Convertor

Buy/Sell
  • 4 minutes read

Types of Bitcoin Addresses: Simple Guide for Beginners in 2025

Bitcoin has gained popularity worldwide, becoming an increasingly widely used currency. Understanding the types of bitcoin addresses is key for anyone wanting to get involved in this fascinating universe. Whether you’re a new user or a seasoned investor, it’s essential to know what address types exist and how they can influence your experience. In this article, we’ll explore the five main types of bitcoin addresses, the benefits of each variant and the best opportunities to use them.

example bitcoin addresses
example of addresses, these addresses are purely theoretical

Legacy Addresses, also known as P2PKH (Pay to Public Key Hash), were the first types of Bitcoin addresses created. They start with the digit “1” and are used for sending Bitcoin to public keys.

Usage:

Legacy addresses are the simplest and are supported by all Bitcoin wallets available on the market. Therefore, they are the preferred choice for many beginner users and beyond.
Example:
A Legacy address might look like this: “1A1zP1eP5QQGefi2DMPTfTL5SLmv7DivfNa“, which was used by Satoshi Nakamoto, the creator of Bitcoin. On this address and now there are 100 BTC, you can check here.

2. SegWit (P2SH) addresses

SegWit (P2SH) addresses are a more modern variant, which optimizes transactions by separating transaction signatures from the actual data. They start with the digit “3”.
Usage:
SegWit addresses are popular when transaction efficiency is desired, as they allow transaction sizes to be reduced by up to 40%. This leads to lower commissions and shorter wait times.
Example:
A SegWit (P2SH) address might look like this: “3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy“.

3. SegWit addresses (P2WPKH)

P2WWPKH (Pay to Witness Public Key Hash) addresses are another variant of SegWit addresses, starting with “bc1”. These are the latest and most efficient ways to use Bitcoin, proposing average fees 40% lower than Legacy addresses.

Usage:

P2WWPKH addresses are ideal for users who want to take advantage of all the benefits of the Witness Segment, including lower fees and faster transactions.

Example:

A SegWit (P2WWPKH) address might look like this: “bc1qw508d6qejxtdg4y5r3zp3t5nrs0c5r3qvrtlsh“.

4. Taproot addresses (P2TR)

Taproot (P2TR) addresses are the latest development in Bitcoin addresses. They are designed to improve privacy and efficiency and allow the use of more sophisticated smart contracts.

Usage:

Taproot is ideal for advanced users who require complex and flexible options when managing their bitcoin funds.

Example:

A Taproot address might look like this: `bc1p...`, although the full format is not standardized due to frequent network updates.

5. Lightning Network – Lightning type address

The Lightning Network is a fast Layer 2 solution for Bitcoin, intended to enable fast and low-cost transactions without congesting the main blockchain. A Lightning address is an address is an address with a special format used to receive payments through the Lightning Network.

Usage:

Lightning addresses are ideal for merchants who want to accept frequent payments without experiencing long wait times.

Example:

Lightning address has a format similar to “lnbc123...”.

Analyzing a Bitcoin address

A Bitcoin address consists of several components, each with a specific role. Here is a brief description:

  1. Prefix: Indicates the type of address (e.g., ‘1’ for Legacy, ‘3’ for P2SH, ‘bc1’ for P2WPKH).

  2. Public Key Hash: This is an encrypted version of your public key, used to identify the destination of the transaction.

  3. Checksum: Is a verification code that helps prevent errors.

These components combine to form a unique address, used in the Bitcoin network to send and receive funds.

What is a Change Address. (change address)

A change address is a bitcoin address whose funds are used to return unused funds from a transaction.

In a Bitcoin transaction, the concept of inputs and outputs is used. If Michael has an input of 1 BTC (an amount in a UTXO – Unspent Transaction Output) and wants to send Flavia 0.5 BTC, he cannot “cut” exactly 0.5 BTC from that input. The transaction uses the entire input of 1 BTC, and the difference (0.5 BTC) is sent to an exchange address that Michael controls.

Concrete example of the mechanism:

  1. Input: 1 BTC (from Michael’s address).

  2. Output:

    • 0.5 BTC to Flavia.

    • 0.5 BTC to a change address (a new address controlled by Mihai).

  3. Fee: A small portion of the transaction is used for miner fees.

The exchange address is automatically generated by Michael’s wallet, and he controls it. This mechanism ensures that unused funds are not lost.

example bitcoin address
example of a transaction, where the remaining funds go to the change(rest) address

Usage:

This address is essential for efficient funds management. Understanding this concept helps users optimize transactions and maintain control over their financial resources.

Closing

Knowing the types of bitcoin addresses is essential for anyone planning to integrate bitcoin into their financial life. Each address type has specific characteristics, advantages and uses. The right choice can significantly influence your experience in this digital ecosystem.

If you want to verify a transaction that has reached its destination you can access a blockchain explorer such as Blockchair or Coin.cz . In case you want to visualize a short guide on how to verify an address we recommend you to check point 5 of the article.