All it takes to send bitcoins from one person to another is two addresses, the sender’s and the receiver’s. A wallet address usually contains 26 to 35 alphanumeric symbols. You can use it to make a transaction to any other address on the blockchain, but only if the other party’s wallet supports the type of address. With numerous software wallets and exchanges people use to make bitcoin transactions out there, it’s worth knowing your basics around bitcoin address types and what to be careful about when you send or receive BTC from other people.
Essentially, there are three types of bitcoin addresses people use and not all wallets support each three. In the majority of transactions, compatibility of the address type and the software used does not become an issue but some wallets only support certain types of addresses.
Now, let’s take a closer look at the three types of bitcoin core addresses.
P2PKH, or default (legacy) addresses.
The oldest type of address and the abbreviation stands for pay to public key hash. You know if you have a default address if it starts with 1. These addresses are not SegWit-compatible or, to be more precise, reverse-compatible. Meaning, that you can send your coin from a default address to a SegWit-compatible one just fine, but not vice versa. Another issue with default addresses is that they usually require a larger fee because the transactions themselves are bigger than others.
For example, 1BvAUDEYstTokqTFn5Au474GFg7xJaNVN2
P2SH or compatibility addresses.
Those start with 3 and the abbreviation stands for pay to script hash and are an advanced version of the legacy addresses. They are called compatibility addresses because they are compatible with both the latest new and the default addresses so you can use these addresses to work with virtually any type of wallets or exchange software. This type of address is universally accepted.
For example, 3FnWSZtpWX8bK2LwQEB9CRrapjrFGy7M6G.
Bech32 or new addresses.
If your address starts with bc1, this is the type you have. The new addresses are considered to be the most efficient ones, and by new, most wallets will show you this native SegWit address type. This address type is supported by the majority of hardware and software cryptocurrency wallets, but is not supported by most exchanges. At the moment, only about 1% of all bitcoin out there is stored using this type of address. So if you want to use it to send coins to someone, make sure their address is either compatibility or a new one. SegWit addresses occupy less space and require a smaller transaction fee, so it can be a good idea to try and use them as much as possible.
For example, bc1q7up28khjtsmhn3fpxx3q3djhlc4xtlrwemc9v2
OWNR Wallet allows sending and receiving BTC with all the three types of addresses above.