CS120: Bitcoin for Developers I

A bitcoin address is a string of digits and characters that can be shared with anyone who wants to send you money. Addresses produced from public keys consist of a string of numbers and letters, beginning with the digit "1". Here's an example of a bitcoin address:

19rxWcjug44Xft1T1Ai11ptDZr94wEdRTz

The bitcoin address is what appears most commonly in a transaction as the "recipient" of the funds. If we compare a bitcoin transaction to a paper check, the bitcoin address is the beneficiary, which is what we write on the line after "Pay to the order of". On a paper check, that beneficiary can sometimes be the name of a bank account holder, but can also include corporations, institutions, or even cash. Because paper checks do not need to specify an account, but rather use an abstract name as the recipient of funds, they are very flexible payment instruments. Bitcoin transactions use a similar abstraction, the bitcoin address, to make them very flexible. A bitcoin address can represent the owner of a private/public key pair, or it can represent something else, such as a payment script, as we will see in [p2sh]. For now, let's examine the simple case, a bitcoin address that represents, and is derived from, a public key.

The bitcoin address is derived from the public key through the use of one-way cryptographic hashing. A "hashing algorithm" or simply "hash algorithm" is a one-way function that produces a fingerprint or "hash" of an arbitrary-sized input. Cryptographic hash functions are used extensively in bitcoin: in bitcoin addresses, in script addresses, and in the mining Proof-of-Work algorithm. The algorithms used to make a bitcoin address from a public key are the Secure Hash Algorithm (SHA) and the RACE Integrity Primitives Evaluation Message Digest (RIPEMD), specifically SHA256 and RIPEMD160.

Starting with the public key K, we compute the SHA256 hash and then compute the RIPEMD160 hash of the result, producing a 160-bit (20-byte) number:

where K is the public key and A is the resulting bitcoin address.

Tip: A bitcoin address is not the same as a public key. Bitcoin addresses are derived from a public key using a one-way function.

Bitcoin addresses are almost always encoded as "Base58Check" (see Base58 and Base58Check Encoding), which uses 58 characters (a Base58 number system) and a checksum to help human readability, avoid ambiguity, and protect against errors in address transcription and entry. Base58Check is also used in many other ways in bitcoin, whenever there is a need for a user to read and correctly transcribe a number, such as a bitcoin address, a private key, an encrypted key, or a script hash. In the next section, we will examine the mechanics of Base58Check encoding and decoding and the resulting representations. Public key to bitcoin address: conversion of a public key into a bitcoin address illustrates the conversion of a public key into a bitcoin address.

Figure 5. Public key to bitcoin address: conversion of a public key into a bitcoin address