Differences between Bitcoin address types explained simply

[Theupdude]

Many beginners are confused about different types of Bitcoin address. Some start with a 1, others with a 3, others with bc1 and others are just more recent but still known to start with a bc1p address. You will be overwhelmed at first but the reality is these addresses are meant to enhance speed, fees and security in the long run.

A simple breakdown given below can be understood by anyone being a beginner.

Legacy addresses

Starts with 1

Example

Code:

1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

These are the earliest addresses for bitcoin. They function quite well still although they do get outpaced with the modern ones. Their charges tend to be higher since they are dealing with the outmoded system of transactions. You still might see them, however, in case you implicitly send or receive with older wallets or exchanges.

P2SH addresses

Starts with 3

Example

Code:

3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

These were added to provide greater flexibility. This type is used by multisig wallets and some SegWit wallets. Fees are not the lowest but is lower than legacy. Such addresses are in principle nothing more than containers inside which more sophisticated spending rules can be stored.

Bech32 SegWit addresses

Starts with bc1q

Example

Code:

bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh

These are more recent in nature and has the lowest cost, in comparison to 1 and 3. They optimise and lower the cost of Bitcoin transactions. They also reduce errors as the format is easier to read by a software. They are now accepted by most wallets and exchanges and beginners tend to be advised to use this type.

Taproot addresses

Starts with bc1p

Example

Code:

bc1p5cyxnuxmeuwuvkwfem96lxyepd6l2q9ea9s4c2

The most recent upgrade to Bitcoin is Taproot. Such addresses can make transactions more secretive and make smart contract such as spending conditions with very little information revealed. They are also cost effective in terms of fees. They aren't supported by all wallets and exchanges as yet but the support is growing rapidly.

FAQ

In your opinion what should be the address of a beginner?
bc1q or bc1p should be used in case your wallet allows it. They have cheaper charges and newer functions. P2SH (3) and Legacy (1) are mostly compatibility based.

Do these speeches affect the amount of Bitcoin you receive?
No. The type of speech makes no difference to the amount of bitcoin. It does nothing but changes the structure of the transactions and charges.

Is it possible to send one type of Bitcoin to another type?
Yes. A bc1 address can go to a 3 or 1 address and vice versa provided that that wallet or exchange is capable of it. The Bitcoin is identical in no matter what format the address comes in.

Why are these differences significant
People tend to waste an extra money in charges due to the ignorance of using old addresses. Knowledge on the address types will help you to choose the most effective one and will not get confused during a deposit or withdrawal.

[Charles-Tim]

P2SH addresses

Starts with 3

Example

Code:

3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

These were added to provide greater flexibility. This type is used by multisig wallets and some SegWit wallets. Fees are not the lowest but is lower than legacy. Such addresses are in principle nothing more than containers inside which more sophisticated spending rules can be stored.

It is used in multisig legacy addresses and also nested segwit address, but it is not used in segwit. The two segwits are the addresses that start from bc1 (bc1p and bc1q).

Taproot addresses

Starts with bc1p

Example

Code:

bc1p5cyxnuxmeuwuvkwfem96lxyepd6l2q9ea9s4c2

The most recent upgrade to Bitcoin is Taproot. Such addresses can make transactions more secretive and make smart contract such as spending conditions with very little information revealed. They are also cost effective in terms of fees. They aren't supported by all wallets and exchanges as yet but the support is growing rapidly.

The singlesig taproot addresses does not make transactions more secretive. We only read about its multisig (which makes it interesting) but there is nothing like that for now on wallets

[Zaguru12]

You will be overwhelmed at first but the reality is these addresses are meant to enhance speed, fees and security in the long run.

This is not entirely true, type of address doesn’t actually increases or reduce speed or security. First the speed of the transaction depends on the network, how congested it is and how fast the miners were able to find mine a block which is averagely 10 minutes, also your transaction fee heavily contributes to it because miners pick your transaction base on the fee as such the higher the fee the higher your chance of transaction been prioritize by the miners,

Also the security of the transaction depends on let’s say the number of bits of entropy of the keys (128 bits is an agreed number) and also how you safeguard the back up of your wallet keys or seed phrase.

