Wallets with multiple addresses

[headingnorth]

If you had a substantial amount of bitcoin in a wallet might it be a good idea to split your holdings into multiple bitcoin addresses,
so that each address in that wallet contained a small amount of bitcoin, as opposed to just one address with a large amount in it?

That is, to avoid being a potential target (aka honeypot) of any hackers or scammers who might be using blockchain explorer to look for bitcoin addresses with large holdings.
So even if one address was somehow compromised by a hacker or scammer, they would not know the contents of the entire wallet if it were divided into multiple addresses?

I believe that is how it works, but would like to verify. Or I could be wrong.





 

[1714571303]

1714571303

[OcTradism]

If you had a substantial amount of bitcoin in a wallet might it be a good idea to split your holdings into multiple bitcoin addresses,
so that each address in that wallet contained a small amount of bitcoin, as opposed to just one address with a large amount in it

Split your bitcoin to different addresses in one wallet is good but not best. At least with different address, you can spend your bitcoin with better privacy like choosing UTXOs from that address to spend.

A better way is to split your bitcoin to different wallets. It will give you better privacy practically.

Read about UTXO with Learn me a Bitcoin.
https://learnmeabitcoin.com/technical/transaction/utxo/

[Charles-Tim]

If you had a substantial amount of bitcoin in a wallet might it be a good idea to split your holdings into multiple bitcoin addresses,
so that each address in that wallet contained a small amount of bitcoin, as opposed to just one address with a large amount in it?

It will help in privacy. But while spending, it would be good to use coin control. Or you can use different wallet for each addresses.

That is, to avoid being a potential target (aka honeypot) of any hackers or scammers who might be using blockchain explorer to look for bitcoin addresses with large holdings.

So even if one address was somehow compromised by a hacker or scammer, they would not know the contents of the entire wallet if it were divided into multiple addresses?

If a hacker has access to your seed phrase through your online mistake like malware download, or someone has access to your seed phrase offline where you keep the backups, such can be used to compromise your wallet and to steal your coins. Privacy is different from security.

[mk4]

It doesn't really help much for security, but rather, privacy. The amount of funds tied to your identity is harder to track down if your funds are split into multiple wallets, and at the same time with you doing good coin control(receiving payments in different wallets and spending directly from them, etc).

[headingnorth]

If you had a substantial amount of bitcoin in a wallet might it be a good idea to split your holdings into multiple bitcoin addresses,
so that each address in that wallet contained a small amount of bitcoin, as opposed to just one address with a large amount in it

Split your bitcoin to different addresses in one wallet is good but not best. At least with different address, you can spend your bitcoin with better privacy like choosing UTXOs from that address to spend.

A better way is to split your bitcoin to different wallets. It will give you better privacy practically.

Read about UTXO with Learn me a Bitcoin.
https://learnmeabitcoin.com/technical/transaction/utxo/

I have heard of the term UTXOs and unspent transactions a few times in the last couple years but still don't quite understand how they work. I'll get it one of these days, I hope!

Knowledge is power and the more we understand how bitcoin works, even at the technical level the better investors we will be.
By "we" I mean those of us who are not programmers or cannot read computer code.
  

[Zaguru12]

That is, to avoid being a potential target (aka honeypot) of any hackers or scammers who might be using blockchain explorer to look for bitcoin addresses with large holdings.
So even if one address was somehow compromised by a hacker or scammer, they would not know the contents of the entire wallet if it were divided into multiple addresses?

Yes one of the best practice for privacy sake is to use different address for different transactions. This way even if you use one particular address from same wallet in a transaction the attacker or public wouldn’t have knowledge of the other funds in the other addresses.

 Attacks like dust attack or address poisoning on an address will only affect that particular address and wouldn’t reveal any other addresses to the attacker except if it is connected in transactions which can be protected by using the coin control feature.

But as for attacks like phishing attack which compromises the entire wallet then it will affect all other addresses on that wallet. And also even if you use multiple wallet to malware on that device will also affect all other different Wallets too. Best is to use a cold wallet if a wallet protection is what you seek

I have heard of the term UTXOs and unspent transactions a few times in the last couple years but still don't quite understand how they work. I'll get it one of these days, I hope!

