What is a Bitcoin address and what types are there?
A Bitcoin address is a string of characters used to transfer cryptocurrency and linked to a specific user. It is generated when creating a crypto wallet or registering on a cryptocurrency exchange, and also functions as a public key.
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A unique identifier contains random letters and numbers proposed by hash algorithms based on cryptography. Although the address is recorded in the public blockchain along with other transaction details, a third-party user cannot determine who it belongs to.
When transferring BTC, it is important to ensure the accuracy of the entered characters. If an error is made in the address, the cryptocurrency will not reach the intended recipient. As transactions cannot be canceled, the funds will be irretrievably lost. Fortunately, the address can be copied in one click, which minimizes the risk of inaccuracies.
What types of Bitcoin addresses exist?
All addresses created for Bitcoin transactions have distinctive features in the form of their first characters. There are four types of identifiers in total: two outdated, one popular, and one new. They are compatible with each other, and when setting up a crypto wallet, you can independently specify the type of address.
Taproot (P2TR)
Taproot (P2TR) is a new address format that was introduced in 2021 as the latest update to the popular Segwit type. It was designed to scale the Bitcoin network by enabling transactions to be processed with the lowest fees and enhanced security. You can recognize a Taproot address by its initial characters bc1p. However, the main drawback is that this address format is still relatively new, and not all crypto wallets and exchanges support it yet.
An example of a Taproot address:
bc1p8demc9t4sse9hluasrvxgkdqhkydrk5ctwre8nkl4pwdvegn0sdsc6ejky
Segwit (P2WPKH)
Segwit (P2WPKH) is the most widely used Bitcoin address, distinguished by its initial code bc1q. It was created in 2016 as an alternative to outdated Script and Legacy formats. Its use reduces the block size, significantly lowering transaction fees and increasing transaction speed.
Example of a Segwit address:
bc1qj80956x7zv0pk4n00kgwp505nvlsufn6hzznyw
Script (P2SH)
Script (P2SH) is an address format developed in 2012 and starts with the digit 3. In this format, the recipient pays a reduced commission and signs more than one signature.
An example of a script address:
3EmGD0Uh4BPW7zxhyWeJsNc9vdUdLkPqQS
Legacy (P2PKH)
Legacy (P2PKH) is the standard Bitcoin address that Satoshi Nakamoto developed alongside the blockchain. It can be identified by the digit 1 at the beginning. The recipient with this address must provide their signature, which is generated from private and public keys. The disadvantages of this address are high commissions and long transaction processing times.
An example of a legacy address:
1MweQTmOs5b89pCfSa9yKr7HWZ7NwJFQq2
How to analyze a Bitcoin address and its transactions?
All addresses that perform transactions in the Bitcoin network appear in a public distributed ledger. Therefore, each of them can be familiarized with using special blockchain explorers.
Popular services for tracking Bitcoin addresses and their transactions are Blockchain Explorer, Blockstream, BitRef, and Blockonomics. To study a particular address, you need to enter it in the search box on the main page of one of the explorers.
After that, you can view previously made transactions with this address, the completion time of each transaction, commission size, amount of BTC transferred, and other details.
Also, next to the Bitcoin address, you can see its QR code, which is used to simplify cryptocurrency transfers instead of a long set of characters. Many crypto wallets also contain this element for ease of sending and receiving BTC.
One of the ways to use these sites is to track transaction completion. If the user is concerned about whether the deal will be registered on the blockchain, they can watch the activity of the address in real-time mode.
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