Wallet Address Meaning
What is a Wallet Address in Cryptocurrency?
A cryptocurrency wallet address is a unique string of letters and numbers used to send and receive digital assets, such as cryptocurrencies and non-fungible tokens (NFTs). A wallet address typically identifies the wallet’s location on a blockchain network. A wallet address is just like a unique email address. You can send or receive cryptocurrency on your wallet address, just like you would send or receive an email.
A crypto wallet contains two key pairs – private keys and public keys. The private keys are used to access crypto stored in the wallet whereas a public key allows you to receive funds from others (and it is public). The public keys are used to generate a unique wallet address from which you can send or receive crypto.
Wallet addresses are difficult to memorize and interpret for humans but comprehensible for computers. The formats for wallet addresses also vary from one blockchain to another. For instance, a Bitcoin wallet would start with 1, 3, or bc1, ranging from 27 to 34 characters. On the other hand, TRON wallet addresses are represented by a 42-character string and begin with ‘T’.
What are the Different Kinds of Wallet Addresses?
The different types of wallet addresses include P2PKH, P2SH, Bech32, and Taproot Addresses.
Legacy or P2PKH Address
P2PKH addresses start with “1”. It was the first ever address format on Bitcoin. However, the transactions became costly and the transaction speed slowed as the price of Bitcoin began to rise. Thus, more affordable alternatives, such as SegWit (P2SH) and Native SegWit (bech32), entered the field.
Compatibility or P2SH Address
Pay to Script Hash (P2SH) addresses begin with “3” and are secured using more complex algorithms compared to the original legacy Bitcoin addresses. P2SH addresses were introduced to Bitcoin in 2012. In contrast to legacy addresses, it facilitates compatibility between various address formats, including Segwit and non-SegWit addresses.
P2SH allows you to transfer Bitcoin to different wallets and exchanges without facing compatibility issues.
Segwit or Bech32 Address
A Segwit or Bech32 address is a popular type of address commonly used in blockchain transactions. The address is designed to reduce space consumption and transaction fees. All Segwit addresses start with bc1 and are all in all lowercase for better readability, which gives it a distinct format.
Taproot or BC1P Address
A taproot address, also known as pay-to-taproot (P2TR) or bech32m, is the most recent and advanced Bitcoin wallet address. Taproot addresses begin with a bc1p prefix. Taproot addresses offer increased flexibility and efficiency for Bitcoin transactions. Taproot addresses are part of the ongoing initiatives to make Bitcoin more private, versatile, and scalable for a variety of use cases.