Bitcoin, the world’s first decentralized digital currency, operates on a peer-to-peer network and uses cryptographic protocols to secure transactions. One of the key elements of Bitcoin transactions are the addresses. There are two main types of Bitcoin addresses: Legacy and Segregated Witness (SegWit). This article aims to provide a clear understanding of these two types of addresses.
Legacy Addresses
Legacy addresses are the original Bitcoin addresses. They start with the number ‘1’. For example, “1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa” is a Legacy address. Transactions from Legacy addresses tend to be larger in size, meaning they take up more block space. As a result, transactions from Legacy addresses usually incur higher fees compared to SegWit addresses. However, they are compatible with all Bitcoin wallets as they have been around since the inception of Bitcoin.
SegWit Addresses
SegWit addresses are a more recent addition to the Bitcoin network. There are two types of SegWit addresses. One starts with ‘3’ (P2SH format), which is more common, and the other starts with ‘bc1’ (bech32 format). For example, “3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy” is a SegWit address in P2SH format, and “bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq” is in bech32 format. Transactions from SegWit addresses are smaller in size or, when they are the same size as Legacy, they effectively take up less block space due to a different calculation of ‘weight’ in the block. As a result, transactions from SegWit addresses usually incur lower fees compared to Legacy addresses. SegWit was implemented as an upgrade to the Bitcoin network to enable better scaling solutions like the Lightning Network.
Choosing Between Legacy and SegWit
While SegWit addresses have advantages in terms of lower transaction fees and better scaling compared to Legacy addresses, certain SegWit addresses (bech32) may not be compatible with all services. Therefore, users should be cautious when sending funds to ensure that the recipient’s service can receive funds at a SegWit address. So, it’s not always the same which type you use. It’s advisable to check compatibility before sending Bitcoin.
Converting Legacy to SegWit
Yes, it’s possible to move Bitcoin (BTC) from a Legacy address to a SegWit address. However, users may incur transaction fees when moving BTC from a Legacy address to a SegWit address. Also, it’s important to note that while you can convert a Legacy address to a SegWit address, they represent different types of outputs on the Bitcoin network. If the recipient gave you a native SegWit address, they expect a transaction that pays to such an output, and they may not recognize a transaction that does anything else. In certain cases, they may literally be unable to access coins sent elsewhere (for example, because they use an HSM that can only sign certain transactions). So, be careful when sending funds.
In conclusion, understanding the differences between Legacy and SegWit addresses is crucial for anyone involved in Bitcoin transactions. While both have their uses and advantages, the choice between the two depends on factors such as transaction fees, block space, and compatibility with recipient services.
