Day 15: Bitcoin Address Formats: Legacy, SegWit, and Taproot

Bitcoin Address Formats

Concept
Bitcoin addresses have evolved to improve efficiency, security, and functionality. Understanding the differences between Legacy, SegWit, and Taproot addresses is crucial for optimizing transactions and embracing Bitcoin’s advancements.

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1. Legacy Addresses (P2PKH)

• Format: Begins with 1 (e.g., 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2).

• Technology: Uses Pay-to-Public-Key-Hash (P2PKH).

• Features:

  • Original Bitcoin address format (2009).

  • Compatible with all wallets but lacks modern upgrades.

  • Higher transaction fees due to larger data size.

• Use Case: Supported by older wallets/exchanges; less efficient than newer formats.

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2. SegWit Addresses (Bech32, P2WPKH)

• Format: Starts with bc1q (e.g., bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq).

• Technology: Introduced with Segregated Witness (SegWit) in 2017 (BIP 141). Uses Pay-to-Witness-Public-Key-Hash (P2WPKH).

• Features:

  • Reduces transaction fees by ~30–50% by separating witness data (signatures).

  • Fixes transaction malleability.

  • Increases block capacity (effective 4 MB block weight).

• Use Case: Standard for most modern wallets; balances cost and compatibility.

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3. Taproot Addresses (Bech32m, P2TR)

• Format: Starts with bc1p (e.g., bc1p5d7vq8g5q0v4jq6f5xv5xv5xv5xv5xv5xv5xv5xv5xv5xv5xv5xq8g5q0).

• Technology: Enabled by Taproot upgrade (2021, BIP 340-342). Uses Pay-to-Taproot (P2TR) and Schnorr signatures.

• Features:

  • Enhanced privacy: Complex transactions (e.g., multisig) appear identical to simple ones.

  • Lower fees for complex transactions (aggregated signatures).

  • Future-proof for smart contracts (e.g., Lightning Network).

• Use Case: Ideal for advanced users prioritizing privacy and scalability.

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4. Comparison Table

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5. How to Identify Address Types

1. Legacy: Starts with 1.

2. SegWit: Starts with bc1q (Bech32 encoding).

3. Taproot: Starts with bc1p (Bech32m encoding).

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6. Why Upgrade to SegWit/Taproot?

• Lower Fees: Smaller transaction size = cheaper fees.

• Enhanced Privacy: Taproot masks transaction complexity.

• Future-Proofing: Compatibility with Lightning Network and decentralized finance (DeFi).

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Example

• Real-World Analogy:

  • Legacy: A paper map—functional but outdated.

  • SegWit: A GPS app—efficient and widely used.

  • Taproot: A self-driving car—advanced, private, and scalable.

• Code Snippet (Generating Address Types with bitcoinlib in Python):

from bitcoinlib.wallets import Wallet  

# Create a wallet  
wallet = Wallet.create('DemoWallet')  

# Generate Legacy address (P2PKH)  
legacy_address = wallet.get_key().address  
print("Legacy:", legacy_address)  

# Generate SegWit address (P2WPKH)  
segwit_address = wallet.get_key(address_type='segwit').address  
print("SegWit:", segwit_address)  

# Generate Taproot address (P2TR)  
taproot_address = wallet.get_key(address_type='taproot').address  
print("Taproot:", taproot_address)  

• Output:

Legacy: 1Lbcfr7sAHTD9CgdQo3HTMTkV8LK4ZnX71  
SegWit: bc1q2w7erqk6j3m4n5t6z7x8c9v0d...  
Taproot: bc1p5d7vq8g5q0v4jq6f5xv5xv5xv5xv5xv5xv5xv5xv5xv5xv5xv5xq8g5q0  

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Exercise
Identify Address Types Using a Blockchain Explorer:

1. Visit Mempool.space.

2. Search for a transaction and note the sender/receiver addresses.

3. Classify each as Legacy, SegWit, or Taproot based on their prefixes.

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Engagement
Discuss: Which Bitcoin address format do you think will dominate in 5 years, and why?
Share your thoughts using #BitcoinBasics!

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Key Takeaway
Bitcoin’s address formats reflect its evolution: Legacy for backward compatibility, SegWit for efficiency, and Taproot for privacy and scalability. Using modern formats ensures cheaper fees and access to cutting-edge features.

Next: On Day 16, we’ll dissect the anatomy of a Bitcoin transaction—inputs, outputs, and more! 🔍