Multi-Sig wallets require more than one signature - typically from different private keys - to...
Bitcoin Address Types
Some Bitcoin addresses look different and noticeably start with different letters. This is due to the ongoing development and changes made to the protocol. Each progression in address format has been a response to the growing needs of the diverse user base and the burgeoning ecosystem of blockchain applications.
Pay-to-Public-Key-Hash (P2PKH) Addresses
The P2PKH address format, recognisable by starting with the number "1," was part of Bitcoin's original design as conceived by Satoshi Nakamoto in 2009. This foundational address format was intended to provide a straightforward and secure method of transacting on the blockchain by hashing public keys, thereby obfuscating the actual public key to provide a layer of protection against potential quantum computing threats. These address types are rarely used anymore due to the higher fees and inefficiencies compared to newer address types.
Pay-to-Script-Hash (P2SH) Addresses
The implementation of Pay-to-Script-Hash (P2SH) addresses, commencing with the number "3," came about through Bitcoin Improvement Proposal (BIP) 16 in 2012. The introduction of P2SH addresses unlocked the door to a wider array of transaction types, notably enabling multi-signature wallets which enhance security by necessitating multiple approvals before funds can be spent. The P2SH format provided a platform for more complex and programmable transaction conditions, catalysing innovation in Bitcoin's use cases.
Introduced via Bitcoin Improvement Proposal (BIP) 173 in 2017, the Bech32 address format, identifiable by starting with "bc1," represents a modern evolution aimed at correcting previous inefficiencies. Bech32 addresses optimise for transaction processing efficiency and error detection, significantly reducing the chances of mistaken transactions. Furthermore, this format is SegWit-native, supporting the segregated witness protocol, which assists in alleviating network scalability issues and reducing transaction fees.
Pay-to-Taproot (P2TR) Addresses
The Pay-to-Taproot (P2TR) address format emerged with the activation of the Taproot upgrade in November 2021. These addresses, prefixed with "bc1p", bring forward advanced features by enhancing Bitcoin's smart contract capabilities while simultaneously improving privacy and efficiency.
P2TR addresses camouflage the complexity of the scripts involved in a transaction, making simple payments and complex smart contract interactions appear the same on the blockchain. This not only elevates privacy but also makes complex transactions less data-intensive, potentially reducing transaction costs and improving the network's scalability.