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In the eUTXO model, we use a new key each time we receive some ADA (or perhaps not each time, but often anyway). So when someone sends me some ADA to a new address, this address is unused and has never been seen on the network. However, the network somehow knows that this address is mine, as the balance is counted in my stake. How does it work?

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You are actually using only one single key. From this key, you can derivate a number of different accounts and addresses.

If you look closely at all these Shelley addresses in the wallet of your choice, you will notice it has two parts, which are:

  • Payment part, the first part of a Shelley address indicates the ownership of the funds associated with the address.
  • The second part of a Shelley address indicates the owner of the stake rights associated with the address. We call it, the delegation part.

You will notice that for all your addresses, the delegation part is the same. This is how, even using different addresses for payment, you can have all of them be managed by one single stake key.

Read more in CIP 19: Cardano Addresses.

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