What are ‘Change Addresses’?

Have you ever examined your Bitcoin receive addresses on a blockchain explorer and found that the balance doesn't add up to the total displayed by your Exodus Bitcoin wallet?

This article is here to help!

In this article:

What is happening?

Don’t worry! There’s nothing wrong with your wallet this is how some cryptos work because they are UTXO based assets. UTXO stands for Unspent Transaction Output. With these types of cryptos, your wallet’s total balance is actually the balance of several addresses, which includes receiving addresses and change addresses.

Some UTXO based cryptos that Exodus supports are: BTC, LTC, DASH, DCR, BCH, BTG, DGB and BSV. Each of these assets has multiple change addresses that are managed by your wallet. To understand what change addresses are, we first should understand the concept of change.

What is change in a UTXO based crypto?

UTXO cryptocurrencies work in a similar way to physical cash.

Example of how change addresses work

Let’s say you are paying for a meal, and it costs $20. You reach into your pocket and pull out a $50 bill that you hand to the waiter, who returns with $30 in change, which you then put in your wallet. Using Bitcoin in this example. Any Bitcoin you’ve received in your Bitcoin wallet is like “bills” waiting to be spent.

Imagine that you are paying for your meal with Bitcoin and it costs 20 BTC (an expensive meal). You have 50 BTC inside of your wallet. So when you pay your 20 BTC for your meal, you receive 30 BTC in change as expected. This change is sent to another address controlled by your Bitcoin wallet, called a change address.

How change addresses work on the blockchain

After making a transaction. instead of sending your leftover BTC back to the same address, your wallet automatically sends it to a different change address that is also part of your Bitcoin wallet. The leftover change does not ever leave your Bitcoin wallet but it moves to a different address.

Each time you make a transaction that doesn't send your whole balance, the leftover change will be sent back to a different Bitcoin address. This is why when you look up one address on a block explorer, you only see part of your balance, your Exodus wallet knows to look at all of your addresses to see your total balance.

This is how all UTXO based cryptocurrencies work!

If you want to see all your addresses you can export the addresses for each crypto from the asset menu and look each one up on a block explorer.

Why not receive change to the same address?

Now, you might be thinking: This is really confusing, why not receive change to the same Bitcoin address?

Change addresses are important for user privacy. The blockchain is viewable by anyone with an Internet connection. To preserve some degree of anonymity, features like change addresses are needed, otherwise, everyone would easily know everyone else’s entire financial history, which is something most people don’t want.

For Example: if a transaction for 1 BTC moves a 2 BTC UTXO from address X to address Y, and the 1 BTC of change is returned to address X, it would be obvious that address X paid address Y. On the other hand, if the 1 BTC of change is returned to a change address, address Z, it wouldn’t be clear if the original payment of 1 BTC was meant for address Y or address Z, since both received 1 BTC.

Finally, the next time you check the balances of your receiving addresses and see the balances don’t add up to what’s shown in your wallet, you’ll know that you don’t need to worry. Your assets are tucked away safely in change addresses that not only allow you to receive change but also enhance your financial privacy.