Also if i send btc to an address that has not been created yet. Where does that go? Does it bounce back or does some future person land some free btc?
Sending btc to an invalid address is not possible because of the checksum.
Your wallet validates the checksum of you entered address. So it won't be processed.
It is also highly unlikely to accidentally enter a valid btc address.
thanks for the quick reply. If you could also explain how they are created/issued too?
Since I recently explained this to someone in the German subforum, I'm just gonna leave you a translation of that here.
Hopefully the topic will be more understandable for you.
In general there are
two types of cryptography:symmetric cryptography: The same key is used to encrypt and decrypt messages. ( this key must be known to sender and receiver)
asymmetric cryptography: 2 keys - an encryption key (public key) and a decryption key (private key) - also known as
'Public Key Cryptography' Public key cryptography is now used, for example, when a wallet is created or when a transaction is signed.
Bitcoin itself uses
digital signatures, called
ECDSA (Elliptic Curve Digital Signature Algorithm) to create a public/private key pair or
derive the corresponding public key from a private key.
Important: the other direction is NOT possible, that is from public to private key.
Then the SHA-256 hash function is applied twice to this public key and the
public address is generated.
Important: the other direction is also NOT possible here, so you can NOT get from the public address to the public key.
This address is now made 'easier to read' using the Base58Check encoding.
This also excludes the following characters: '0', 'O', 'I', 'l', '+', '/ '
>> A Bitcoin address is therefore only a short form for the public key.So, if you want to buy a beer with bitcoin now, you have to sign the transaction (how many btc you want to send and to whom) with your
private key.
The signature and your public key are attached to the transaction so that anyone can verify it.
ECDSA also allows schemes such as BIP32/BIP44 HD wallets. (A Ledger Nano or Electrum are HD Wallets)
HD stands for "hierarchical and deterministic".
The keys are arranged in a hierarchy and follow strict rules.
From the seed a parent key pair is generated, from which all child key pairs are derived.