Bitcoin Wallet Address & Comparison of Three Address Formats

What is a Bitcoin Wallet Address?

A Bitcoin wallet address(also called Bitcoin address) is an identifier (account) consisting of 27-34 alphanumeric Latin characters (excluding 0, O, I). Addresses can be represented in QR code form, are anonymous, and do not contain information about the owner.

Address Example: 14qViLJfdGaP4EeHnDyJbEGQysnCpwn1gd

Most Bitcoin addresses are 34 characters long. They consist of random numbers and uppercase and lowercase letters, excluding uppercase letters "O," uppercase letter "I," lowercase letter "l." The number "0" is not used to prevent visual confusion. Some Bitcoin addresses may be shorter than 34 characters (as short as 26) and still be valid. A considerable portion of Bitcoin addresses is only 33 characters long, and some addresses may be even shorter. Each Bitcoin address represents a number. These shorter addresses are valid because they represent randomly occurring numbers starting with zero, and when zero is omitted, the encoded address becomes shorter. Several characters in Bitcoin addresses are used as checksums to automatically detect and reject printing errors. The checksum also allows Bitcoin software to confirm that a 33-character (or shorter) address is actually valid, rather than just a simple address missing characters.

What is the Purpose of Bitcoin Addresses?

Bitcoin addresses are used to represent the source or destination of Bitcoin payments (similar but not equivalent to a bank account number). It is akin to sending funds from your bank account A to your friend's bank account B: if you want to send Bitcoin to a friend, you need to send Bitcoin from your address A to your friend's address B.

How to Obtain Bitcoin Addresses?

Any Bitcoin user can obtain addresses for free. For example, when using Bitcoin Core (the Bitcoin core client), you can click on "New Address" and be automatically assigned an address. Alternatively, you can obtain Bitcoin addresses from exchanges or within accounts in software or hardware wallets.

Three Formats of Bitcoin Addresses:

Legacy (P2PKH) Format

Example: 1Fh7ajXabJBpZPZw8bjD3QU4CuQ3pRty9u

Addresses starting with "1" are the original Bitcoin address format and are still in use today. P2PKH stands for Pay To PubKey Hash.

Nested SegWit (P2SH) Format

Example: 3KF9nXowQ4asSGxRRzeiTpDjMuwM2nypAN

Addresses starting with "3" are Pay To Script Hash (P2SH), which supports more complex functionalities than Legacy addresses. Nested P2SH involves encapsulating existing P2SH addresses (starting with "3") together with SegWit addresses for backward compatibility. However, this is a kind of workaround that results in SegWit transactions requiring about 10% additional space. This contradicts the purpose of scalability.

Native SegWit (Bech32) Format

Example: bc1qf3uwcxaz779nxedw0wry89v9cjh9w2xylnmqc3

Addresses starting with "bc1" are Bech32 encoded addresses, specifically designed for SegWit. Bech32 was defined in BIP173 at the end of 2017. One of the main features of this format is its case insensitivity (the address contains only 0-9, az), which effectively avoids confusion and makes it more readable during input. Because fewer characters are needed in addresses, Bech32 uses Base32 encoding instead of the traditional Base58, making calculations more convenient and efficient. Data can be stored more densely in QR codes. Bech32 provides higher security, better optimization of checksums, and error detection codes, minimizing the chances of invalid addresses.

Bech32 addresses are compatible with SegWit itself. There is no need for additional space to put SegWit addresses into P2SH addresses, so using Bech32 format addresses results in lower fees.

Bech32 addresses have several advantages over old Base58 (Base58Check encoding is used to encode byte arrays in Bitcoin into human-readable strings):

l Smaller QR codes

l Better error correction

l Higher security

l Case insensitivity

l Composed only of lowercase letters, making them easier to read, input, and understand.

Comparison of Base58 and Bech32 QR Codes

Comparison of Three Bitcoin Address Formats

(Note: The transaction fee column compares the average fees when transferring between the three address formats)

Reminder:

. There is still relatively limited support for Bech32 format addresses in wallets and exchanges. If you need to transfer Bitcoin to or from a Bech32 format address, please confirm whether the wallet and platform support this format to avoid loss of assets.

. To check wallet and platform support for Bech32 format addresses: Bech32 Adoption. It is best to directly consult the wallet manufacturer or exchange platform for confirmation.

. Hardware wallets that support Bech32 format addresses include Ledger and LUBANSO. If Trezor and KeepKey users want to use this format for Bitcoin addresses, they can connect to the Electrum wallet.


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