Types Of Bitcoin Blockchain Address - Segwit and Legacy
The BTC blockchain comprises of database of transactions by different node administrators. BTC blockchain being decentralized makes sure it duplicates every transactions among its administrators all over the world.
First of all before we go deeper let's understand the term Blockchain. Blockchain as the name implies is a group of blocks chained together. not the ceramic blocks, but a pack of informations or a database. It is used by many companies to store data or informations.
We are not going to the other business part of blockchain but we will deal on BTC blockchain.
Since we've gotten the idea of the term blockchain, we can then move forward. Every transaction made in the BTC blockchain comprises of three components, they are;
• output - the public address of the receiver or recipient.
• input - the public address of the sender.
• digital signature (part of the input) - this guy is actually the space consumer in the BTC blockchain. It takes about 65% of the transaction space hence covers a lot of space in the blockchain. The signature actually shows that the sender can fund such payment.
As we have summarised that every transactions consist of the above three. When the fund is transferred from the inputs to the outputs every single nodes connected to the BTC blockchain is notified of such transaction. At this point the transaction is then piled up in the block at the block chain.
These continued at the early stage of BTC discovery as at 2009 until it became an issue in BTC as a whole, when much transactions increase at a high rate, causing more blocks to be produced at the chain every 10 minutes because of its 1 megabytes(MB) capacity. Problems like high transaction fee rose up at the same time, because a simple rule was observed in the chain and that is, the lower the transaction size capacity, the higher the fee. Not only that, there where other noticeable problems like time wastage of transaction completion due to many transactions taking place at a particular seconds. At that time BTC was able to hold only 7 transactions at a second while other companies like Visa was able to hold thousands of transactions at a second.
Many companies like BIP 100, Bitcoin XT, BIP 102, BIP 103 and Bitcoin classic tried to solve some of the problems but couldn't. I think we are progressing, let's move on.
Since the history of BTC till date there are two types of Bitcoin address, which are;
• LEGACY BITCOIN ADDRESS (P2PKH)
This was the original Bitcoin wallet address which begins it address with "1", I mean the first address right from origin. It was the address used by BTC when the above problems were observed as of when BTC transaction rate increased.
•Merits of Legacy Bitcoin
it was noticed to be the original wallet address of BTC.
for the above reason, it does BTC transactions with any other wallets - generally accepted by other wallets.
•Demerits of Legacy Bitcoin
Because of it's one megabytes(MB) block size, that's the transaction size capacity, transactions are squeezed and so causes a weight observed in the block which tends to cause
slow network
high transaction fee
enormous time wastage which could take to about hours before a transaction is completed.
• SEGWIT BITCOIN ADDRESS (Segregated witness, P2SH)
First of all before we get to know what this's all about. We need to first understand the component words - "segregate" and "witness". The word "segregate" means to exclude somebody or something from a group or its host. While the word "witness" in the block chain term means the signature data. Clustering the two words together, Segregated witness simply means the exclusion or removal of the transaction signature or digital signature from the transaction. This was possible by the influence of the soft fork. It starts it's address with "3". It was formulated by the Bitcoin developer, Pieter Wuille in 2015, then in August 2017, it upgrade was implemented as a soft fork in a Bitcoin. I think this man has already solved some of the issues suffered in the Legacy address, if not all. So segwit goes beyond to create an additional 3 megabytes block, extending the blocks to organise transactions at the interval of 1 megabytes - 4 megabytes. Therefore increasing the transaction size limit. In this kind of address, the blocks are then top up to occupy more transactions, whereby the digital signature has been cut off from the main transaction that includes only the inputs and outputs, and repositioned in the extra 3 megabytes space added to main Legacy block below.
Through the Segwit address, the Lightning Network was invented having a purpose of allowing more transactions to be confirmed in a short amount of time resulting in faster transactions for users. These transactions are collected off-chain because it is no longer connected with the Bitcoin network, hence lives without the alteration of Bitcoin network.
There are two types of the SEGWIT Bitcoin address
• Nest - Segwit address (or Segwit, also known as P2SH) - it has all qualities of the segwit. It starts with "3" in it's address.
• Native - Segwit address(also known as bech32) - this is the newest one. It address starts with "bc1". It's more advanced than the earlier, hence, is more faster in transaction than the nest-segwit address and lesser transaction fee than it.
• Merits of Segwit in general
it's more faster in transaction than the legacy.
it increases the transaction limit size in the blockchain.
it solves problems concerning malleability and scalability in the BTC Blockchain.
it removes the signature from the transaction hence avoid letting the recipient to have access to the transaction ID, so as not to steal any fund from the sender.
it lowers the transaction fee. Before it came to existence transaction fee was about $30 or above but now it's even below $1 no matter the quantity of cypto to be exchanged.
• Demerits of Segwit in general
No matter its flexibility in trying to solve the issues, it still has disadvantages.
- it's not generally accepted by all wallets hence, cannot perform transactions with wallets that have not supported it.
Written by @prolee
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