Bitcoin Basics - Discussion

[Maki]

@Frosty00

your funds are still virtually stored in the wallet

Bitcoin wallet stores the private key, not the coins themselves. Your coins are stored on the Bitcoin blockchain, and your private key is required to authorize transfers of those coins to another person’s wallet.

[Frosty00]

Ah yes i think i understand now, so it would be safe to say the “input” is basically referring to the the original address/addresses of your current wallet receiving the funds on block explorer and the output is the movment of funds to someone elses wallet? Another question when you receive the change from leftover transactions is a new personal wallet address randomly generated for you to receive the funds back or is it the same wallet address you sent from?

[Frosty00]

Are the inputs on blockexplorer the addresses that have previously sent you coins to your address? If so where on the blockexplorer is the wallet you use to send/ receive afterwards displayed? Would the address you previously received be displayed as an input on the next transaction? if thats the case and there are multiple inputs what are the other inputs?

[Maki]

@Frosty00

Another question when you receive the change from leftover transactions is a new personal wallet address randomly generated for you to receive the funds back or is it the same wallet address you sent from

Most of wallets generate a different address.

[Maki]

Correct, a transaction can have multiple inputs and multiple output too.

[jon_m]

Hi Eric,

@ecbwong

Are Bitcoin or Ethereum “receiving” addresses unique?

Theoretically speaking, it’s possible for 2 addresses to be generated that are exactly the same, but the likelihood is so remote that, practically speaking, we can safely say that it won’t happen. By continually generating and transacting with new addresses, the liklihood of there ever being 2 identical addresses in use simultaneously is even more remote.

@ecbwong

Why do I see in certain wallets, new “receiving” addresses are generated that’s totally different from the original receiving address? How do they account for it to make sure tokens are received by the same wallet address?

A wallet doesn’t have an address, so to speak. For security, it is standard practice for wallets to generate multiple private keys, which in turn generate multiple public keys and multiple addresses. With Bitcoin it is certainly recommended that a different address is generated for each transaction. Because it generates them, your wallet knows all of the addresses associated with each of the accounts you’ve set up within your wallet (e.g. for different crypocurrencies and tokens, or multiple accounts for the same coin). Therefore, at any point in time, your wallet can aggregate all of the UTXOs (for Bitcoin) and all of the positive address balances (for Ethereum) which are associated with your multiple addresses, in order to display meaningful total balances, for your information.

[ecbwong]

Hi Jonathan

For second part of the question relating to multiple public addresses, am I correct in understanding that each wallet would have generated a host of multiple related public addresses that are dispensed out in each new transaction? They are tagged to the same wallet so if I were to search with all these various addresses on the blockchain explorer, they will still direct me to the same wallet?

Thanks
Eric

[jon_m]

Hi Eric,

@ecbwong

… am I correct in understanding that each wallet would have generated a host of multiple related public addresses that are dispensed out in each new transaction?

Each address generated by a wallet is generated from a separate private key, and in this respect they are unique and unrelated to each other. But as your wallet has generated the private keys, it knows which addresses correspond to it, and so is able to provide you, the owner, with aggregate balances.

@ecbwong

They are tagged to the same wallet so if I were to search with all these various addresses on the blockchain explorer, they will still direct me to the same wallet?

Externally, however, public addresses are not tagged/flagged as belonging to a specific wallet. So, unless you have additional information from the owner, or are able to carry out some forensic analysis based on other factors (such as timing, volume, amount, frequency etc.) you cannot trace the address(es) detailed for a transaction on a block explorer to a specific wallet.

This is an advantage of not re-using the same addresses. Even though the transactions and the addresses are publicly visible on a block explorer, it makes their traceability to a specific owner that much harder i.e. it increases privacy.

[ecbwong]

Hi Jonathan

What you are saying is a wallet has the ability to generate series of private keys even after the wallet is created? I thought only a pair of private and public keys are generated once only, upon a wallet creation. What I gather from your answers is that a pair of private and public keys are created at each new transaction - am I correct to assume that?

Thanks
Eric

[jon_m]

Hi Eric,

I think this post answers your question. Or should point you in the right direction

@Alko89

A wallet generates a new keypair for each new address it generates. Some wallets like the bitcoin core wallet generates 100 addresses in advance when you initialize it and then adds more as you continue to use it.

Most modern wallets are so called HD (hierarchical deterministic) wallets, which means they are able to generate new addresses from one master key (a fancy name for the root private key) based on derivation paths. These types of wallets have been described in BIP32. What this means you only need to back up the key once, often using a mnemonic seed which uses a set of common english words as described in BIP39, to generate all future addresses.

