- What Is a Wallet Address in Crypto?
- How Do I Find My Wallet Address?
- How To Create a Crypto Wallet Address – a Step by Step
- How Do Wallet Addresses Work?
- Bitcoin Wallet Address Examples: Different Formats Explained
- Wallet Address Security Risks
- Wallet Address Security Tips
- Wallet Name Services: How They Simplify Wallet Addresses
- Conclusion
- FAQs
- A wallet address is the number that identifies your unique blockchain account, and lets people send you crypto.
- It’s designed to be shared publicly, like an email address, and is easy to locate within your wallet interface.
- Creating a wallet address involves setting up a crypto wallet using a waller provider.
- Your address is derived from your public key, however they are not the same thing.
Blockchain technology has changed the way we conduct transactions by providing a secure and decentralized method for sending and receiving cryptocurrency. According to statistics, around 50 million people own Bitcoin. But with potentially infinite users and different types of cryptocurrencies, how can you ensure your crypto reaches the right destination? This is where your crypto wallet address comes in.
In this article, we’ll discuss wallet addresses, how they work, how to create one and how to mitigate some of the associate risks.
What Is a Wallet Address in Crypto?
Your wallet address is like an email address for your crypto. It’s the unique identifier of your blockchain account, and it allows you to receive crypto from other people, or send crypto to yourself from another account.
A wallet address is an alphanumeric string of data. For example, the very first Bitcoin wallet address is:
1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
Different cryptocurrencies and wallets use various formats. For example, Ethereum addresses start with “0x” followed by a 40-character hexadecimal string, while Bitcoin addresses can come in several formats. Some wallets also offer your wallet address in the form of a QR code
How Do I Find My Wallet Address?
Finding your wallet address is easy, and generally involves navigating to the “Receive” button on your interface. Depending on the type of wallet you’re using, the steps to locate it might differ slightly. For example:
- MetaMask browser extension: click on the wallet and find your address on top. Changing between blockchains will change your wallet address but you’ll still be able to find it at the top.
- TrustWallet: select the “Copy” icon or by clicking on “Receive“. You’ll then get a list of different networks and you can click each one to see your wallet address for each network.
How To Create a Crypto Wallet Address – a Step by Step
Creating a crypto wallet address takes just a few minutes. To do it yourself, you can follow these steps:
- Choose a Wallet Provider: Select a reliable wallet provider that supports the cryptocurrency you intend to use. Popular options include hardware wallets like Ledger, software wallets like Exodus, browser extension wallets such as MetaMask and mobile wallets like Trust Wallet.
- Download and Install the Wallet: Download the wallet application from the provider’s official website or app store. Follow the instructions to set up the application and get it running on your device.
- Set Up Your Wallet: Upon installation, you’ll be prompted to create a new wallet. This process usually involves setting a strong password and backing up your seed phrase, which is essential for wallet recovery. Once your wallet is set up, it will automatically generate a new address for you, and you’ll be able to see it by clicking “Receive“.
How Do Wallet Addresses Work?
Contrary to what many people think, a cryptocurrency wallet doesn’t actually store your crypto assets. Instead, it simply stores the keys for your blockchain accounts.
Derived from Your Public Key
When you create a wallet on a given blockchain, it generates a pair of cryptographic keys: a public key and a private key. The wallet address is derived from this public key (although they are not the same thing). It acts as the public identifier of your blockchain address and provides a secure and unique identifier for your blockchain transactions.
Your Wallet Address Can be Shared
Like an email address, you can share this identifier with other people to enable them to send you crypto. Similarly, you use someone else’s wallet address to send crypto to them.
Sending Crypto to a Wallet Address: Step-by-Step
- Initiate a Transaction: On your wallet interface, input the recipient’s address and the amount of crypto you want to send.
- Sign the Transaction: You will use your private key to sign the transaction, confirming you authorise the crypto being sent.
- Network Validation: The transaction is sent to the blockchain network, where it’s validated and added to a block.
- Crypto Received by Recipient: Once validated, the assets are transferred to the wallet address you specified.
Bitcoin Wallet Address Examples: Different Formats Explained
As we’ve mentioned earlier, wallet addresses can take different formats, especially when it comes to Bitcoin. This is a direct result of the evolution of Bitcoin over the years. Currently, there are four common types of Bitcoin addresses:
- Legacy or P2PKH Address
- Compatibility or P2SH Address
- Native Segwit or Bech32 Address
- Taproot or BC1P Address
Let’s take a closer look at each of them and why they exist.
