What Is a Bitcoin Address & How Can You Get One?

Learn what Bitcoin addresses are, how they work, what different types of addresses there are, and how you can get one.

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Elizabeth Olson

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April 29, 2024

A Bitcoin address is essential for transactions on the Bitcoin network. It allows you to send and receive bitcoin (BTC) and other Bitcoin-native assets without the need for an intermediary.  

Read on to learn about Bitcoin addresses, how they work, the different types of Bitcoin wallet addresses, and how you can create one.

What Is a Bitcoin Address? 

A Bitcoin address is a string of alphanumeric characters that serves as a unique identifier for Bitcoin transaction destinations on the blockchain. Most contain 34-62 characters and usually start with 1, 3, or bc1 prefixes. 

Bitcoin wallet addresses are concise and user-friendly derivatives of public keys that contain information about the user’s wallet. They provide secure public-facing destinations for peer-to-peer BTC transactions and can also be represented as QR codes. 

How Do Bitcoin Addresses Work?

Bitcoin wallets are software programs or hardware devices that allow you to interact with your funds on the Bitcoin blockchain. They generate and manage Bitcoin addresses. A single Bitcoin wallet can generate multiple unique addresses. 

Wallets use asymmetric encryption to produce private-public key pairs. In the pair, private keys are used to sign transactions when sending BTC and are kept confidential, while public keys are shared with others to receive BTC. Bitcoin addresses are compressed versions of the public keys.

Bitcoin addresses are generated from public keys using one-way cryptographic hash functions and encoding. Hashing generates shorter representations of public keys to produce compact and shareable Bitcoin addresses. 

The generated wallet address is a unique string of letters and numbers that works like an email address. You share your Bitcoin address to receive BTC just like you share your email address to receive emails. 

The Bitcoin address is verified using a checksum feature to know whether it is written correctly. Once the address is verified as valid, the BTC is sent to the recipient. However, if an incorrect address is valid, the funds will be sent to the wrong recipient. Addresses expressed as QR codes are simply scanned by the sender to ease transaction execution.

Bitcoin addresses are technically reusable. However, for privacy purposes, it's recommended that you generate a new address for each transaction. 

A Bitcoin address's primary function is to verify and confirm transactions, but it also conceals your personal information by providing a pseudonym. 

Most wallets have Bitcoin address validators that safeguard users from sending BTC to other blockchain addresses. For instance, Xverse is a self-custody Bitcoin wallet that safeguards you from sending your funds to an incompatible blockchain by displaying an error message when you input an invalid address.

Types of Bitcoin Wallet Addresses

The Bitcoin network is an evolving blockchain that features different types of Bitcoin addresses to match the ever-changing technology. Each address format corresponds to a different payment method and appears different from one another in length and prefixes. 

The different Bitcoin address formats accommodate various functionalities and ensure compatibility across the network. 

Let’s look at the four types of Bitcoin wallet addresses.

Legacy Addresses

Legacy addresses have been used since the inception of Bitcoin and follow the original Bitcoin address format. They start with the prefix ‘1’ and are encoded using Base58 which makes the addresses more legible and free from characters that are difficult to differentiate. 

Legacy addresses use the Pay-to-Public-Key-Hash (P2PKH) script that allows you to send funds to the hash of the public key. 

However, legacy addresses have larger transaction sizes, slower transaction time, and higher fees than other address formats. The reason for this is to provide room for holding the entire script and signature data within a transaction. 

Segregated Witness (SegWit) Addresses

SegWit addresses were introduced in the 2017 SegWit update of the Bitcoin network. The addresses start with the prefix ‘3’ and are based on the Pay-to-Script-Hash (P2SH) format. 

P2SH allows you to lock funds to the hash of a script (a set of instructions to unlock funds). 

SegWit addresses separate signature data from transaction data and supports advanced features like the Lightning Network. They offer reduced fees and higher transaction capacity.

