Bitcoin Address Types Explained: Which One Should You Actually Use?

Confused about Bitcoin addresses? You’re not alone. Here’s the breakdown of the 4 main types you’ll encounter:

The Classic: P2PKH (Pay-to-Public-Key-Hash)

Starts with “1” — the OG Bitcoin address format. It hashes your public key before broadcasting it, adding an extra privacy layer. If someone gets the address, they can’t directly steal your private key. Think of it as a safety buffer.

Example: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2

Why it matters: This format is ancient by crypto standards (2009) but still rock-solid. Problem? Less efficient than newer alternatives.

The Smart Contract Special: P2SH (Pay-to-Script-Hash)

Starts with “3” — the multisig workhorse. Instead of just a public key, you’re locking funds behind a script. Need 3-of-5 signatures? P2SH handles it.

Example: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy

Real talk: This is what exchanges use for deposits. Way more flexible than P2PKH.

The Modern: Bech32 (SegWit)

Starts with “bc1q” — the efficiency king. Named after its designers’ surnames + the error-correction tech (“ech”). Bech32 squeezes ~30% more transactions into a block, meaning lower fees for you.

Example: bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq

Why wallets push this: Better error detection (won’t mix up “1” and “l”), faster verification. Most modern wallets default here.

The Latest: Taproot (P2TR)

Starts with “bc1p” — the privacy champion. Built on SegWit tech but with extra tricks: complex smart contracts look like regular transactions on-chain. Even cheaper fees, better privacy.

Example: bc1p5…

The catch: Still not universally supported by all exchanges.

Why Your Wallet Keeps Changing Addresses

If your wallet generates a fresh address every time you receive funds—that’s intentional, not a bug.

Two key reasons:

1. Privacy protection: If you reuse the same address, all your transactions are traceable to one identity. New address = harder to link transactions together.

2. Security: If one address gets compromised, only funds on that specific address are at risk. Your other addresses stay safe.

HD Wallets: The Smart Solution

Modern wallets don’t actually generate random keys for each address. They use HD (Hierarchical Deterministic) wallets — one seed phrase generates all your addresses mathematically.

Benefits:

• Backup once (seed phrase), recover everything
• No need to store 100 private keys
• Can create sub-wallets for different purposes
• Still generates new addresses for privacy

Bottom line: Your 12-24 word seed phrase is basically the master key to an infinite chain of addresses. That’s why backing it up is crucial—and why you don’t need to panic when you see new addresses.