Change addresses for UTXO-based crypto assets

Bitcoin (BTC) transactions often include two destination addresses: one for the recipient and another as a change address linked to your Ledger account. This system resembles cash transactions and stems from Bitcoin's use of UTXOs to track your BTC balance.

This change-address system is also seen in blockchains similar to Bitcoin, which employ UTXO accounting, such as Bitcoin Cash (BCH), Litecoin (LTC), Dogecoin (DOGE), Avalanche X-Chain and Zcash (ZEC).

However, the change-address system does not apply to accounts like Ethereum (ETH), XRP, and many others. For instance, Ethereum (ETH) or XRP addresses are static and remain unchanged after each transaction.

How it works

When a transaction does not entirely consume the coins it is spending, the difference is known as change. The change is sent back to an automatically generated address called the change address.

You can compare UTXO-based transactions with cash. Imagine you buy a hotdog that costs $5 with a $10 bill. In return, you will get a $5 bill of change. This change belongs to you and it will come back to your wallet. In that comparison, your wallet with $5 is a change address, still yours but a different bill. The same goes for BTC.

Example: 

1. John has 1 BTC and sends it to me. John has 0 BTC, and I now have 1 BTC.
2. I then send 0.2 BTC to my friend Suzy 
   • 0.2 BTC goes to Suzy's account
   • 0.8 BTC goes to my change address => my BTC account
3. My total account reflects the remaining 0.8 BTC

• Ledger Live automatically generates a fresh change address for every new transaction that does not fully spend its inputs.
• Ledger Live automatically takes care of change, you do not have to track the coins on your change addresses.
• It is not possible to check which address is your change address in Ledger Live. You can check your Bitcoin change addresses using Electrum.