Just like with fiat money, when transacting in cryptocurrencies, users don’t always have the exact amount to send. This means that sometimes you send more funds than the transaction requires. In these cases, the remainder of your assets is returned to a change wallet and then refunded to your original wallet address.
Let’s look at an example. If you have a $50 bill and have to pay $40 for your purchase, your change will be $10. The same can happen with cryptocurrencies. Transactions on the blockchain always have an input and an output. For example, if you go on an exchange and purchase 1 ETH with fiat, the input will be the fiat money, the output will be 1 ETH. However, if you are looking to send 1 ETH to a crypto wallet, the case is not as straightforward.
Sometimes, in cryptocurrency transactions, inputs cannot be precisely calculated to the exact amount requested by the transaction. In such cases, the sender address sends more funds than requested by the transaction. However, the difference between the requested amount and the amount stored in the input is what is called change. This change is temporarily stored in a change address and then refunded back to the sender’s wallet address.
In this sense, change addresses are a very valuable part of the cryptocurrency ecosystem because they allow for fair interactions between wallets. Without change addresses, it wouldn’t be possible to transfer exact amounts between wallets. What’s more, users don’t even see that change addresses exist. While this process happens more often than we might think, it is a background calculation performed by the blockchain itself.
You can see your change address and how much of the funds you’ve sent have gone through it. However, no action is required on your part. The blockchain calculates how much a sender is inputting and what the necessary output is. If the input is insufficient, the transaction will fail. If the input is larger than the requested output, the blockchain will send the remaining funds to a change address. Seconds later, these funds will be returned back to the sender’s wallet.
Change addresses represent an important underlying function of all blockchains. While users might not see them when interacting with the blockchain and making transactions, change addresses are often utilized. Without them, it would have been impossible to send exact amounts to other wallets or to pay for NFTs, for example.
If you are curious to see your change address, you can easily view it in the details about any transaction you’ve made. The change address is visible, even if it was not used in the given blockchain interaction.
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