They are each transactions you receive on your addresses that are yet to be spent. If an address receives like four different transactions separate on same address it still has four UTXOs. You can read more of it here https://learnmeabitcoin.com/technical/transaction/utxo/

[Charles-Tim]

I have heard of the term UTXOs and unspent transactions a few times in the last couple years but still don't quite understand how they work. I'll get it one of these days, I hope!

You can use wallet like Electrum, Sparrow Bluewallet etc and go to coin control and see how it is. Assuming you were sent bitcoin to different or the same addresses 5 times, that means you have 5 UTXOs which you can use coin control to freeze or spend any of them if they are in the same or different addresses.

[headingnorth]

Interesting. I will have to look into this "coin control" feature when I get a chance.

[Hatchy]

I believe that is how it works, but would like to verify. Or I could be wrong.

Yes, this can simply be archived using an hd(Hierarchical Deterministic) wallet, which create a new Child address after receiving transaction from it's previous receiving address. It's better to control privacy but also consider or have in mind security and safety of your funds.
The main idea about using this hd wallets is to help manage multiple Bitcoin address using the same seed phrase and they are all generated from a single master seed. This way, you don't have to think about storing so many keys made from creating a new wallet address, which I think might lead to possibly loss of funds since you may not store them all properly. So while trying to maintain our privacy, we should also try to look out for possible flaws that may lead us to Lossing our holdings.

[Zaguru12]

Interesting. I will have to look into this "coin control" feature when I get a chance.

Yeah it’s a great feature to actually use when you want to specify a particular UTXO to spend from. The feature allows you to select this UTXO for that particular transaction. It is worth mentioning that not all wallets have this feature, wallet like Electrum, BlueWallet and Sparrow actually have this feature. Here is an electrum link on how to use it on electrum wallet https://bitcoinelectrum.com/how-to-spend-specific-utxos-in-electrum/.

[Solosanz]

You need to use passphrases, so when an Average Joe know your 12-24 seed phrase, they won't try to looking more than that because they believe it's all what you have. As long as you didn't link your personal information with your Bitcoin address, you're fine. Most people didn't aware if using centralized exchange is one way to link your personal information and your address.


https://vault12.com/securemycrypto/crypto-security-basics/what-is-a-wallet-passphrase/

[headingnorth]

I should mention the reason for posting my original question:

I had an amount of bitcoin stored in a standard hardware wallet before I learned about the hidden wallet feature that was introduced in BIP-39.

The only problem is you cannot convert a standard hardware wallet into a hidden wallet. You have to create a new hidden wallet.
Then transfer funds from your standard to new hidden wallet. So that is what I did about a year and a half ago.

But I did it all in one transaction from standard to hidden wallet. Later I realized it would have been a better idea to split this transfer into multiple transactions
instead of one transaction. Which is what I did but only after the fact by creating a second hidden wallet and transferring contents from my first hidden wallet to the second hidden wallet
via multiple transactions and multiple addresses. But of course I then realized  all these multi transactions to the second hidden wallet could possibly be linked via the common sending address.

What would be the advice for this situation? Thank you.

[pinggoki]

The problem with this approach is that if you're storing that wallets in only one device, you will still risk getting all of that bitcoin scammed, there's no foolproof way to protect yourself from all of the harm that others can do when it comes to stealing your bitcoins. I really like to do this too but the problem is most of my bitcoin hoard is in a paper wallet that hasn't seen digital entry for a really long time and I'm scared that there's something that's lurking on my computer or devices that I don't know about that might see the amount that the wallet got but at the same time I do want to do this because I know that having it on multiple addresses makes it so I'm less vulnerable to losing all of my bitcoins in one fell swoop.

[headingnorth]

The problem with this approach is that if you're storing that wallets in only one device, you will still risk getting all of that bitcoin scammed, there's no foolproof way to protect yourself from all of the harm that others can do when it comes to stealing your bitcoins. I really like to do this too but the problem is most of my bitcoin hoard is in a paper wallet that hasn't seen digital entry for a really long time and I'm scared that there's something that's lurking on my computer or devices that I don't know about that might see the amount that the wallet got but at the same time I do want to do this because I know that having it on multiple addresses makes it so I'm less vulnerable to losing all of my bitcoins in one fell swoop.

I split my holdings into three separate hidden wallets on same device, which should help mitigate the possibility of losing everything in one fell swoop.
My standard non-hidden wallet shows an amount that might make a scammer or hacker happy, but would not hurt me to lose it.

