Bitcoin address formats: Legacy, SegWit, and Bech32

Contents

Introduction

Bitcoin has evolved over the years, leading to the introduction of different address formats designed to improve efficiency, security, and transaction costs. The three main Bitcoin address formats are Legacy (P2PKH), SegWit (P2SH), and Bech32. Each format has its own characteristics, affecting transaction fees, speed, and overall performance within the Bitcoin network.

Bitcoin wallet format comparison

1. Legacy (P2PKH)

Format: Legacy addresses start with the digit "1" (e.g., 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa).

Description: Legacy addresses are the original Bitcoin address format, introduced with Bitcoin’s launch in 2009. They use the Pay-to-PubKey-Hash (P2PKH) script, where transactions are sent to a hashed public key. While widely supported by all wallets and exchanges, this format results in higher transaction fees due to its larger transaction size and inefficient use of block space.

Fees and Speed:

  • Transactions using Legacy addresses have the largest size in bytes, leading to higher fees.
  • Slower processing compared to newer address formats due to inefficient use of block space.

Advantages:

  • Universally supported by all Bitcoin services.
  • Well-established and widely recognized in the crypto ecosystem.

Disadvantages:

  • Higher transaction fees compared to SegWit and Bech32.
  • Lacks SegWit benefits, such as protection against transaction malleability and enhanced efficiency.

Typical Transaction Fee: High (60 to 120 satoshis per byte, depending on network congestion).

2. SegWit (P2SH-SegWit)

Format: Starts with "3" (e.g., 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy).

Description: Segregated Witness (SegWit) was introduced to improve Bitcoin’s scalability and efficiency by moving digital signature data outside the main transaction block. The P2SH-SegWit format allows transactions to benefit from SegWit while maintaining backward compatibility with non-SegWit wallets. This results in lower transaction fees and improved security against transaction malleability attacks.

Fees and Speed:

  • SegWit transactions are smaller in size, reducing costs.
  • Faster transaction confirmations due to better block space utilization.

Advantages:

  • Lower fees compared to Legacy transactions.
  • Improves network scalability and efficiency.
  • Enhances security by preventing certain types of transaction malleability attacks.
  • Compatible with older wallets since it still uses the P2SH format.

Disadvantages:

  • Slightly larger transaction size compared to Native SegWit (Bech32).
  • Some older services may still lack full SegWit support.

Typical Transaction Fee: Medium (40 to 80 satoshis per byte).

3. Bech32 (Native SegWit)

Format: Addresses start with "bc1" and use the Bech32 encoding format (e.g., bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf8lqx).

Description: Bech32, also known as Native SegWit, is the most advanced Bitcoin address format, offering maximum efficiency in transaction processing.

Fees and Speed:

  • Lowest transaction fees due to smaller transaction sizes.
  • Faster confirmation times as transactions take up less space in blocks.

Advantages:

  • Lowest fees among all Bitcoin address formats.
  • Improved error resistance, reducing chances of mistaken address inputs.
  • Fully compatible with SegWit benefits, optimizing scalability and efficiency.

Disadvantages:

  • Not universally supported by all wallets and exchanges, potentially causing compatibility issues.

Typical Transaction Fee: Minimal (10 to 30 satoshis per byte).

Compatibility Between Bitcoin Address Formats

Bitcoin allows seamless transactions between different address formats, meaning users can send funds between Legacy, SegWit, and Bech32 addresses without issues.

How to Choose an Address Format Using BTC Wall

Simply click on the drop-down list with address formats, and choose which one you currently prefer to work with.

Selecting wallet format in the interface

Please note: these are all independent wallets, each with its own balance. You can transfer bitcoins between them.

Conclusion

The evolution of Bitcoin address formats has led to significant improvements in transaction efficiency, fees, and network scalability. Legacy addresses remain widely used but are costly in terms of fees. SegWit addresses offer better efficiency and lower fees, while Bech32 (Native SegWit) provides the best overall performance with the lowest transaction costs. Users looking to save on fees and optimize their transactions should consider adopting Bech32 where supported.