Then for transaction fee yes the segwit address formats are able to reduce fee even though it is not what it was meant for, it was a solution to transaction malleability. But the reason why we pay less using Segwit addresses when sending out is simply because transaction fees are no longer calculated based on size but on Weight and Segwit transactions has less weight

[LoyceV]

Legacy addresses
Starts with 1

Your overview is incomplete: there are compressed and uncompressed legacy addresses.

they do get outpaced with the modern ones.

I checked List of all Bitcoin addresses with a balance to see how much Bitcoin is stored in each address type:

Addresses starting with 1 (both compressed and uncompressed):
21,575,613 addresses hold 6,611,890.80468021 BTC.

Addresses starting with 3:
6,423,010 addresses hold 4,065,461.00329874 BTC.

Addresses starting with bc1q:
22,030,848 addresses hold 9,088,273.43127034 BTC.

Addresses starting with bc1p:
4,693,434 addresses hold 185,760.58065203 BTC.

I would have guessed the number of Bitcoin stored in legacy addresses to still be higher.

[Charles-Tim]

Legacy addresses
Starts with 1

Your overview is incomplete: there are compressed and uncompressed legacy addresses.

Both uncompressed and compressed legacy addresses start from 1, and there is no difference in both address formats. Or am I wrong? Probably he may not include it because both addresses starts from 1, provided if he knows about it.

But in transaction fee, uncompressed legacy addresses is the earliest (with public key that starts from 04, and private key that starts from 5, unlike compressed legacy addresses that public keys start from either 02 or 03, and private key start from K or L) has higher fee than compressed legacy addresses.

But the addresses starts from the same character which is 1.

[LoyceV]

Both uncompressed and compressed legacy addresses start from 1, and there is no difference in both address formats. Or am I wrong?

The difference is in the public key, which is only publicly visible after signing a transaction.

But the addresses starts from the same character which is 1.

I still like the way those look, especially for vanity addresses starting with a 1 is much nicer than starting with 4 characters.

[Mia Chloe]

I would have guessed the number of Bitcoin stored in legacy addresses to still be higher.

Well if not for the data you gave up I think I would have had the same thought too. however on the other hand if you consider how long SEGWIT has been around plus how long more wallet have switched from using legacy addresses to using SEGWIT then there's you could still consider the possibility of funded SEGWIT addresses topping the chart.

If you look up the mempool you'll most likely see more transactions with segwit and I guess it's obviously because they are way cheaper fee wise.

[Charles-Tim]

If you look up the mempool you'll most likely see more transactions with segwit and I guess it's obviously because they are way cheaper fee wise.

Segwit makes up 94% or more of bitcoin transactions, more wallets make it default is the main reason. All the bitcoin wallets that I am using right now, including the ones that I have tested recently, and also including the unrecommended ones that are close source make segwit by default now.

Most people do not know much about transaction fee and the different types of addresses and how one can reduce fee than the other, only few of us know that, but most wallet helped by making segwit version 0 the default, which is helpful for newbies and everyone that makes transactions with cheaper fee with their default generated segwit addresses.

If not exchanges as most exchanges are using legacy addresses, while few are using nested segwit and few using multisig (like OKX), it is very possible that segwit transactions would have been 99 to 99.99% by now most likely.

[SquirrelJulietGarden]

Many beginners are confused about different types of Bitcoin address. Some start with a 1, others with a 3, others with bc1 and others are just more recent but still known to start with a bc1p address. You will be overwhelmed at first but the reality is these addresses are meant to enhance speed, fees and security in the long run.

A simple breakdown given below can be understood by anyone being a beginner.

Segwit address has bc1q and bc1p.
https://en.bitcoin.it/wiki/List_of_address_prefixes
https://en.bitcoin.it/wiki/Bech32

There are many topics about it already.
Bitcoin Address types for Beginners
Identifying Bitcoin Address By Format
The Importance of Identifying Different Type of Bitcoin Address
Create Taproot address for your Bitcoin
Bitcoin Taproot (Bech32m - bc1p) adoption
Bitcoin address types (learnmeabitcoin.com).