You can send and receive bitcoins with a Bitcoin address, just like a traditional bank account number. If you use the official blockchain wallet, you’re already using Bitcoin addresses!

However, not all Bitcoin addresses are created the same, so knowing how to use them effectively is important if you send and receive bitcoins regularly.

What Is a Bitcoin Address?

A Bitcoin wallet address is a distinct identifier that allows you to send and receive bitcoins. It is a virtual address that indicates the destination or source of a bitcoin transaction, telling people where to send bitcoins and from where they have received a bitcoin payment. It is comparable to the email system through which you send and receive emails. In this case, the emails are your bitcoins, the email address is your Bitcoin address, and your email box is your Bitcoin wallet.

Bitcoin addresses are usually linked to your Bitcoin wallet, which helps you manage your bitcoin. A Bitcoin wallet is software that allows you to receive, send, and store bitcoins securely. You’ll need a Bitcoin wallet to generate a bitcoin address.

Structurally, Bitcoin addresses are typically between 26 and 35 characters and are usually alphanumeric. They have private keys, which you need to carry out transactions between addresses. These addresses have a standard format: a pay-to-public key hash (P2PKH).

Bitcoin addresses were launched following the discontinuation of the IP address-based system. This system created avenues for cybercriminals to carry out man-in-the-middle attacks. The new system—Bitcoin addresses—has proven to be a more secure way for people to send bitcoins.

What Are the Different Types of Bitcoin Addresses?

gold bitcoin behind random wallet address

There are several types of Bitcoin addresses. Each type works uniquely and has a specific method of identification.

Segwit or Bech32 Address

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 a transaction stores. As a result, segwit addresses can save you about 16% on transaction fees. Because of this cost savings, it is the most commonly used Bitcoin address for transactions.

  • This is an example of a Bech32 address: bc1q42kjb79elem0anu0h9s3h2n586re9jki556pbb

Legacy or P2PKH Address

Legacy Bitcoin addresses, or pay-to-public-key-hash (P2PKH) addresses, start with the number one and lock your bitcoins to your public key. The address points people to pay into your Bitcoin address.

Originally, when Bitcoin created the crypto scene, the legacy address was the only type available. Currently, it is the most expensive because it consumes the most space within transactions.

  • Here’s an example of a P2PKH address: 15f12gEh2DFcHyhSyu7v3Bji5T3CJa9Smn

Compatibility or P2SH Address

Compatibility addresses, also known as pay-to-script-hash (P2SH) addresses, start with the number three. The hash of a compatibility address is specified within the transaction; it is not derived from the public key but from a script that comprises specific conditions for spending.

These conditions are kept from the sender. They may range from simple conditions (the user of public address A can spend this bitcoin) to more complex ones (the user of public address B can only spend this bitcoin after a certain amount of time has elapsed and if he reveals a certain secret). As a result, this Bitcoin address is about 26% cheaper than the legacy address alternative.

  • Here’s an example of a P2SH address: 36JKRghyuTgB7GssSTdfW5WQruntTiWr5Aq

Taproot or BC1P Address

This type of Bitcoin address starts with bc1p. Taproot or BC1P addresses help to provide spending privacy during transactions. They also offer novel smart contract opportunities for bitcoin addresses. Their transactions are smaller than legacy addresses but a bit bigger than native Bech32 addresses.

  • An example of a BC1P address is as follows: bc1pnagsxxoetrnl6zi70zks6mghgh5fw9d1utd17d

Which Bitcoin Address Should You Use?

yellow bitcoin digital graphic

If you want to send bitcoins and know how to save money on transaction fees, you should use a segwit Bitcoin address. That’s because they have the lowest transaction costs; therefore, you’ll save more with this Bitcoin address type.

However, compatibility addresses offer great flexibility. You can use them to transfer bitcoins to new Bitcoin addresses because you can create scripts without knowing the type of script the receiving address employs. P2SH addresses are a good option for casual users who generate their addresses.

A legacy or P2PKH address is the traditional Bitcoin address, and even though it pioneered the bitcoin address system, its high transaction fees have made it less attractive to users.

If privacy during transactions is a priority for you, you should use a taproot or BC1P address.

Can You Send Bitcoin Across Different Addresses?

Yes, you can send bitcoin to different Bitcoin wallet types. That’s because Bitcoin addresses are cross-compatible. You should not have issues sending from one type of Bitcoin address to another.

If there is a problem, it’s probably with your service or with your cryptocurrency wallet client. Upgrading or updating to a Bitcoin wallet that offers the latest types of Bitcoin addresses will likely solve the problem.

Generally speaking, your wallet client handles everything concerning your Bitcoin address. As a result, you should have no problems, especially if you double-check the Bitcoin address to confirm its accuracy before sending.

Best Practices in Using Bitcoin Addresses

Man writing code on a laptop

Here are the best practices to avoid making costly mistakes with bitcoin addresses.

1. Double Check the Receiving Address

It’s good practice always to double-check the receiving address. A hidden virus could mess with your clipboard when you copy and paste the address. Always double-check the characters to be exactly like the original address so that you don’t send your bitcoins to the wrong address.

2. Test the Address

If you are nervous about sending your bitcoins to the wrong address or even making transactions generally, testing out the receiving address with a small number of bitcoins may help allay your fears. This tip is particularly useful for newbies to gain experience before sending huge amounts of bitcoins.

How to Recover Bitcoin Sent to the Wrong Address

Recovering bitcoins you mistakenly sent to the wrong address is nearly impossible. However, if you know who owns the address you sent the bitcoins to, a good strategy is to reach out to them. Luck may be on your side, and they may send it back to you.

Additionally, you can also try the OP_RETURN feature by sending a message that says you transferred your bitcoins mistakenly to the Bitcoin address that is implicated. Try to describe your mistake clearly and appeal to them to consider helping you. These methods aren’t reliable, so you shouldn’t send your bitcoins without double-checking the address.

Bitcoin Addresses: The Virtual “Bank Account”

Bitcoin addresses have some similarities with modern-day bank accounts, and that’s because bank accounts are also used in transactions to send currencies. However, in the case of Bitcoin addresses, bitcoins are sent.

Even though there are different types of Bitcoin addresses, you can send bitcoins from one type to another because of their cross-compatibility feature. However, always double-check the address before sending your bitcoins because recovering them can be very challenging.