You can use a bitcoin address to send and receive bitcoins, just like a traditional bank account number. If you use the official blockchain wallet, you are already using a bitcoin address!
However, not all bitcoin addresses are created equal, so if you send and receive bitcoins a lot, it’s important to know how to use them effectively.
What is a Bitcoin address?
A bitcoin wallet address is a unique identifier that allows you to send and receive bitcoins. It is a virtual address that indicates the destination or source of bitcoin transactions, telling people where to send bitcoins and where they receive bitcoin payments from. It’s similar to an email system where you send and receive email. In this case, email is your bitcoin, email address is your bitcoin address, and your mailbox is your bitcoin wallet.
A bitcoin address is usually linked to your bitcoin wallet, which helps you manage your bitcoins. A bitcoin wallet is software that allows you to receive, send and store bitcoins securely. You need a bitcoin wallet to generate a bitcoin address.
Structurally, a Bitcoin address is usually between 26 and 35 characters, consisting of letters or numbers. It is different from the Bitcoin private key, and the Bitcoin will not be lost due to information leakage, so you can tell anyone the Bitcoin address with confidence.
The format of a bitcoin address
Commonly used bitcoin address formats are generally as follows. Each type is unique in how it works and has specific ways to recognize it.
Segwit or Bech32 addresses
Segwit addresses are also known as Bech32 addresses or bc1 addresses because they start with bc1. This type of Bitcoin address limits the amount of information stored in a transaction. So a Segregated Witness address can save you around 16% in transaction fees. Because of this cost savings, it is the most commonly used Bitcoin transaction address.
Here is an example of a Bech32 address:
bc1q42kjb79elem0anu0h9s3h2n586re9jki556pbb
Legacy or P2PKH addresses
A traditional Bitcoin address, or Pay-to-Public Key Hash (P2PKH) address, starts with the number 1 and locks your bitcoins to your public key. This address points to the Bitcoin address where people send payments to you.
Originally, when Bitcoin created the crypto scene, legacy addresses were the only type available. Currently, it is the most expensive as it takes the most space in the transaction.
Here is an example of a P2PKH address:
15f12gEh2DFcHyhSyu7v3Bji5T3CJa9Smn
Compatibility or P2SH address
Compatibility addresses, also known as Pay Script Hash (P2SH) addresses, begin with the number 3. The hash of the compatible address is specified in the transaction; it does not come from the public key, but from a script containing specific spending conditions.
These conditions are kept confidential from the sender. They range from simple conditions (a user of public address A can spend this bitcoin) to more complex conditions (a user of public address B can spend this bitcoin only after a certain amount of time has passed and if he reveals a certain secret) . Therefore, this Bitcoin address is about 26% cheaper than traditional address alternatives.
Here is an example of a P2SH address:
36JKRghyuTgB7GssSTdfW5WQruntTiWr5Aq
Taproot or BC1P address
This type of Bitcoin address starts with bc1p. Taproot or BC1P addresses help provide spending privacy during transactions. They also provide novel smart contract opportunities for Bitcoin addresses. Their transactions are smaller than legacy addresses, but a bit larger than native Bech32 addresses.
Examples of BC1P addresses are as follows:
bc1pnagsxxoetrnl6zi70zks6mghgh5fw9d1utd17d
Which Bitcoin address should you use?
If you want to send bitcoins and know how to save on transaction fees, you should use a segregated witness bitcoin address. That’s because they have the lowest transaction costs; therefore, you can save even more by using this Bitcoin address type.
However, compatibility addresses provide a great deal of flexibility. You can use them to transfer bitcoins to new bitcoin addresses because you can create scripts without knowing what type of script the receiving address uses. P2SH addresses are a good option for casual users who generate addresses.
A legacy or P2PKH address is a traditional Bitcoin address, and although it pioneered the Bitcoin address system, its high transaction fees make it less attractive to users.
If privacy during transactions is your top priority, you should use a taproot or BC1P address.
Can you send bitcoins across different addresses?
Yes, you can send bitcoins to different bitcoin wallet types. That’s because Bitcoin addresses are cross-compatible. There should be no problem sending from one type of bitcoin address to another.
If there is a problem, it may be related to your service or your cryptocurrency wallet client. Upgrading or updating to a Bitcoin wallet that offers the latest type of Bitcoin address may resolve the issue.
Generally speaking, your wallet client handles everything related to your bitcoin address. Therefore, you should have no problem, especially if you double-check the bitcoin address to confirm its accuracy before sending.
Best Practices for Using Bitcoin Addresses
Here are the best practices to avoid costly mistakes when using Bitcoin addresses.
1. Double check the receiving address
It’s always best to double check the receiving address. Hidden viruses can corrupt your clipboard when you copy and paste addresses. Always double check that the characters are exactly the same as the original address so you don’t send bitcoins to the wrong address.
2. Test address
If you’re nervous about sending bitcoins to the wrong address or even making transactions in general, testing the receiving address with a small amount of bitcoins may help ease your fears. This trick is especially useful for newcomers to gain experience before sending large amounts of Bitcoin.
How to recover bitcoins sent to the wrong address
It is nearly impossible to recover bitcoins that you mistakenly sent to the wrong address. However, if you know who owns the address you are sending your bitcoins to, a good strategy is to contact them. Luck might be on your side and they might send it back to you.
Also, you can try the OP_RETURN function by sending a message that you have transferred bitcoins to the associated bitcoin address by mistake. Describe your error as clearly as possible and appeal to them to consider helping you. These methods are unreliable, so you should never send your bitcoins without double checking the address.
Bitcoin Addresses: Virtual “Bank Accounts”
Bitcoin addresses have some resemblance to modern bank accounts in that bank accounts are also used in transactions to send money. However, with bitcoin addresses, what is sent is bitcoins.
Even with different types of bitcoin addresses, you can send bitcoins from one type to another because of their cross-compatibility features. However, be sure to double-check addresses before sending bitcoins, as recovering them can be quite challenging.
Post time: Dec-14-2022