As we have already seen when dealing with sending and receiving BTC, there are several types of wallet addresses with different features and formats. Throughout the life of the BTC Blockchain, updates have been made to solve operational problems that have affected the BTC address format also called "Hash or Address Code". It is also technically called "public keys" because they are the ones that can be shared to send and receive BTCs.Source: blog.bitgo.com
We currently have three formats that have appeared at different times. Below are the 3 BTC address formats that exist at the present in order of appearance over time:
1st) The Legacy (P2PKH): whose hash or code begins with 1... (followed by numbers and lower and upper case letters).
2nd) The SegWit Compatible (P2SH): whose hash begins with 3... (followed by numbers and lower or upper case letters).
3rd) The SegWit Native (Bech32): which is the most modern and efficient and whose hash starts with bc1... (followed by numbers and lowercase letters).
Here below a brief explanation of each address hash format:
- Legacy: whose code starts with 1..., and is the first one that appeared to send and receive funds in Bitcoins. It's still in use and through it you can send BTCs to the other address formats without any problem. However, the average transaction cost is higher and takes longer than the other formats to complete the transaction so the other hashes are starting to be used more.
- SegWit Compatible: whose structure is similar to the previous one with the the difference that it starts with 3... It is an improved format respecting the previous one, faster and more cost-efficient, as it reduces the data in each transaction separating the data which is not necessary for the funds to travel, making the blocks less heavy and therefore travelling faster. This has made the network more scalable and faster. SegWit stands for Segregated Witness meaning that data is segregated or separated to achieve higher transaction speed. For now this format is the most used and can send transactions to addresses in any of the other two formats considered.
- SegWit Native or Bech32: this last format, which starts with bc1... is significantly different from the previous two and is even more efficient than its predecessors. Better scalability and even more cost-efficiency per transaction. It has a system for detecting and avoiding errors and its format has only lowercase letters for better reading and identification. It is not yet very widespread but it is the best option and it is a matter of time for all platforms to enable this format.
Out the three formats the best one by far is the SegWit Native although only 1% of BTCs are stored in wallets that support the bech32, however this percentage is slowly increasing.
Next we will now explain which wallets and applications support this format which are as follows: Trust, Coinomi, Mycelium, Exodus and Bitwala.
1st)Trust: It is one of the most intuitive and easy to use wallets and has multiple possibilities when storing many cryptocurrencies and Etherium-based tokens. It is a mobile application that supports iOS and Android and is completely free.Source: trustwallet.com
The real control of the private keys is the responsibility of the user, although it is a very secure wallet both for its anti-hacking systems and the maintenance of backups to restore the wallet. No KYC or identity verification is required.
There are two features that make it very convenient to use:
- It supports the Bech32 format (bc1...) for a better technical and economical efficiency of the BTC sendings and receptions, and
- It connects to the "Mercuryo" exchange for an immediate purchase of cryptocurrencies by credit/debit card with affordable commissions of around 4%.
2nd) Coinomi: It is another multi-currency wallet with a very friendly interface and with a large number of cryptocurrencies to store. It also supports iOS and Android and is free. It has a great emphasis on privacy and security. It is a wallet whose private keys or backup words have to be kept by the user. No KYC or identity verification is required.Source: coinomi.com
Like the previous one, it supports the Bech32 address format, although it offers the possibility of using any of the first ones, and you can buy BTC and other cryptos although it is carried out by another exchange platform called "Simplex" in which you can use a debit/credit card as an instant payment method with an average commission of between 6-7%.
3rd) Bitwala: this is a wallet in web or app format that is “custodial”, so we do not have to save the private keys to be able to restore our funds. Although it supports the Bech32 address format, it does not give the option to buy bitcoins and other cryptos with a debit/credit card but through a fiat fund transfer to a German IBAN, so later we can proceed with the purchase.Source: bitwala.com
It is necessary to complete a KYC or identity verification, so you have less privacy and anonymity. You have the option of applying for a prepaid debit card to make purchases or withdraw cash from ATMs. Unfortunately, it does not offer the possibility of selling bitcoins to recharge the prepaid card in euros.
4th) Mycelium: this wallet is an app that supports iOS and Android, and gives the option to choose the type of address format you want to use and are interchangeable. It has a great privacy and the private keys or backup phrases have to be kept by the user. Although it supports the recommended address format, the Bech32, it does not have the option to buy bitcoins with a debit/credit card serving as a simple wallet to store BTCs and send and receive very easily. In the future they will implement more services such as the fiat wallets.Source: wallet.mycelium.com
5th) Exodus: this wallet for both desktop and mobile app is one of the most sophisticated and attractive wallets on the market because of its graphic interface.
Although it supports the Bech32 format and has a huge amount of cryptocurrencies to be stored, it does not offer the possibility of being able to buy cryptos with fiat currency with any conventional payment system. As it is a system that can be installed in the computer, it is not recommended to accumulate a large amount of cryptocurrencies within this wallet, as it can have greater vulnerabilities to hacking attacks and the user may not keep the proper security practices. This is a "non-custodial" wallet, which means that it is the user who is responsible for keeping and guarding his/her private keys in order to restore the wallet with all its funds. It offers great integration with the Trezor cold wallet to provide greater security and thanks to this we can manage our Trezor in the exodus environment.
As you can see there are great options for using wallets that support the recommended address format, the SegWit Native - Bech32, and although it has not yet been massively adopted, we know that it is the best option for greater technical and economic efficiency in the Bitcoin blockchain.