Native SegWit Addresses 

Native SegWit addresses, also known as Bech32 addresses, are fully compatible with SegWit addresses and backward compatible with Legacy addresses. They start with the prefix ‘bc1’ and, unlike other formats, only use lowercase letters. 

Bech32 addresses are Pay-to-Witness-Public-Key-Hash (P2WPKH) and fully utilize SegWit efficiency improvements by offering lower transaction fees and efficient use of block space. 

Native SegWit addresses are more case-sensitive, offer a more concise representation of addresses, and have improved error detection, compared to other addresses.

Taproot Addresses 

Taproot addresses or Bech32m offer the newest Pay-to-Taproot (P2TR) address format following the network’s Taproot upgrade in 2021. They are advanced and case-sensitive addresses that start with the prefix ‘bc1p’. 

Taproot addresses offer improved efficiency, flexibility, and optimization of transaction space.

Bech32m allows more complex transactions like unlocking smart contract functionality on Bitcoin, and offers benefits like Schnorr signature for reliable signing of transactions, enhanced privacy, and security.

How to Create a Bitcoin Address Using Xverse 

Now, let’s go through the steps of setting up a Bitcoin wallet and creating a wallet address using Xverse.

Step 1: Download Xverse 

Click ‘Download’ on the Xverse official website. Xverse is available on the Apple App Store and Google Play as a mobile app and as a Chrome browser extension.

Step 2: Create and set up a new Bitcoin wallet

Open your Xverse wallet to get the ‘Create new wallet’ prompt. Xverse is a non-custodial wallet that won't ask for personal information to create an account. Set up your wallet by backing it up and choosing a strong password.

Step 3: Automatic address creation

Once you complete your setup, the Xverse wallet will automatically create a Bitcoin address. Click on ‘Receive’ on the home screen to view your new address.

Xverse: The Bitcoin Wallet for Everyone 

Xverse is a market-leading Bitcoin wallet that allows you to store, send, receive, buy, sell, and manage your BTC and Bitcoin-native assets. 

The wallet’s user-friendly interface and wide array of features make it the Bitcoin wallet for everyone, from complete beginners to Bitcoin Web3 experts.

Download Xverse today to securely manage all your Bitcoin assets! 

FAQs

What are the different types of Bitcoin addresses?

There are four major types of Bitcoin addresses: Taproot, Native SegWit, Segregated Witness, and Legacy addresses. They begin with different prefixes and have different script formats. They all work uniquely and correspond with different types of Bitcoin transactions.

How many Bitcoin wallet addresses are there?

There are currently over 460 million Bitcoin wallet addresses with approximately 46 million holding at least a $1 value. However, the number doesn't translate to active users since Bitcoin wallets allow users to create multiple addresses.

What is an example of a Bitcoin wallet address?

Different types of addresses come with unique formats. For instance, a Legacy address example is 1A2pZ1wp3GQbri3PMDFtLZ6Tjpa8DVefMa, and a Native SegWit address example is bc1qeroffrr8sytrf5l6l7lydnq8pe44gtffee7ieq.

What is the difference between Taproot and SegWit addresses?

Taproot addresses have more advanced features than SegWit addresses and are focused on improving security and supporting complex smart contract functionalities. While SegWit addresses have the prefix ‘bc1q’, Taproot addresses start with ‘bc1p’.

Can I send BTC from Taproot to SegWit?

Yes, you can send BTC from Taproot to SegWit addresses. Taproot addresses are compatible with SegWit and Native SegWit addresses. However, not all wallets support Taproot and can create Bech32m addresses.

How do I know if my address is SegWit?

Segregated Witness(SegWit) addresses have the prefix of ‘3’ or ‘bc1’ in Native SegWit. You can identify the type of Bitcoin address with the first character of the alphanumeric string. Legacy addresses start with the prefix ‘1’ while Taproot addresses start with the prefix ‘bc1p’.

What wallet supports SegWit?

Xverse is a world-leading Web3 Bitcoin wallet that supports different types of Bitcoin addresses, including SegWit. Download the Xverse wallet as a mobile app from the official website to get your SegWit address.

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