HD wallets particularly use two derivation paths, one to generate new addresses and the second to generate new change addresses, effectively they are the same its just using two sets of paths to generate addresses from and the wallet is able to use all of them because it is able derive the private keys for all of them.

There are some other good posts in this topic which should give you some further clarity e.g.

@Fabrice

Your bip39 seed phrase (12 or 24 words) generates a master key where many addresses can derived wich you control in your HD Wallet. You’ll have lots of addresses wich are all yours. you should never reuse old addresses for privacy and safety. Your private keys stored in your Wallet will know wich addresses belong to you. Your wallet will sum up all utxo’s of all your addresses together to show your total balance.

@Fabrice

You can use more addresses in the outputs.
For example you have 1utxo of 1btc and you need to pay 0.5 to someone.
Then You can use 1btc as input
0.5 as output on the address for the receiver and
0.5 (minus miner fee you can send to a different address of yours)

An outsider will see 1 input address and 2 different output addresses. He can’t know wich address is yours. In a HD Wallet, you will have many different addresses linked to your private keys wich only you know that all these addresses belong to you. Only if you combine more utxo’s for inputs together in a transaction, people can assume the addresses in the input belong to the same person. But today there is also something like payjoin, which doesn’t guarantee it.

In Ethereum, we don’t use utxo’s, but it uses an account model. So if you pay someone in ETH, you just subtract amount from account A and add it to account B. If you check an Ethereum address of someone you payed, you can see on the block explorer what his balance is and all tokens he has.
In Bitcoin, you have utxo’s on many different addresses and only the owner of the private keys can know the total balance

@Alko89

The 12/24 word mnemonic keys have a numerical mapping that in its entirety form a private key. Words are used so that they are easier to remember than numbers. For example:

dog	001
cat	010
mouse	100

And you have a mnemonic seed: cat dog mouse that means your private key is 010001100. Mnemonic codes been introduced in BIP39

Wallets that support mnemonic codes are usually also HD (hierarchical deterministic) wallets, meaning that they derive multiple private keys from a single master key (fancy name for the root private key) based on a derivation path described in BIP32.
This is why you only have to backup the root key because all your keys are derived from said key

[ecbwong]

Ok thanks Jonathan.

I will go through it.

[deejay_academic]

Is there any project opportunity available where a beginner can start working/contributing while learning on Moralis Academy

[Elad_St]

If the private key generated randomly, can I just pick random letters and numbers? like: theFoxJumpedOverThe3FeetFenceToCatchThePinkRabbitW0W (<–52 characters)

[Alko89]

You could, but its not recommended. Humans are a bad source of randomness.

[Saria]

When I have Bitcoin in an exchange like Binance! How does the BTC address is generated and owned by who’s?

[Maki]

when you store cryptocurrency on a centralised exchange, you’re not in control of your private key it’s stored on the exchange. In fact, you’re never even told what the wallet’s private key is. The only way to have total control over your holdings is to transfer the coins/tokens to an off-exchange wallet and store your wallet’s private key somewhere safe and secure.

[sephc]

anybody have an opinion on the name of bitcoin creator ‘satoshi nakamoti’ and it translating in english as ‘central intelligence’?

http://ow.ly/ppRR30s3R8z

[dnc77]

Hey guys!
Hope you are all well! Happy Christmas first of all!

I have a dilemma between supply chain and privacy.

We earlier mentioned that as a customer, we would be able to track, the transactions in the block chain to determine that what our supplier is claiming in terms of the quality of their products is true by following the food chain to the source provider.

However we now see that in the block chain, transactions are marked by input and output addresses with the idea of privacy in mind to not show who the true owner of the input and output addresses are.

Am I missing something here because this to me seems contradictory. How can we say on one end that we can track the food chain suppliers authenticity when the transactions inputs and outputs are just addresses that are not identifiable due to privacy?

Please help!

Thanks

Duncan

[kevinkanak]

Dont have any question. If you would add a real example of what is a private key and what is a public key to the video, it would be easier to understand. But otherwise great

[dnc77]

Hi All,

I love pencil diagrams. I prefer them over visio/etc… for my own internal rough sketching. Maybe I will find the time to do a cleaner presentation, but with a little use of zoom, this diagram presents an overview of mining and wallets and the process.

This has been a great section and I needed an intermission to do this to get it clear in my head before I proceed. Hope it’s useful to anyone out there!

Cheers!!
!