A Bitcoin Vanity address is an address that starts with a certain set of characters and is analogous to mining.
You repeat the process of generating a private key and finding the public key coordinates on the elliptic curve and the following hashing and conversion to base 58 – as shown in our guide on how to create a Bitcoin address.
In the case of mining this is defined as the difficulty that the miners are trying to reach, or essentially the number of zeros at the start of the ending hash – whilst with a vanity address it is the wanted result at the start. As all bitcoin addresses start with a 1 apart from on the testnet and other circumstances, a vanity address will start with a 1. Two examples are below:
The longer the intended sequence in the vanity address the more difficult is to create and the more valuable it is. The number of addresses is huge so there might be value on creating a specific address for an individual or company where the probability of creating an address of the length is low. As an example some websites are charging 0.1 BTC to generate a seven character non case sensitive address – and free below that as it can be easily generated on a home computer.
There are two methods to create a vanity address, firstly do it yourself – probably the most secure way as nobody can see the private key and public key pair. This does involve knowing a little bit of computing and downloading the correct software which you can get here. You can then choose how much of your processing power you wish to dedicate to the process, but beware dedicating a large proportion of your CPU can make the program crash.
The other method which might not be as secure is to go onto a pool such as vanitygen.com where you can outsource the work to Bitcoin vanity address miners. These miners dedicate their CPU & GPU power to finding the address you want and send it to you either via email or in the post (if you are paying for it). Although this is a quick process there is the risk that the miners could hold onto the private key that generated the address and use it at some point in the future to hack your funds and steal the millions your vanity address has stored in it.
Being secure the best method is to install the software and run the program yourself!