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When you’ve been utilizing bitcoin for some time, you’ve in all probability observed that some bitcoin addresses seem fairly completely different from others. You could have additionally seen dialogue round a number of acronyms starting with “P2,” resembling P2PKH or P2WSH. When you’re unfamiliar with what these acronyms imply, right here we’ll look by way of all of the standardized on-chain strategies for receiving bitcoin all through its historical past and clarify some important variations that make every technique distinctive.
P2PK
Pay-to-Public-Key (P2PK) is the unique technique of receiving bitcoin, and it doesn’t contain an tackle. As an alternative, because the identify suggests, bitcoin is paid on to an uncovered public key. The primary ever bitcoin transaction from one particular person to a different used P2PK, when Satoshi Nakamoto despatched cash to Hal Finney in Block 170.
P2PK is not used as a result of it’s a costlier, much less non-public, and fewer safe method of receiving bitcoin than subsequent strategies.
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P2PKH
Pay-to-Public-Key-Hash (P2PKH) was obtainable to be used at bitcoin’s starting, and it confirmed up on the blockchain for the primary time lower than two weeks after the genesis block. P2PKH makes a number of enhancements upon P2PK, resembling using an tackle. As mentioned in our earlier article, addresses comprise a checksum that helps stop typos and misplaced bitcoin.
P2PKH addresses are sometimes 34 or 33 characters in size (however might theoretically be as quick as 26 characters), and they’re encoded in Base58 format. They start with a prefix of 1 and are at the moment liable for receiving and securing 43% of the mined bitcoin provide, greater than every other tackle kind.
Making a P2PKH tackle includes placing a single public key by way of hash capabilities SHA-256 and RIPEMD-160. This shortens the quantity of information, which in flip helps save block house and transaction charges for the consumer. It additionally introduces additional resistance to reverse-engineering the non-public key past the already believed-to-be-unbreakable secp256k1 elliptic curve.
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P2MS
Pay-to-Multisig (P2MS) is a trivial transaction kind that was solely briefly related and has by no means been liable for holding greater than 100 bitcoin at one time throughout all community individuals. However, P2MS is part of bitcoin’s historical past.
P2MS was launched as a regular script in early 2012, as specified by BIP 11. Nonetheless, this transaction kind suffered from the identical issues as P2PK because it included uncovered public keys and didn’t use any tackle format. It additionally restricted the variety of public keys in a multisig quorum to a few. Inside months P2MS would get replaced by another technique for receiving bitcoin right into a multisig association referred to as P2SH, which we’ll cowl subsequent.
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P2SH
Pay-to-Script-Hash (P2SH) was launched to bitcoin as a smooth fork in accordance with BIP 16 on April 1, 2012. Like most forks, the story behind it’s fascinating. P2SH shares so much in widespread with P2PKH. The principle distinction is that the tackle is created by hashing a redeem script as a substitute of hashing a single public key.
A redeem script may be considered coded directions specifying how bitcoin obtained to the P2SH tackle may be spent sooner or later. There might be a variety of prospects, together with a number of completely different public keys. The receiver, not the sender, determines the script particulars, and the spending directions usually are not uncovered publicly till bitcoin is spent out of the tackle.
Whereas superior customers can assemble complicated scripts, the most typical makes use of for P2SH have been to create Nested SegWit addresses (coated beneath) and multisig wallets. For instance, a script can embrace three public keys and specify that signatures from any two of the corresponding non-public keys can spend the bitcoin. This may create a 2-of-3 multisig tackle.
P2SH addresses are precisely 34 characters in size, and so they start with a prefix of three, as specified by BIP 13. Earlier than the smooth fork on April 1st, a handful of transactions experimented with this different prefix, the primary of which is present in Block 170,052.
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P2WPKH
Pay-to-Witness-Public-Key-Hash (P2WPKH) is the primary of two tackle sorts launched to bitcoin upon the SegWit smooth fork in August 2017. The story behind this extraordinarily vital and notably contentious smooth fork is documented in a guide referred to as The Blocksize Battle, written by Jonathan Bier.
P2WPKH is the SegWit variant of P2PKH, which at a fundamental degree, signifies that selecting this tackle kind quite than older P2PKH addresses will allow you to lower your expenses on transaction charges when shifting your bitcoin round.
SegWit addresses look fairly completely different from the older tackle sorts as a result of, per BIP 173, they use Bech32 encoding as a substitute of Base58. Most notably, there are not any capital letters in Bech32. P2WPKH addresses may be recognized by a prefix of bc1q and a personality size of precisely 42.
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P2WSH
Pay-to-Witness-Script-Hash (P2WSH) is the SegWit variant of P2SH. The principle benefit to utilizing P2WSH over P2SH is that it will possibly assist decrease transaction charges, and the first purpose to make use of a script hash as a substitute of a public key hash is to accommodate multisig preparations.
Like P2WPKH, a P2WSH tackle begins with a prefix of bc1q. Nonetheless, it has an extended character size of precisely 62. Not like the tackle sorts coated to date, P2WSH addresses are created utilizing the SHA-256 hashing perform alone, with out together with RIPEMD-160, ensuing within the elevated character size. This was carried out cautiously, including additional safety from a reasonably nuanced and intensely unlikely multisig assault vector.
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Nested SegWit (P2SH-P2WPKH and P2SH-P2WSH)
Nested SegWit (also called Wrapped SegWit) is technically not a special tackle kind than we’ve coated above. Nonetheless, it’s a distinctive method to make use of beforehand mentioned tackle sorts in a way that was quickly helpful for the bitcoin neighborhood.
When the SegWit soft-fork occurred, not all bitcoin nodes, software program, and providers instantly upgraded to help the brand new Native SegWit tackle sorts, P2WPKH and P2WSH. Solely the entities that did improve might ship to those new addresses. This meant that folk who needed the flexibility to obtain bitcoin from anyone (together with those that hadn’t upgraded) couldn’t use a Native SegWit pockets but. Nonetheless, since SegWit supplied cheaper transaction charges, most individuals have been eager to start utilizing it.
The artful resolution to this dilemma was to make the most of the P2SH transaction kind. The entities that had not but carried out SegWit might nonetheless ship bitcoin to P2SH addresses—which, as mentioned above, are constructed with a redeem script specifying the directions on how the bitcoin may be spent in a while. Because it seems, these directions might incorporate the brand new SegWit spending mannequin, offering customers with a bridge to lowered charges. Subsequently, the P2SH addresses utilizing this trick turned often called Nested SegWit, and so they performed a major position within the SegWit adoption course of.
On the floor, Nested SegWit addresses are indistinguishable from different P2SH addresses, so the provision of bitcoin held on this association is unknowable. Moreover, since all fashionable bitcoin instruments can now ship on to Native SegWit addresses, there is no such thing as a longer any good purpose to make use of Nested SegWit.
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P2TR
Pay-to-Taproot (P2TR) is the most recent tackle kind, made obtainable by the Taproot soft-fork in November 2021. P2TR adoption stays fairly low on the time of writing, and lots of bitcoin softwares and providers are nonetheless engaged on integration.
Whereas P2WPKH and P2WSH are often called SegWit V0, P2TR is taken into account SegWit V1. Notably, P2TR makes use of a digital signature algorithm referred to as Schnorr, which differs from the ECDSA format utilized in earlier bitcoin transaction sorts. Schnorr signatures have a number of benefits, together with extra transaction payment reductions and elevated privateness.
Relating to privateness, the important thing and signature aggregations made doable by Schnorr permit multisig addresses to be indistinguishable from singlesig, and the complete spending circumstances for a P2TR tackle are…
