Bitcoin Addresses: Legacy vs SegWit
This article explains the differences between the Legacy Bitcoin address format and the newer SegWit address formats.
In this article
What is the difference between Legacy and SegWit?
The most visible difference between Legacy and SegWit addresses are the address formats.
There are three address types:
- Legacy (P2PKH): addresses start with a 1.
- Nested SegWit (P2SH): addresses start with a 3.
- Native SegWit (bech32): addresses start with bc1.
All three addresses can be used to send and receive bitcoin. So what's the difference? Well for starters, not all wallets support all three address types. Legacy addresses are the original BTC addresses. You can expect all wallets to support sending and receiving to Legacy addresses.
However, not every wallet or service has upgraded to support the new SegWit address format and therefore, some wallets can only send to Legacy addresses. Luckily, if someone wants to send you BTC from a SegWit address, your Legacy address will be able to receive it just fine.
In Exodus, you can receive to and send from all three address types.
What does SegWit mean?
SegWit is the shortened version of Segregated Witness, where Segregated is to separate and Witness is the transaction signatures involved with a specific transaction. SegWit is therefore the separation of certain transaction signature data from a transaction. What is most important to remember is that SegWit is activated on the Bitcoin Blockchain and therefore runs on the Bitcoin network.
Why is SegWit good?
The main benefit of separating the transaction signature from the transaction data is it reduces the size of the transaction data needed to store in one Bitcoin block. This allows each block to have extra capacity to store more transactions per block. This means the network can process more transactions per block and the sender pays lower transaction fees. This helpsfaster transactions as well as added security. Basically, use your SegWit address to receive deposits if you want lower fees when it's time to send the BTC out.
Another main benefit of SegWit addresses is that they are backwards compatible, meaning that you are able to send funds from a Bitcoin SegWit address to a Legacy Bitcoin address.
Why is SegWit bad?
While SegWit addresses are the newest address format and have the lowest fees, one main side effect and downside with a SegWit address is that not all wallets, exchanges and services support sending to them.
So whilst SegWit addresses are backwards compatible, you will need to make sure that whatever you are using to send to your SegWit address—understands the Segwit address. If you are expecting to receive bitcoin from someone and they tell you your BTC address is not valid, they are likely sending from a wallet that does not yet support SegWit. In that case, use your Legacy address to receive your BTC.
Hopefully, more wallets and services upgrade to support SegWit. Then we can remove this part of the article ;)
What does Exodus Support?
You’re in luck! Exodus supports sending to all three types of Bitcoin addresses. You can receive funds to your Exodus Native SegWit address (begins with bc1) or your Legacy address (begins with 1). Keep in mind, receiving deposits to your SegWit address will help lower fees when sending.
What does Trezor Support?
Trezor supports all three address types. However, if you are using Trezor with Exodus, we only allow the use of Nested SegWit (P2SH) addresses (begins with 3).
You can read more about Trezor SegWit support here: https://blog.trezor.io/rolling-out-trezor-wallet-segwit-segregated-witness-5700269debc5
Which should you choose?
It is totally up to you!
Keep in mind that sending to your bc1 SegWit address may not work if the service does not support it. Thankfully you can just send to your Legacy Bitcoin address and the funds will end up in the same wallet! If you are using a Trezor, you can try sending to the 3 address as well.