to you inidividually

you need to spend an unspent output as a new TX input. spending it as a whole amount
meaning if you only want to use part of it. you need, or the wallet automatically does create a 'change' address to put the remainder you dont want to use.

its done this way for easy audit of funds origins on the blockchain

funds are not stored in your wallet
your wallet has keys that associate to addresses, a wallet looks at all transactions and keeps a list of unspent destinations of transactions aimed at your address(es)
you need to spent an unspent output as a whole, you CANNOT re-write the blockchain ledger to leave half of funds in the original transaction output that was aimed at your address of that specific transaction someone sent to you

[tranthidung]

Now, it talked about you having to issue or sign a transaction in an agreed amount but, what’s actually spent is spent as a whole in your wallet’s content and you have a balance refunded to you.
Like, you own $50 and wants to pay for a purchase that cost just $5. What would actually be spent is $50 even without you inputting that as your actual paid amount but, would have $45 refunded to your wallet.

It is not a refund because the $45 in BTC never move out of your wallet. It only moves from your initial address to a change address, in a same wallet of yours.

Why the need for this back and forth concept since, Bitcoin has smaller denominations that could be spent directly.

Wouldn’t it have been more easier to just send the exact amount in the acceptable denomination and that would be all to it without having any need for a refundable balance?

Again, it is not a refund.

The spending is for $5 to another wallet address of your trade partner. The rest (not used for that trade) is sending to another wallet address of yours. That's it.

• https://learnmeabitcoin.com/technical/utxo
• https://learnmeabitcoin.com/beginners/outputs
• What is the "Change" address on bitcoin wallet ? read to know !

Understand more about importance of change address, read

• General guidelines for sending BTC transactions

[hugeblack]

If you download an open source, well-programmed wallet, it will enable you to control the addresses so that they are customized to reduce fees, pay from a specific coincontrol, or any additional settings you desire.

The wallets are programmed either to enhance privacy and therefore will choose for you the address that contains the most of your balance to reduce the number of inputs or fees.