Understanding Bitcoin Addresses: Types, Generation, and Security

Bitcoin addresses serve as unique identifiers for sending and receiving Bitcoin, functioning similarly to bank account numbers in traditional finance. These alphanumeric strings typically begin with "1," "3," or "bc1" and range from 26 to 35 characters in length. Below, we explore the key types, generation process, and security best practices.

Types of Bitcoin Addresses

1. P2PKH (Pay-to-PubKey-Hash)

   • Prefix: "1"
   • Example: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
   • Features: The most traditional and widely used format.

2. P2SH (Pay-to-Script-Hash)

   • Prefix: "3"
   • Example: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
   • Features: Supports complex conditions like multi-signature wallets.

3. Bech32 (SegWit Addresses)

   • Prefix: "bc1"
   • Example: bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf3q0s
   • Features: Introduced with SegWit for improved efficiency and lower transaction fees.

How Bitcoin Addresses Are Generated

1. Private Key Creation
   A 256-bit random number (private key) is generated, which controls access to the Bitcoin.
2. Public Key Derivation
   The private key is processed using elliptic curve cryptography (SECP256K1) to produce a public key.
3. Public Key Hashing
   The public key undergoes double hashing (SHA-256 followed by RIPEMD-160) to create a public key hash.

4. Checksum and Encoding

   • A version byte (e.g., 0x00 for P2PKH) is prepended.
   • A 4-byte checksum is appended after double SHA-256 hashing.
   • The result is Base58-encoded to form the final address.

Security Best Practices

👉 Secure your Bitcoin with a hardware wallet

• Private Key Management: Store keys offline using hardware wallets or paper backups.
• Regular Backups: Safeguard recovery phrases in multiple secure locations.
• Transaction Caution: Avoid using public Wi-Fi or untrusted devices for transactions.

Technical Example: Generating Addresses with btcutil

func NewBTCAddress() {
    // Generate private key
    privKey, err := btcec.NewPrivateKey()
    if err != nil { panic(err) }

    // Derive public key
    pubKey := privKey.PubKey()

    // Generate P2PKH address
    addressPKH, err := btcutil.NewAddressPubKey(pubKey.SerializeUncompressed(), &chaincfg.MainNetParams)
    if err != nil { panic(err) }
    fmt.Printf("BTC Address: %s\n", addressPKH.EncodeAddress())

    // Generate P2SH address (for multi-sig)
    pubKeyHash := btcutil.Hash160(pubKey.SerializeCompressed())
    addressP2SH, err := btcutil.NewAddressScriptHashFromHash(pubKeyHash, &chaincfg.MainNetParams)
    fmt.Printf("P2SH Address: %s\n", addressP2SH.EncodeAddress())

    // Generate Bech32 address
    addressBech32, err := btcutil.NewAddressWitnessPubKeyHash(pubKeyHash, &chaincfg.MainNetParams)
    fmt.Printf("Bech32 Address: %s\n", addressBech32.EncodeAddress())
}

FAQs

Q: Can I reuse a Bitcoin address?
A: While possible, reusing addresses compromises privacy. Use new addresses per transaction.

Q: What happens if I lose my private key?
A: The associated Bitcoin becomes irrecoverable. Always back up keys securely.

Q: Are Bech32 addresses case-sensitive?
A: No, they’re lowercase-only to reduce errors.

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