Legacy or P2PKH Address
The oldest Bitcoin address format is called P2PKH (Pay-to-Public-Key-Hash) and is also often referred to as “Legacy”. Addresses using this format start with a “1”, for example, the first Bitcoin address:
1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
Symbols in legacy addresses are case-sensitive. Legacy addresses are the original format used in Bitcoin transactions. These addresses are still widely used and supported by exchanges but they’re not as efficient as newer formats.
Compatibility or P2SH Address
Compatibility addresses use the Pay-to-Script-Hash format are part of the natural evolution of the Bitcoin network. These addresses amplified transaction throughput and reduced gas fees. The format is case-sensitive and it starts with a “3” like:
3J98t1WpEZ73CNmQviecRnyiWrnqRhWNLy
P2SH addresses improve the Bitcoin network with backward compatibility with older Bitcoin addresses. At the same time, they also support advanced transaction types like multi-signature transactions.
Bech32 or Native Segwit Address
Bech32 addresses are based on the native SegWit protocol. Unlike earlier formats, Bech32 addresses use only lowercase letters, enhancing error detection and human readability. They are particularly suitable for new services and applications aiming to fully utilize the capabilities of the Bitcoin network. Bech32 addresses start with “bc1”:
bc1qw4q3ry0lf5jm7fyt42mjmz6w8fscf8sy82zp6m
These addresses offer the lowest transaction fees and optimize block space usage. They achieve this by reducing the amount of data needed for a transaction.
Taproot or P2TR Address
This brings us to the latest Bitcoin address format called Taproot. The most advanced format is case-sensitive and each address starts with “bc1p”:
bc1plw5ff7zsd4ed3wlpgg8mztwzq4jnt7hfn3ce6m
Taproot addresses enhance the privacy and efficiency of Bitcoin transactions. They also allow more complex transaction types and support Schnorr signatures, allowing users to sign multiple transactions at once.
Wallet Address Security Risks
If you’re using a hot wallets, which is connected to the internet and has its interface on your computer screen, it’s possible for your address to be used by hackers to target your crypto.
Man-in-the-middle Attack
The most notable risk is a man-in-the-middle attack. In a man-in-the-middle attack, a malicious actor intercepts communication between two parties to steal data or alter the conversation without their knowledge. In the context of your crypto transaction, the attacker can potentially access your computer screen, and change the wallet address of the receiver you’re sending crypto to. This would redirect your funds to the hacker’s own wallet instead of your intended receiver.
The only way to truly eliminate this risk is by using a hardware wallet with a screen displaying your transaction details. This enables you to double-check the wallet address you’re sending to before confirming any transaction.
That being said, there are also a number of other ways to mitigate the risk of a MITM attack.
Wallet Address Security Tips
The digital space is full of online threats but you can follow a few tips to mitigate the risks.
Eliminate Human Error
Make sure that you always copy/paste your wallet address and avoid typing your address manually. This will remove the risk of any typos.
Double-Check
Always check with the sender that the address they received matches the one on your screen. This step is especially useful in preventing man-in-the-middle attacks.
Use a VPN
By encrypting your internet connection, a VPN ensures that data transmitted between your device and the VPN server is secure and private. This makes it difficult for attackers to intercept or tamper with communication.
Use a Hardware Wallet
By using a hardware device, you can add an extra layer of security. This is because the wallet address will be shown on your device first, so no hacker can tamper with the display.
Wallet Name Services: How They Simplify Wallet Addresses
Wallet Name Services, such as the Ethereum Name Service, Unstoppable Domains and others, simplify the use of wallet addresses. They achieve this by translating long, complex alphanumeric strings into human-readable names. The process is similar to how DNS maps domain names to IP addresses.
This process enhances usability and reduces errors during transactions. Name services make blockchain interactions more accessible and user-friendly. They are crucial for the future of cryptocurrency, as they encourage broader adoption and facilitate smoother, more secure digital transactions.
Conclusion
Understanding and securely using wallet addresses is crucial for anyone involved in the world of crypto transactions. By being aware of the risks involved and following best practices, users can improve their security. With tools like wallet name services, users can ensure that their crypto assets are safe and transactions are executed accurately.
FAQs
What’s the Difference Between a Wallet Address and a Public Key?
A wallet address is a hashed version of the public key, providing a simpler and more secure way to represent it.
Can I Share My Wallet Address Publicly?
Yes, this data is designed to be shared. Your address cannot be reverse-engineered to access your private keys, due to cryptographic hashing.
What’s the Safest Way To Share My Wallet Address With a Sender?
The safest way is to copy/paste your wallet address from your wallet interface and check with the sender that the address they received matches the one on your screen. When using a hardware device, verify the address on the device first before confirming it on your screen.
What Is a Bitcoin Wallet Address?
It’s the unique identifier of your account on the Bitcoin blockchain and allows you to receive Bitcoin.
