The Four Types of Bitcoin Address You Should Know About

Issue 1

When it comes to managing your Bitcoin and Bitcoin wallet there are four different types of address that you can choose from. In this short article we will cover these four types and their pro and cons. All these types are compatible with HD wallets and you can generate multiple addresses using the same wallet.

1.P2PKH or Legacy:
This type of address starts with 1, e.g. 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2.
Legacy addresses are not compatible with Segwit transactions and you will have to pay slightly higher fees. There also exists a security risk related to transaction malleability associated with this type of address that makes them less attractive.

2. P2SH or Segwit Compatible:
This type of address starts with 3. E.g. 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy.
By using this type of address you will end up having smaller txs and thus pay less fees. By using P2SH addresses you can save as much as 26% on transaction fees.

3. BECH32 or native segwit:
This type of address starts with BC1. E.g. bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq
This is the most efficient type of address. You can expect saving as much as 38% compared to a legacy address.

4.P2TR or Taproot:
This type of address starts with BC1P. e.g.” bc1pmzfrwwndsqmk5yh69yjr5lfgfg4ev8c0tsc06e
One of the main benefits of this type of address is their enhanced privacy for multi-sig wallets. Taproot addresses for single-sig and multi-sig wallets look exactly the same.
We haven’t seen them around yet but soon with Taproot transactions becoming more common we can expect to see them more often and we will write more as their use-case and benefits become more clear.