Addresses are one of the key pillars of the cryptocurrency market. An address is a unique identifier that serves as a pointer to each wallet where coins can be sent. Addresses in the cryptocurrency world are no different from mailing addresses, account numbers, or even phone numbers.
The only difference is that crypto addresses are completely secure, and can be shared publicly without consequence.
Crypto addresses play a role in ensuring that each crypto user has a unique identifier
What Are Addresses?
It is important to first understand how cryptocurrency addresses work. When a new bitcoin wallet, for example, is created, a unique string of arbitrary digits and letters is generated. This string serves as the address of that wallet and is the only way to send bitcoin into that wallet.
Sometimes wallets and the addresses attached to them go for long periods without being used. These wallets often contain cryptocurrencies.
The state of a wallet refers to how long ago the wallet was used for sending or receiving, or for any transaction of any kind.
As far as state goes, wallets and their addresses generally fall into one of three categories
- Active addresses
- New addresses
- Dormant addresses
The key differences between active and new wallets will be explained in detail below
Addresses are designated as active when they have recently engaged in receiving cryptocurrency, sending them or have directly participated in any other kind of transaction in the network.
The number of active addresses in a blockchain is used to determine how active the users of a particular network are.
For an address to be designated as active, it must have participated in a transaction that is recorded and has been verified over the blockchain.
A new address refers to one that is attached to a recently created wallet.
A new wallet has no transaction history. To generate a new address, a user must have previously owned an active wallet. This wallet likely would have been obtained from wallet service providers like crypto exchanges or hardware/software wallet managers like trust wallets.
It should be noted that the number of new addresses in a network does not represent the number of new users signing up for new crypto wallets.
This is because sometimes, crypto exchanges automatically generate new addresses after every successful transaction. This is a safety measure that ensures complete anonymity on their platform. With these dummy addresses, unauthorized users cannot track funds or check past transactions.
What Are Their Key Differences?
When considered side by side, the number of active and new addresses on a network can tell us how healthy the network is overall.
It is a great way to determine how many investors are using a particular network, and how many new users a blockchain currently has. Nevertheless, it is still important to understand their key differences
Below are some of them
- A new address can become an active address, but the reverse is not possible.
- There can only be one active address per user. This is not the case for new addresses.
- Active addresses can expire, while new addresses cannot
- New addresses have no transaction history, but active ones do.
- An active address may or may not contain cryptocurrencies, while new addresses never contain them.
- New addresses have no history of participation in transactions, while active addresses do.
- The number of new addresses on a network does not determine how active it is. The number of active users, however, is a great metric for this end.