Change Definition
In the context of cryptocurrency and blockchain technology, “Change” refers to the difference in value between the digital currency a spender sends, and the amount that gets registered on the recipient’s digital wallet. This is similar to the concept of change in traditional money transactions, wherein a certain amount is paid, and the excess is returned back to the spender.
Change Key Points
- Change in crypto transaction represents the balance return after a transaction is completed.
- Change addresses are created to handle the returned value in many blockchain systems.
- Change alleviates challenges with privacy and fungibility in a blockchain transaction.
- The mechanism for handling change varies between different cryptocurrencies.
What is Change?
“Change” is a term often used in transactions involving cryptocurrencies like Bitcoin. It represents the difference between the value in crypto coins or tokens that a spender sends for making a transaction and the actual value that the receiver acknowledges. The balance ‘change’ is returned back to the spender, remaining within the same ownership.
Why is Change Important?
Change is crucial for maintaining privacy and fungibility in transactions on a blockchain. By sending the ‘change’ back to a new change address, a blockchain system makes it harder for third parties to trace transactions back to the spender. It also ensures the movement and transfer of cryptocurrencies are smooth, keeping transactions relatively seamless.
When is Change Used?
Change is used in every blockchain transaction where the value of the sent crypto coins or tokens exceeds the value acknowledged by the receiver. It returns to the spender using a new change address to protect their privacy and manage fungibility.
Where is Change Used?
Change is used in virtually all blockchain-based cryptocurrencies including Bitcoin. But it is pertinent to note that specific mechanisms for handling change may vary between different cryptocurrencies.
How is Change Used?
During a blockchain transaction, if a sender pushes more value in crypto coins or tokens than what is needed for the transaction, the excess amount which represents the ‘change’, gets returned. Often, this is done by creating a new digital address where the change can be sent and kept within the spender’s ownership. This process is usually automated and managed by the cryptocurrency’s underlying mechanisms.
