Introduction to Bitcoin's Four Types of Addresses

Why Bitcoin Addresses Are Essential

Transaction Pathways

In the crypto ecosystem, wallet addresses function like bank account numbers or shipping addresses. A Bitcoin address serves as a digital identifier—akin to a bank account number on the Bitcoin network—enabling transactions by specifying where funds are sent or received.

Key functions include:

• Sending assets: Transfer BTC, BRC-20 tokens, or NFTs to specific addresses.
• Receiving assets: Receive airdrops or payments from Web3 projects.

Every transaction tied to an address is immutably recorded on the blockchain, ensuring transparency. Cryptographic mechanisms (public/private key pairs) guarantee that only the private key holder can authorize transactions, safeguarding against tampering.

Decentralized Identity Verification

Bitcoin addresses revolutionize identity authentication by:

• Eliminating reliance on centralized authorities (e.g., government-issued IDs).
• Providing self-sovereign identity through algorithmically generated addresses.
• Enabling ownership and control of digital identity in Web3 ecosystems.

Example: A unique Bitcoin address can represent your membership in a BTC inscription DAO.

Note: One address may represent multiple users (e.g., "sybil attacks" in airdrop farming), and individuals may control multiple addresses.

Obtaining and Formats of Bitcoin Addresses

How to Get a Bitcoin Address

1. Bitcoin Core Client: Generate addresses via the "New Address" button.
2. Exchanges: Custodial addresses (e.g., Gate.io) for depositing/receiving assets.
3. Software Wallets: Non-custodial options like MetaMask or Gate Web3 Wallet.

Address Formats

All mainnet Bitcoin addresses begin with:

• 1 or 3 (Legacy/P2SH)
• bc1 (Native SegWit/Taproot)
• Testnet addresses start with tb1.

Examples:

1LMcKyPmwebfygoeZP8E9jAMS2BcgH3Yip  
3E13MQrZvPHqSSTsdQaZzZiYPzjEDT5VKE  
bc1qsr03qya584vkdqztxyat3d5s63pjfddy8vwrue

QR codes simplify address sharing.

Types of Bitcoin Addresses

1. Legacy (P2PKH) Addresses

• Prefix: 1 (e.g., 15f12gEh2DFcHyhSyu7v3Bji5T3CJa9Smn)

• Characteristics:

  • Base58 encoding (26–36 characters).
  • Larger transaction signatures → higher fees.
  • Mostly obsolete; used only for legacy wallet compatibility.

2. Pay-to-Script-Hash (P2SH) Addresses

• Prefix: 3 (e.g., 35PBEaofpUeH8VnnNSorM1QZsadrZoQp4N)

• Advantages:

  • Supports multisig and complex scripts.
  • 26% cheaper fees vs. Legacy.
• Use Case: Multisig wallets (e.g., 2-of-3 signatures required).

3. SegWit (Bech32) Addresses

• Prefix: bc1 (e.g., bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq)

• Benefits:

  • Separates signatures from transaction data → smaller size.
  • 38% lower fees vs. Legacy.
  • Backward-compatible.
• Limitation: Not universally supported by exchanges/wallets.

4. Taproot (P2TR) Addresses

• Prefix: bc1p (e.g., bc1pmzfrwwndsqmk5yh69yjr5lfgfg4ev8c0tsc06e)

• Innovations:

  • Merges Schnorr signatures (efficient multisig) + MAST (privacy).
  • Optimized for smart contracts and Runes protocol.
• Use Case: BTC inscription protocols like Ordinals/BRC-20.

FAQ Section

Q1: Can I send funds from a SegWit address to a Legacy address?

A: Yes, SegWit addresses are backward-compatible.

Q2: Why are Taproot addresses considered more private?

A: They merge complex transactions into single-output formats using MAST, hiding unused conditions.

Q3: Which address type has the lowest fees?

A: Taproot (bc1p) > SegWit (bc1) > P2SH (3) > Legacy (1).

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Conclusion

Bitcoin's address evolution—from Legacy to Taproot—reflects its commitment to scalability, privacy, and efficiency. Whether you're transacting, managing multisig wallets, or exploring BTC inscriptions, choosing the right address type enhances security and cost-effectiveness.

As the network evolves, innovations like Taproot will further empower decentralized finance. Embrace these tools to unlock Bitcoin's full potential in the Web3 era.

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