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Crypto Terms:  Letter C
Jul 07, 2023 |
updated: Apr 02, 2024

What is Change Address?

Change Address Meaning:
Change Address - occurs when a user uses an input that is worth more than the transaction cost, the extra funds are sent back to the users as change through a newly generated address.
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Let's find out Change Address meaning, definition in crypto, what is Change Address, and all other detailed facts.

When a person enters an input that is valued more than the transaction fee, the additional money is returned to the user as change via a recently created address. That is when users don’t have the exact amount that is needed.

It’s the same as in the real world, if you have a $20 bill, and have to pay $10 for your buying, your change will be $10. Transfers on the blockchain have an input and an output. For instance, for users that go on an exchange and buy 1ETH with fiat currency:

  • The input will be fiat money.
  • The output will be 1ETH.

In addition, any Bitcoin you’ve been sent to your Bitcoin wallet can be referred to as “bills” that should be spent. To put things into perspective, let’s say you are out on a date in an expensive restaurant and you need to pay 20 BTC for your meal. You have 50 BTC in your wallet, so you’ll get 30 BTC in change. 

The main factor is that the change will be sent to another address that is managed by your Bitcoin wallet - a change address.

Even though it might seem that receiving a change to the same address is less confusing, different addresses are important for users' privacy. As we all know, the blockchain can be seen by anyone, this feature helps to give some level of anonymity to the user.

It is possible to view your changed address as well as how much of the payments were transferred through it. The blockchain determines how much a sender is bringing in and how much output is required.

The transaction will crash if the input is inadequate. If the input exceeds the specified output, the blockchain will transfer the leftover money to a new address. The money will be restored to the sender's wallet moments later.

Inputs are not always calculated to the exact amount required by the transaction. In this situation, the sender's address sends extra money than the set price, which is then held in a change address and refunded to the sender's digital wallet.

Change address is a critical component of the cryptocurrency world. One of the reasons is it ensures that interactions across wallets are fair. It would be impossible to transfer exact numbers across wallets without the use of change addresses. 

Furthermore, people often are unaware that change addresses exist. While this procedure occurs more frequently than we may believe, it is a side computation conducted by the blockchain itself.