Understanding Bitcoin Address Types

Various address types have been introduced to enhance Bitcoin's efficiency, security, and scalability. In this article we'll explore four different types of transactions.

1. Legacy

• Legacy transactions, also known as Pay-to-Public-Key-Hash (P2PKH), represent the original and most common address format.

• Addresses in this format start with the number "1."

• Legacy transactions are less space-efficient and can lead to higher transaction fees due to their larger size.

Example Legacy Address: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

2. Nested SegWit (P2SH-P2WPKH)

• Nested SegWit, or Pay-to-Witness-Public-Key-Hash (P2SH-P2WPKH), is an interim solution that combines features of both Legacy and Native SegWit.

• Addresses in this format start with the number "3."

• It allows Legacy wallets to send funds to SegWit addresses while still benefiting from lower fees.

Example Nested SegWit Address: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

3. Native SegWit (bech32)

• Native SegWit, or bech32, represents an improvement over Legacy transactions in terms of scalability and reduced transaction fees.

• Addresses in this format start with "bc1."

• Native SegWit uses a more efficient scripting language (Segregated Witness) to reduce transaction size.

Example Native SegWit Address: bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq

4. Taproot

• Taproot is the latest Bitcoin address format designed to enhance privacy, scalability, and scripting capabilities. Addresses in this format start with "bc1p."

• Taproot allows the aggregation of multiple signatures, making complex transactions more efficient and cost-effective.

Example Taproot Address: bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq

Our recommendation

For UniSat Wallet users, we suggest choosing Taproot or Native Segwit. Taproot offers substantial cost savings on transaction fees, but not all CEX platforms support it. Native SegWit has better compatibility with CEX platforms.