Table of Contents
Initially printed on Unchained.com.
Unchained is the official US Collaborative Custody accomplice of Bitcoin Journal and an integral sponsor of associated content material printed by way of Bitcoin Journal. For extra data on companies provided, custody merchandise, and the connection between Unchained and Bitcoin Journal, please go to our web site.
When you’ve been utilizing bitcoin for some time, you’ve in all probability seen that some bitcoin addresses seem fairly completely different from others. You could have additionally seen dialogue round a number of acronyms starting with “P2,” comparable to 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 methodology distinctive.
P2PK
Pay-to-Public-Key (P2PK) is the unique methodology of receiving bitcoin, and it doesn’t contain an tackle. As an alternative, because the title suggests, bitcoin is paid on to an uncovered public key. The primary ever bitcoin transaction from one individual to a different used P2PK, when Satoshi Nakamoto despatched cash to Hal Finney in Block 170.
P2PK is now not used as a result of it’s a costlier, much less personal, and fewer safe manner of receiving bitcoin than subsequent strategies.
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P2PKH
Pay-to-Public-Key-Hash (P2PKH) was out there 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, comparable to 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 brief as 26 characters), and they’re encoded in Base58 format. They start with a prefix of 1 and are at present chargeable for receiving and securing 43% of the mined bitcoin provide, greater than some 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 personal 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 chargeable 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 typical script in early 2012, as specified by BIP 11. Nevertheless, 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 3. Inside months P2MS would get replaced by another methodology 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 mushy fork in accordance with BIP 16 on April 1, 2012. Like most forks, the story behind it’s fascinating. P2SH shares quite a bit in widespread with P2PKH. The primary distinction is that the tackle is created by hashing a redeem script as a substitute of hashing a single public key.
A redeem script might be considered coded directions specifying how bitcoin acquired to the P2SH tackle might be spent sooner or later. There may very well 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 commonest makes use of for P2SH have been to create Nested SegWit addresses (coated under) and multisig wallets. For instance, a script can embody three public keys and specify that signatures from any two of the corresponding personal keys can spend the bitcoin. This might create a 2-of-3 multisig tackle.
P2SH addresses are precisely 34 characters in size, they usually start with a prefix of three, as specified by BIP 13. Earlier than the mushy 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 mushy fork in August 2017. The story behind this extraordinarily vital and significantly contentious mushy fork is documented in a guide referred to as The Blocksize Struggle, written by Jonathan Bier.
P2WPKH is the SegWit variant of P2PKH, which at a fundamental degree, implies that selecting this tackle kind somewhat than older P2PKH addresses will assist you get monetary savings 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 might 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 primary benefit to utilizing P2WSH over P2SH is that it may well 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. Nevertheless, it has an extended character size of precisely 62. Not like the tackle sorts coated so far, P2WSH addresses are created utilizing the SHA-256 hashing operate alone, with out together with RIPEMD-160, ensuing within the elevated character size. This was applied 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 (often known as Wrapped SegWit) is technically not a distinct tackle kind than we’ve coated above. Nonetheless, it’s a distinctive manner to make use of beforehand mentioned tackle sorts in a fashion that was quickly helpful for the bitcoin group.
When the SegWit soft-fork occurred, not all bitcoin nodes, software program, and companies 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 people who needed the flexibility to obtain bitcoin from anyone (together with those that hadn’t upgraded) couldn’t use a Native SegWit pockets but. Nevertheless, since SegWit provided cheaper transaction charges, most individuals have been eager to start utilizing it.
The artful answer to this dilemma was to make the most of the P2SH transaction kind. The entities that had not but applied 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 might be spent in a while. Because it seems, these directions might incorporate the brand new SegWit spending mannequin, offering customers with a bridge to decreased charges. Due to this fact, the P2SH addresses utilizing this trick grew to become referred to as Nested SegWit, they usually performed a big function within the SegWit adoption course of.
On the floor, Nested SegWit addresses are indistinguishable from different P2SH addresses, so the availability of bitcoin held on this association is unknowable. Moreover, since all fashionable bitcoin instruments can now ship on to Native SegWit addresses, there isn’t 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 out there by the Taproot soft-fork in November 2021. P2TR adoption stays fairly low on the time of writing, and plenty of bitcoin softwares and companies are nonetheless engaged on integration.
Whereas P2WPKH and P2WSH are referred to as 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.
Concerning privateness, the important thing and signature aggregations made potential by Schnorr permit multisig addresses to be indistinguishable from singlesig, and the total spending situations for a P2TR tackle usually are not essentially revealed publicly. The creator of the tackle may even embody a number of custom-made redeem scripts to select from so as to spend the bitcoin later.
P2TR addresses are 62 characters lengthy, they usually use Bech32m encoding, a barely modified model of Bech32, as described in BIP 350. P2TR addresses might be recognized by their distinctive bc1p prefix.
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Reference chart
Now that now we have coated all standardized strategies to obtain bitcoin on-chain, a few of the fast info and tackle options might be mixed right into a handy chart for reference.
Initially printed on Unchained.com.
Unchained is the official US Collaborative Custody accomplice of Bitcoin Journal and an integral sponsor of associated content material printed by way of Bitcoin Journal. For extra data on companies provided, custody merchandise, and the connection between Unchained and Bitcoin Journal, please go to our web site.
