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: bc1puaz84y65g0jh7zlhwv9vwhuu3se8ldf82lk5ca6zru6kdny2zvws69x6jd

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.

Disclaimer:

The content of this document is for informational purposes only. It does not constitute (i) investment advice or recommendations, (ii) an offer, solicitation, or inducement to purchase, sell, or hold digital assets, or (iii) financial, accounting, legal, or tax advice. Digital assets (including FTs and NFTs) are subject to market volatility, involve high risk, regulatory changes, and may depreciate in value. The information is provided "as is," and we make no warranties regarding its accuracy. Please consult your legal, tax, or investment professionals to determine whether trading or holding digital assets is suitable for you.