Types and features of Bitcoin wallet addresses

What is a Bitcoin wallet address?

A Bitcoin wallet address is a unique identifier in the Bitcoin network, represented as a string of alphanumeric characters. Each wallet has a unique address required to send and receive bitcoins — like a postal address for receiving mail or a bank account number for receiving funds.

A Bitcoin wallet address is also called a public key, since it is publicly accessible: using block explorers such as Blockchair, Blockchain.com, or OKLink, one can check not only the BTC balance but also all transactions associated with the wallet. A Bitcoin wallet address allows you to view:

• Transaction amounts;
• The size of paid fees;
• Date and time of transactions;
• Block numbers that included transactions from this address.

It is worth noting that the Bitcoin protocol utilizes the UTXO (Unspent Transaction Output) model. This means that each Bitcoin transaction has one input and two outputs: the spent amount and the BTC remainder.

The amount spent in a Bitcoin transaction is sent to the recipient's wallet address specified by the sender. However, bitcoins cannot be "split off" from the total stored in the wallet. In the UTXO model, each transaction operates not with a portion of the funds, but with the entire sum stored in a single output. This means that if a user has an output of 1 BTC, but needs to send 0.4 BTC, the system still uses the full 1 BTC. From this, 0.4 BTC is transferred to the recipient, while the remaining 0.6 BTC is returned to a special change address, which the wallet automatically creates.

This mechanism can be compared to paying with cash: if you pay with a 1000 ruble bill for a purchase worth 400 rubles, the seller takes the entire bill but gives you 600 rubles in change. Similarly, in the Bitcoin network, change is formed as a new transaction and is again tied to the user, but as a new UTXO, which can be used in future transfers.

This distinguishes Bitcoin from other networks that use the Accounts model — such as Ethereum or Solana — where the user spends only the amount of cryptocurrency sent. At the same time, unspent coins remain untouched in the wallet. This is the same model used by banks for settlements.

Types of Bitcoin wallet addresses

Since 2017, the list of supported Bitcoin address types has expanded. Currently, there are four: Legacy, Nested SegWit, Native SegWit, and Taproot.

Legacy (P2PKH)

Legacy or Pay-to-Public-Key-Hash is the original type of Bitcoin wallet address used since the blockchain's launch. Legacy addresses start with "1," consist of 34 characters, and look like this:

1BM1sAcrfV6d4zPKytzziu4McLQDsFC2Qc

Legacy addresses are rarely used now, as transactions through them take up a lot of space on the blockchain and are the slowest and most expensive today. They were replaced by newer and more efficient types of addresses.

Nested SegWit or Script (P2SH)

Pay-to-Script-Hash is a newer address format that appeared shortly before the Segregated Witness (SegWit) upgrade was activated on the Bitcoin network. This format supports scripts for transaction automation while maintaining compatibility with older blockchain protocols.

Nested SegWit addresses start with "3" and contain 34 characters, like Legacy addresses. Example:

3BTV9JbUgN9j9z5MjkPpnsFnEM47bNNJQJ

P2SH addresses allowed transaction sizes to be increased while reducing costs. Large miners often use them to manage a high volume of Bitcoin transactions.

Native SegWit (P2WPKH or Bech32)

Pay-to-Witness-Public-Key-Hash, also known as Native SegWit addresses, were introduced after the activation of Segregated Witness. They are also called Bech32 addresses.

All Native SegWit addresses start with "bc1q" and have a 42-character string, for example:

bc1qdz47psdty8m3r9hkasxg0fgneyue64hpvrufjc

Native SegWit was designed to eliminate the limitations of Legacy addresses, doubling transaction speed and cutting fees in half by increasing block capacity. Currently, Native SegWit is the most widely supported format, with almost all wallets and exchanges utilizing it.

Taproot (P2TR)

Pay-to-Taproot is the newest Bitcoin wallet address format, introduced in late 2021 with the Taproot upgrade. Taproot transactions are designed to enhance user privacy.

Even complex P2TR transactions involving smart contracts are almost indistinguishable from regular Bitcoin transfers and are challenging to detect in block explorers.

Taproot addresses are similar to Native SegWit but differ slightly: they start with "bc1p" (not "bc1q") and are 62 characters long. Example:

bc1p4k4yp6ddjmgfgntwwuq3tmpdnuezgqt39mmk3c52syk95x9q7yxq2pp06v

Taproot addresses enable the fastest and cheapest Bitcoin transactions to date, including through the Lightning Network, though not all wallets and exchanges yet support P2TR.

Despite this, the share of transactions made with Taproot addresses has significantly increased in the last three years — from 0.25% to 21.27%.

Note: All Bitcoin wallet address types are compatible with each other. For example, a user can send bitcoins from a Legacy address to a Native SegWit address and vice versa.

How many Bitcoin wallet addresses exist?

A Bitcoin wallet address has no expiration date. However, the more often a user uses the same address, the easier it is to identify them. Experienced users rely on advanced wallets that allow managing multiple addresses (including change addresses) and tools like CoinJoin to enhance transaction privacy.

A user may need to change their Bitcoin wallet address in the following cases:

• Loss or compromise of the private key (or mnemonic phrase);
• If the address has been compromised, and privacy must be restored;
• To increase transaction confidentiality;
• To create a wallet for other purposes (e.g., payments or digital transfers).

Getting a Bitcoin wallet address

To get a Bitcoin address, one must use a crypto wallet client or create an account on an exchange. A public address is provided together with a private key, except in custodial wallets or exchanges where the service controls keys.

To obtain a public address, it is enough to generate a 256-bit private key. This can be done within a wallet application, a hardware wallet, or manually using a random number generator (RNG) — even by rolling dice, since it is essentially a set of pseudorandom numbers. The latter is the most complex but most secure method, used by some advanced crypto enthusiasts.