Bitcoin addresses are the unique strings of characters used to send and receive bitcoin. They are an essential part of the bitcoin network, and understanding the different types of addresses and which one is best for you can help you use bitcoin safely and securely. In this article, we’ll take a look at the different types of bitcoin addresses and how to choose the right one for your needs.
- There are several address formats on the Bitcoin network: Legacy (P2PKH), Script (P2SH), SegWit (P2WPKH), and Taproot (P2TR).
- Each type of bitcoin address is distinguished by the technologies used and the benefits for the user – in particular, the ability to pay lower transaction fees.
- As of August 2022, the most popular bitcoin address standard is SegWit.
- The latest in the protocol of the first cryptocurrency appeared addresses of the Taproot format, or Bech32m. It was implemented along with the activation of the update in November 2021.
How to distinguish between address formats in the bitcoin network?
There are several types of addresses in the bitcoin network. They can be easily distinguished by the prefix – the characters at the beginning of the address:
- Legacy (P2PKH): starts with a number 1. Example: 1N4Qbzg6LSXUXyXu2MDuGfzxwMA7do8AyL.
- Script (P2SH): starts with a number 3. Example: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy.
- SegWit (P2WPKH): starts with “bc1q“. Example: bc1qfg9t7fwn0atn4yf9spca5502vk8dyhq8a9aqd8.
- Taproot (P2TR): starts with “bc1p“. Example: bc1peu5hzzyj8cnqm05le6ag7uwry0ysmtf3v4uuxv3v8hqhvsatca8ss2vuwx.
What is a bitcoin address in Legacy format?
The legacy address is the very first address standard in the bitcoin network, proposed by Satoshi Nakamoto. Otherwise, it is called P2PKH (Pay To Public Key Hash), since it requires the recipient to sign a signature calculated from the private key and the public key.
A Legacy address consists of three parts:
- the public key generated as a result of applying the SHA256 and RIPEMD algorithms to the private key;
- check sum.
Both incoming and outgoing transfers from such addresses are supported by all wallets and applications running on the Bitcoin network. The main disadvantage of Legacy addresses is high commissions. They also have a low speed of double hashing of the checksum and more weight in QR codes.
What are the differences between Script (P2SH) and Legacy?
Script addresses appeared in Bitcoin Improvement Proposal BIP-0016 in January 2012 thanks to Bitcoin Foundation Chief Scientist Gavin Andresen.
They have the same structure as Legacy addresses, but start with the number 3. Such addresses assume that when transferring funds, the recipient must have a script that matches the hash script. This feature allows you to reduce the transfer fee, pass the fee on to the recipient, and create multi-signature addresses.
What are the benefits of the SegWit format?
In the spring of 2016, developers Peter Welle and Greg Maxwell proposed a new kind of address called Bech32 in the BIP-0173 update. It is also called Segregated Witness (SegWit) or P2WPKH (Pay to Witness Public Key Hash).
Such addresses use the SegWit protocol, which allows you to reduce the block size in the Bitcoin network by removing the signature from it, which makes transaction fees even lower than when using Script or Legacy. The corresponding update was activated at the end of August 2017.
As of 2022, SegWit is considered the industry standard and is supported by all popular bitcoin wallets. According to the website Transactionfee.infoabout 85% of all outgoing transactions in mid-August 2022 were made from SegWit addresses.
Taproot – the best kind of bitcoin address?
An update to the bitcoin protocol called Taproot has been waiting for several years. Its activation was completed in November 2021.
The upgrade included important technical changes, in particular the implementation of the Schnorr signature scheme and the MAST concept. Taproot is supposed to increase the efficiency and scalability of the Bitcoin blockchain. However, there is another consequence of the update – a new address format called Pay-to-Taproot (P2TR) or Bech32m.
The main advantage of Taproot addresses for their owners is the lowest fees compared to other formats and cheaper payments on the Lightning Network.
However, Taproot has a big drawback – this type still supports only a small number of wallets. In mid-August 2022, only 0.56% of all outgoing transfers in the Bitcoin network committed from addresses of this type.
The gradual spread of the new standard is the norm for the decentralized Bitcoin network, which is used by a huge number of applications and users. A similar situation was observed after the introduction of SegWit.
Is it possible to transfer bitcoins between addresses of different formats?
Today Legacy, Script and SegWit are fully compatible with each other. That is, both incoming and outgoing transfers can be freely made between them.
The situation is somewhat different with Taproot. Most non-custodial wallets in use support sending transactions to an address like Bech32m, but do not have the functionality to create such an address. Also, not all cryptocurrency exchanges allow you to send funds to a Taproot address. The current situation with the implementation of Taproot in popular bitcoin wallets can be viewed on the website bitcoin wiki.
P2TR address transactions are supported by many used bitcoin block explorers, for example block chair or Blockstream.
What is a bitcoin address?
A Bitcoin address is a unique identifier with which a user can send and receive cryptocurrency. Each BTC address is unique and generated through complex encryption mechanisms. Serves as an analogue of a bank account in the bitcoin network.
What is the best bitcoin wallet format?
As of 2022, we recommend using SegWit – it is the modern standard, allows you to pay low fees for transfers on the Bitcoin network and is supported by most wallets. In the future, this format is likely to replace Taproot.
How to choose the type of bitcoin address?
Often, a bitcoin storage application allows you to choose an address format at the stage of creating an address.
How many characters are in a bitcoin wallet address?
The legacy address for the first cryptocurrency consists of 34 characters, SegWit addresses (Bech32) most often include 42 characters, Taproot (Bech32m) – 62 characters.
How many bitcoin addresses are there?
According to Glassnode, in August 2022, there were more than 38 million addresses in the Bitcoin network with a non-zero balance. Transactions sent or received daily about 1 million bitcoin addresses.
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In conclusion, Bitcoin addresses come in two types: P2PKH and P2SH. P2PKH is the most common and is compatible with most wallets, making it the best choice for most users. P2SH is more advanced and allows for more complex transactions, but it is less widely supported and not recommended for most users. Ultimately, the best type of Bitcoin address to choose depends on the user’s individual needs and preferences.