I was recently asked about what the differences were among the Bitcoin wallet address types which then inspired me to write this post.
If you didn't already know, Bitcoin has three wallet address types. One type starts with a "1", another type starts with a "3", and the other starts with a "bc1." In terms of the "1" wallet addresses, these addresses are also known as "Legacy." This was the original Bitcoin wallet address type so most Bitcoin wallets start with a "1." After came "Nested SegWit" which starts with a "3." The network fees are slightly cheaper than Legacy's fees when sending Bitcoin. The latest one is "Native SegWit" which starts with "bc1" which is the cheapest, in fees, to send from.
So essentially the reason why there are different address types is because people weren't happy with how expensive it was getting to send Bitcoin from a Legacy wallet. In comparison to a Legacy address, you can save about 40% in transaction fees with a Native SegWit address. There is a drawback though.
The drawback is that not every wallet supports Native SegWit (yet). As time goes on though, I believe that most wallets will make the switch over to Native SegWit. There are some other features that Native SegWit has that make it worth considering using. A feature would be that it's case insensitive as all the letters are in lower case. With Legacy addresses however, they are not case insensitive. This means that a "N" and a "n" will matter.
Here's a quick 3 minute video where I explain the differences among the three Bitcoin address types.
I hope that the video has helped you better understand the differences among the Bitcoin wallet address types.
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