Did you know that there are 3 types of Bitcoin addresses? Legacy, Nested SegWit and Native SegWit
Anyone who has been dealing with Bitcoin knows that to transfer any amount of BTC you need a Bitcoin address, and that there are 3 types of addresses; Legacy, Nested SegWit and Native SegWit.
Almost all Bitcoin traders have used Bitcoin address and can generate these addresses either through an online wallet service or in an exchange. These address can be stored differently depending on your preference. You may use an online wallet, offline one or a slip of paper only. These addresses, however, can be of 3 types, here we will consider them briefly;
Legacy (P2PKH) format
P2PKH which stands for "Pay To PubKey Hash" is the most popular address format that starts with “1”. This address format was the very original and first format used by Bitcoin.
Nested SegWit (P2SH) format
P2SH stands for “Pay To Script Hash” and starts with “3” and it’s impossible to tell MultiSig addresses or Segregated Witness compatible addresses apart. This format is more powerful which supports things with more complex formats than Legacy Functions like having multiple digital signatures for the transaction authorization.
Native SegWit (Bech32) format
This format, unlike the other formats, does not start with a number but “bc1” belonging to the local SegWit address format. This format developed specifically for SegWit. You might face with an error saying “invalid address” in some exchanges if your BTC address is of this type as they don’t support this format.
This format is of three types of which the Bech32 is the least popular. However, it’s better than the other formats for different reasons. First of all the average cost of sending BTC from this address might be lower since no extra space is required for putting the SegWit address into P2SH address.
Secondly, Bech32 was defined in BIP173 (Bitcoin Improvement Proposal) which is a case-insensitive one so it reduces the confusion while reading it and since it has fewer character, the calculation is easier. In addition Bech32 offers a higher security, better optimization of the checksum error detection code, and decreases the chance of invalid addresses.
SegWit stands for Segregated Witness which is a soft fork that happens on Bitcoin blockchain. Indeed, it was a response to Bitcoin’s scalability problem in the shape of an upgrade protocol released in 2015 and officially implemented 2 years later.
How does SegWit work?
Unlike the prior model, signatures are not stored along with the transaction data, as a result, a single block can store more transactions which increases network transaction throughput.
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