Blockchain addresses 101: How to use them correctly and not lose your coins
Imagine Harry. Harry loves Bitcoin. Recently, Harry sent Bitcoin to his friend’s Bitcoin Cash wallet. The money left Harry’s wallet but never got to his friend’s account. Turns out, sending BTC to BCH was not the best idea. Our support team helped Harry to get his coins back, but they had to jump through some hoops. Meanwhile, Harry was very upset. Bottom line: don’t be like Harry. Always check if you’re sending your coins to the right address.
What is a wallet address and why is it so complicated? (it’s not)
To make a transaction on blockchain, you need to know your peer’s blockchain address. The address is a 27-34 digit code consisting of letters and numbers. It is generated by the wallet where you store your coins and is usually currency-specific. In other words, this address belongs to a certain blockchain.
Sometimes it is obvious which blockchain the address is coming from. For example, all Ethereum addresses start with 0x:
In Freewallet, when our users want to send coins, we perform an instant check to make sure the address has the right format. This way, Bitcoins are going to be sent to a Bitcoin address, not an Ethereum address.
Problems begin when two currencies have similar address formats.
For example, Bitcoin Cash appeared due to a hard fork on the Bitcoin blockchain, that is why it initially used the same address format. In January 2018, BCH updated its address format to avoid confusion with established Bitcoin addresses, but the addresses generated before the update are still operational.
So, what exactly happens if I send Bitcoin to an old Bitcoin Cash address (and vice versa)?
In a nutshell, your coins will get “stuck” on the blockchain. They will leave your account, but won’t be able to reach the recipient’s address because it simply doesn’t exist in the original network. To retrieve them, you will need access to the private key of the recipient’s wallet, which is often impossible to obtain, and requires a lot of tech savviness.
What do I do to avoid having my money stuck?
Check the format of the address to which you are about to send your coins. Here you can find examples of the most popular blockchain address formats.
If you are not sure whether the address belongs to the same blockchain as the coin you’re about to send, you better clarify it with the recipient. Asking "Hey, is it BCH or BTC" is way easier than "Hey, my coins are stuck. Can I have your private key?"