I also use a hardware wallet with airgap feature so it is never connected to the internet or PC.

[Cricktor]

The problem with this approach is that if you're storing that wallets in only one device, you will still risk getting all of that bitcoin scammed, there's no foolproof way to protect yourself from all of the harm that others can do when it comes to stealing your bitcoins.

You're in trouble if you believe any bullshit scammers try to sell you. There's no immediate issue if you have just one device like a decent hardware wallet. You should have redundant safe copies of your mnemonic recovery words, offline on paper and if you want and need, stamped in metal for water and fire resistance. With the recovery words (optional mnemonic passphrase and derivation path) you can recover your wallet anytime. Self-custody implies awareness and responsibilities (and understanding how it works and what pitfalls exist).

I recommend to have redundant safe copies of your optional mnemonic passphrase that derives additional independant wallets from your recovery words. Do not store the optional mnemonic passphrase together with the recovery words, better store it separately. Do not rely only on your memory, sooner or later it will fail you, that's almost guaranteed and a recipe for desaster.

Your crypto wallet stuff shouldn't be done on your daily internet computer where you do all your personal internet shit. I recommend a dedicated Linux machine with which you interact with your wallet(s). Avoid browser usage and email on that machine as much as possible. Minimize internet exposure for this device.


When OP has consolidated his Bitcoin stash to a "hidden" wallet address, the disadvantage is that further transfers from the consolidating address reveal the amount of coins OP has at first in that wallet. Every Bitcoin transaction is in the blocks of the blockchain. It's only that there are no names attached to transations.

If I had 2BTC in one address and send from it 0.01BTC to a receiver, this receiver can easily see that I had 2BTC. That's maybe not something to desire.

[seoincorporation]

If you had a substantial amount of bitcoin in a wallet might it be a good idea to split your holdings into multiple bitcoin addresses,
so that each address in that wallet contained a small amount of bitcoin, as opposed to just one address with a large amount in it?

Never have all the apples in the same basket, that's a smart way to roll.

I think having the bitcoins in different addresses is a great move, and saving the private keys in different ways is a great move to, because if you have the BTC on different addresses but the Private keys on the same safe box, then it loses sense.

And if you want to spend all the BTC, you only have to import all the private keys and can send the BTC in one single transaction. So, is a good idea to do it.

[d5000]

But I did it all in one transaction from standard to hidden wallet. Later I realized it would have been a better idea to split this transfer into multiple transactions instead of one transaction. Which is what I did but only after the fact by creating a second hidden wallet and transferring contents from my first hidden wallet to the second hidden wallet
via multiple transactions and multiple addresses. But of course I then realized  all these multi transactions to the second hidden wallet could possibly be linked via the common sending address.

Your assumptions are in general correct: if you transfer your BTC to a hidden wallet using multiple transactions, this is already better than using a single transaction, but linking them together from a common funding address is still possible (depending how many resources a malicious party is willing to spend on blockchain analysis).

To analyze if your transaction behavior could indicate to malicious parties that all funds which came originally from the original wallet's address are still yours, there are two questions to answer:

1) were the transactions to these wallets made close together, e.g. in the same hour?

In this case, everybody analyzing these transactions (scammers, chain analysis companies) would probably assume all the other addresses are also yours. You could thus mark all these addresses as "compromised". It is better to do this whole transfer process over the course of several days or even better weeks, with amounts which aren't similar to each other, so they look like ordinary payments.

If you did this, or if the single transaction to your hidden wallet was the only thing you did, my advice would be to start again with the process. In all periods with low fees, transfer some BTC (not the entire balance of an address) to another address, trying to vary the amounts, the timeframes between transactions, etc. so they look like you're making ordinary payments.

Take into account that in this process you should never re-use any address, because they could linked together again if you make a mistake (e.g. mixing two different "branches" of your funds).

2) does the software of the hardware wallet group all wallet addresses together when they request data from a blockchain node to know the current balance?

This is a common problem of software wallets like Electrum or Sparrow, and as a hardware wallet isn't a full node, it could suffer from the same problem - it could depend on the provider. It's suspected that for example in the Electrum network there are also chain analysis firms operating servers which try to link different addresses together if they detect a request of several addresses at once from the same IP address, which is was Electrum normally does.

If this is the case, and you want to go 100% safe for privacy, you would have to create a hidden wallet for every part of your balance you want to separate.