Change Addresses.

The problem is that the amount attached to these transactions with their inputs and outputs aren’t divisible. So, if Alice has a bitcoin address with one bitcoin in it, and she only wants to send Bob half a bitcoin, then she would have to send Bob that entire bitcoin.

The bitcoin network would then automatically create 0.5 bitcoins in change from the bitcoin that Alice sent, and send it to the third address in Alice’s control. That third address will also be a transaction output, meaning that the address will have multiple transaction outputs.

Over time, this means that bitcoin wallets end up with lots of addresses containing varying amounts of bitcoin and change from bitcoin transactions. When you send bitcoins to someone, your wallet will try its best to piece together the necessary funds using the addresses containing the different amounts.

That leads to transactions that can have several different inputs – different addresses with different amounts used to make up the funds. It’s usually unlikely that these inputs will deliver exactly the right amount, so you normally end up with change.

What if you want to send just a tiny amount of bitcoin? Luckily, you can slice bitcoins very thinly indeed. The smallest divisible part of a bitcoin is called a satoshi, and it amounts to just one hundred millionth of a bitcoin. You can’t send just one satoshi over the network, though – that’s simply too small and would clog up the network with tiny transactions. The smallest transaction value is 5340 satoshis, which is still pretty tiny.

To complicate matters still further, many bitcoin transactions involve a transaction fee, which means that you have to add a certain amount of bitcoin on top of the amount you’re trying to send. If you don’t, then it’s likely that the bitcoin transaction will fail altogether. This is something to consider, especially when sending tiny fractions of a bitcoin.

So, when you open your bitcoin wallet after a few transactions and begin to see multiple addresses containing lots of tiny amounts, that’s what’s happening. It isn’t particularly easy to read and makes bookkeeping a bit annoying, but it does make it possible to trace bitcoin transactions through the entire network – which is important, given bitcoin’s mantra of transparency and immutability.