Bitcoin addresses are fundamental to interacting with the Bitcoin network. Whether you're sending, receiving, or storing BTC, your address acts as a unique identifier—like a digital mailbox for your assets. Over time, Bitcoin has evolved to support multiple address formats, each offering improvements in efficiency, security, and privacy.
Understanding these address types is crucial for optimizing transaction fees, ensuring compatibility, and participating in next-generation Bitcoin ecosystems like Ordinals and Runes. Let’s dive into the four main Bitcoin address types: Legacy (P2PKH), P2SH, SegWit (Bech32), and Taproot (P2TR).
Why You Need a Bitcoin Address
Transaction Pathway
A Bitcoin address functions as a destination on the blockchain—similar to a bank account number or email address. It enables users to send and receive digital assets such as BTC, BRC-20 tokens, and Bitcoin-based NFTs. Every transaction linked to an address is permanently recorded on the public ledger, ensuring full transparency.
Security is maintained through cryptographic principles: each address derives from a public key, and every transaction must be signed with the corresponding private key. This ensures only the rightful owner can authorize transfers, preventing fraud and tampering.
👉 Discover how secure Bitcoin transactions really are with modern wallet technology.
Identity Ownership in Web3
In traditional systems, identity verification relies on centralized authorities like governments issuing IDs or passports. These credentials are stored in centralized databases vulnerable to breaches.
In contrast, Bitcoin introduces a decentralized identity model. Your Bitcoin address becomes your pseudonymous identity in Web3. For instance, if you contribute to an Ordinals-based DAO, your unique address represents your role and reputation within that community.
Note: one person can control multiple addresses, and one address might be shared by a group—common in "airdrop farming" operations where users operate multiple wallets to maximize rewards.
How to Get a Bitcoin Address
Anyone can generate a Bitcoin address for free using various tools:
- Bitcoin Core: The full-node client allows advanced users to create native addresses and participate directly in the network.
- Exchanges: Platforms like Gate.io provide custodial addresses for deposits and withdrawals.
- Software Wallets: Apps like MetaMask or Gate’s Web3 Wallet let you manage non-custodial addresses with full control over your private keys.
All generated addresses follow specific formatting rules depending on their type.
The Four Types of Bitcoin Addresses
1. Legacy (P2PKH) Addresses – The Original Format
Legacy addresses, also known as Pay-to-PubKey Hash (P2PKH), were the first Bitcoin addresses introduced in 2009. They start with "1" (e.g., 1LMcKyPmwebfygoeZP8E9jAMS2BcgH3Yip) and use Base58 encoding.
While fully functional, they are now considered outdated due to inefficiency:
- Larger transaction size
- Higher fees (up to 38% more than SegWit)
- No support for advanced scripting features
These addresses are still supported but should only be used when interacting with older wallets that don’t recognize newer formats.
If you receive funds to a Legacy address in a modern wallet, you may not see the balance until you import the key or upgrade your wallet software. However, funds are never lost—just temporarily inaccessible.
2. P2SH (Pay-to-Script-Hash) Addresses – Enabling Smart Features
P2SH addresses begin with "3" (e.g., 3E13MQrZvPHqSSTsdQaZzZiYPzjEDT5VKE) and allow more complex transaction logic than Legacy addresses.
They work by hashing a redemption script—a set of conditions that must be met to spend funds. Common uses include:
- Multisignature wallets (e.g., 2-of-3 signatures required)
- Time-locked transactions
- Escrow services
For example, three partners managing a joint fund can create a 2-of-3 multisig wallet. Funds sent to the P2SH address require at least two signatures to move, enhancing security and reducing single-point failure risks.
P2SH offers about 26% lower fees compared to Legacy addresses and supports SegWit through nested formats (wrapped SegWit), though not as efficiently as native implementations.
3. SegWit (Bech32) Addresses – Efficiency & Lower Fees
Segregated Witness (SegWit) was a major upgrade that separated signature data ("witness") from transaction data. This increased block capacity without changing the block size limit.
There are two SegWit variants:
- Nested SegWit (P2SH-SegWit): Starts with "3", backward-compatible but less efficient.
- Native SegWit (Bech32): Starts with "bc1", uses Base32 encoding (e.g.,
bc1qsr03qya584vkdqztxyat3d5s63pjfddy8vwrue).
Native Bech32 addresses offer:
- Up to 38% cheaper fees than Legacy
- Better error detection
- Case-insensitive format
- Compact QR codes
Because SegWit reduces transaction weight, more transactions fit per block—speeding up confirmations and lowering costs. Most modern wallets default to Bech32 for this reason.
👉 See how much you could save using efficient Bitcoin address formats.
4. Taproot (P2TR) Addresses – Privacy & Flexibility
Taproot is the latest Bitcoin upgrade, activated in November 2021 via BIP340–342. Taproot addresses start with "bc1p" (e.g., bc1pmzfrwwndsqmk5yh69yjr5lfgfg4ev8c0tsc06e) and use bech32m encoding.
Built on SegWit foundations, Taproot enhances:
- Privacy: Complex transactions (like multisig) appear identical to simple ones.
- Efficiency: Uses Merkle Abstract Syntax Trees (MAST) to reveal only executed conditions.
- Flexibility: Supports advanced smart contracts and Schnorr signatures.
Schnorr signatures enable signature aggregation, combining multiple signatures into one—reducing data size and fees. This is ideal for batched payments or payment channels like the Lightning Network.
Moreover, Taproot improves scalability by minimizing on-chain data. Only the actual spending path is recorded; unused contract branches remain hidden.
FAQs About Bitcoin Addresses
Q: Can I send BTC from any address type to another?
A: Yes. All Bitcoin address types are interoperable. You can send from a Legacy "1" address to a Taproot "bc1p" address without issues.
Q: Which address type should I use today?
A: For most users, native SegWit (bc1) offers the best balance of low fees and wide support. Developers and power users should consider Taproot (bc1p) for advanced features.
Q: Are Taproot addresses safe to use?
A: Absolutely. Taproot has been thoroughly audited and is supported by major wallets including Ledger, Trezor, and Electrum.
Q: Do I need a special wallet for bc1p addresses?
A: Yes. Not all wallets support Taproot yet. Ensure your wallet explicitly lists bc1p or BIP86 compatibility before generating one.
Q: What happens if I send BTC to an unsupported address?
A: Transactions will fail or funds may become temporarily inaccessible. Always verify wallet compatibility before depositing.
Q: Can I track transactions for all address types?
A: Yes. Blockchain explorers like Blockstream.info support all formats, including bc1p Taproot addresses.
Participating in Emerging Bitcoin Ecosystems
With the rise of protocols like Ordinals, BRC-20, and Runes, having the right address matters more than ever.
Runes—a lightweight token protocol designed to fix UTXO bloat—requires Taproot (bc1p) addresses for minting and transferring tokens. Similarly, inscribing NFTs via Ordinals works best with SegWit or Taproot due to lower fees and better data handling.
👉 Start exploring Bitcoin’s evolving ecosystem with the right tools today.
Final Thoughts
Bitcoin’s address evolution reflects its ongoing innovation—from basic payments to smart contracts and digital ownership. Each new format brings tangible benefits:
- Lower fees
- Enhanced privacy
- Greater functionality
By choosing the right address type—whether it's SegWit for daily use or Taproot for cutting-edge applications—you future-proof your interactions with the Bitcoin network.
As the ecosystem grows, staying informed ensures you make secure, cost-effective decisions. The future of Bitcoin isn’t just about price—it’s about utility, accessibility, and empowerment through technology.