As of today, there are three main types of Bitcoin addresses, each differing in structure, performance, and transaction fees. Let’s go through each type and compare their efficiency.
1. P2PKH (Legacy Address)
P2PKH (Pay to Public Key Hash) — this is the legacy address format, which was the first version of Bitcoin addresses. P2PKH addresses start with the number “1” and are between 26 to 36 characters long.
This format is still widely used, although transactions from these addresses tend to be larger in size and thus incur higher fees compared to newer formats. This is due to the fact that P2PKH-based transactions are not optimized for modern blockchain technologies.
Example: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
2. P2SH (Pay to sсript Hash)
P2SH is a newer address type that provides enhanced functionality and security. It begins with the number “3”. The main advantage of P2SH is the ability to use more complex scripts, such as multi-signature transactions or conditional spending.
This address type allows for lower transaction fees compared to P2PKH because P2SH transactions have a smaller size. This makes P2SH a more cost-efficient choice for users.
Example: 3GRdnTq18LyNveWa1gQJcgp8qEnzijv5vR
3. P2WPKH (Bech32)
P2WPKH, or Bech32, is the most modern and efficient Bitcoin address format. It starts with “bc1” and has a longer structure compared to P2PKH and P2SH.
This format is native to the SegWit (Segregated Witness) technology, which was introduced to optimize block size and increase transaction speed. Bech32 addresses offer the lowest transaction fees and the highest processing speed. However, the drawback of this format is that not all wallets and platforms support it yet.
Example: bc1qnkyhslv83yyp0q0suxw0uj3lg9drgqq9c0auzc
At CrystalTrade, we default to using P2SH and Bech32 addresses because our team supports the adoption of cutting-edge technologies to improve transaction efficiency.
Performance Comparison of Different Bitcoin Address Types
For a clearer comparison of transaction performance across different address types, the table below shows the average transaction size based on the type of sender and recipient addresses.
Comparison Table
| Sender Address Type | Recipient Address Type | Average Transaction Size (in bytes) | Conclusion |
|---|---|---|---|
| P2PKH (I) | P2PKH (I) | 764 | The least efficient transaction type, where the sender’s address type plays a key role; the recipient’s address type has little impact on efficiency. |
| P2PKH (I) | P2SH (II) | 756 | Slight improvement in efficiency compared to P2PKH-to-P2PKH transactions. |
| P2PKH (I) | Bech32 (III) | 752 | Marginal improvement over other combinations with P2PKH. |
| P2SH (II) | P2PKH (I) | 541 | Transactions from P2SH are 29% more efficient than those from P2PKH. |
| P2SH (II) | P2SH (II) | 533 | The efficiency of P2SH is consistent for both sender and recipient. |
| P2SH (II) | Bech32 (III) | 529 | Minor improvement compared to P2SH-to-P2SH transactions. |
| Bech32 (III) | P2PKH (I) | 449 | Transactions from Bech32 are over 40% cheaper than P2PKH and 15% cheaper than P2SH. |
| Bech32 (III) | P2SH (II) | 441 | High efficiency compared to P2SH and P2PKH. |
| Bech32 (III) | Bech32 (III) | 437 | The most efficient transaction type, with Bech32 used on both sides. |
Conclusion
Using Bech32 addresses significantly reduces transaction fees and speeds up transaction processing compared to older address formats such as P2PKH and P2SH. While not all wallets and systems currently support Bech32, its advantages make it the best choice for those looking to minimize costs and maximize transaction speed.
At CrystalTrade, we use P2SH and Bech32 by default to ensure optimal performance and user experience.