So you’ve just created your first Bitcoin wallet, sent some coins to it and now want to spend them? You find out that the address you used before is no longer showing up – what gives?
It turns out that in order to better protect the privacy of Bitcoin users, wallet addresses are not static. When one receives a payment, the change is returned to a different address (called the ‘change address’). If this other address has not been used before, it could be temporary. Still, this can cause confusion for beginners, since they are likely unaware of how bitcoin transactions work.
So why would your wallet automatically generate a new address? This helps to anonymise your transactions and protect your privacy. Instead of sending bitcoin directly from one person to another you send them indirectly, via many different addresses – this makes it harder for someone to figure out who sent what to whom.
This is like how a bank does not tell you that the money came from any specific account – only that somewhere at some time there was a transaction of X amount (if you know the direct recipient, you could figure out who else sent them money).
This is also why it may seem like there are less bitcoins in circulation than transactions – because there are actually multiple accounts being used for each transaction. Because if they were not, one could theoretically ‘follow’ a bitcoin and find out where it came from and which addresses it went to.
However, if you want to do more than just receive payment, you will need to disclose your identity by using the same address again – similar to how a bank uses the same account number for future transactions. If you use this same wallet address at another website (like an exchange) they can send bitcoin directly to that wallet without going through any others.
This means that most people use different wallet addresses with every new transaction… but ultimately we hope that our wallets will allow us to choose whether we want to be public or private with each payment so we can decide who we want our transactions known by and who we wish them obscured from.
