Checksum

A checksum is a short value computed from a piece of data that lets software detect errors introduced by typos, truncation, or corruption. Bitcoin addresses embed checksums: legacy Base58Check addresses carry a 4-byte checksum derived from double SHA-256 hashing, and newer bech32 addresses use a code guaranteed to detect any error affecting up to 4 characters.

Why it matters

Bitcoin transactions are irreversible, so a single mistyped character in an address could otherwise send funds into the void. Checksums make that nearly impossible: a wallet recomputes the checksum before sending and refuses any address that fails validation, so a typo produces an error message rather than a loss. Seed phrases carry the same protection, with the final word of a 12 or 24 word phrase encoding checksum bits that catch most transcription mistakes during recovery.

How it works

In Base58Check encoding, the payload is hashed twice with SHA-256 and the first 4 bytes of the result are appended before the whole string is encoded. Any change to a character changes the recomputed checksum and the mismatch is flagged. Bech32, introduced alongside Segregated Witness, replaced the hash-based approach with a BCH error-detecting code that not only catches errors but can indicate where in the string they likely occurred, at a small fixed cost of 6 checksum characters.