Bitcoin Address Types Compared: P2PKH, P2SH, P2WPKH, And More

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Creating a P2PKH address involves putting a single public key through hash functions SHA-256 and RIPEMD-160. This shortens the amount of data, which in turn helps save block space and transaction fees for the user. It also introduces further resistance to reverse-engineering the private key beyond the already believed-to-be-unbreakable secp256k1 elliptic curve.

While advanced users can construct complex scripts, the most common uses for P2SH have been to create Nested SegWit addresses and multisig wallets. For example, a script can include three public keys and specify that signatures from any two of the corresponding private keys can spend the bitcoin. This would create a 2-of-3 multisig address.

SegWit addresses look quite different from the older address types because, per BIP 173, they use Bech32 encoding instead of Base58. Most notably, there are no capital letters in Bech32. P2WPKH addresses can be identified by a prefix of bc1q and a character length of exactly 42.Pay-to-Witness-Script-Hash is the SegWit variant of P2SH.

The crafty solution to this dilemma was to utilize the P2SH transaction type. The entities that had not yet implemented SegWit could still send bitcoin to P2SH addresses—which, as discussed above, are built with a redeem script specifying the instructions on how the bitcoin can be spent later on. As it turns out, these instructions could incorporate the new SegWit spending model, providing users with a bridge to reduced fees.

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