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What is a Native SegWit Address?
Shailee Adinolfi
&
Annie Pei
General Wallet Use
A Native SegWit address is an advanced version of the SegWit address format that reduces the memory size of Bitcoin transactions, simplifies address structure, and decreases fees while improving processing time.
Native SegWit represents an improvement over the first edition of the SegWit (Segregated Witness) address format, which revolutionized the Bitcoin transaction structure by moving witness data, or signature information, outside of the transaction block.
What Is SegWit?
At its core, SegWit is a modification of the Bitcoin address formatting system that aims to increase block efficiency, lower processing times, and decrease fees by moving witness data outside of the main block.
SegWit launched in 2017, before the advent of the Lightning Network, when Bitcoin blocks were more strictly limited to 1MB in size. Since witness data takes up space, its presence in transactions adds to congestion during periods of high demand, which in turn leads to lower processing efficiency and higher transaction fees.
By removing witness data, SegWit also solved the transaction malleability problem, which could lead to double spending and other security concerns.
The Result of SegWit: SegWit Addresses
SegWit addresses are a more lightweight version of legacy Bitcoin addresses, and were made backward compatible with legacy addresses during the transition period around the soft fork that led to their more widespread use.
A SegWit address is identifiable due to it beginning with a ‘3’ as opposed to a legacy address, which begins with a ‘1’. This difference is due to SegWit’s use of Pay-to-Script Hash (P2SH) formatting, which adds an extra layer of security to the transaction process and helps prevent double spending.
What are Native SegWit Addresses?
Native SegWit addresses are the next evolution of SegWit. They further decrease the weight of each Bitcoin transaction through its use of the ‘bech32’ format. Native SegWit addresses are identifiable due to their format, which begins with the characters ‘bc1’.
Native SegWit addresses improve transaction speed and further decrease fees due to their lighter data weight, and are also used by Layer 2 protocol Lightning Network addresses to process transactions.
Advantages of Using Native SegWit
Lighter transaction block weight
Lower Bitcoin network congestion levels during periods of higher demand
Improved transaction processing speeds
Lower transaction fees
Greater scalability
Improved security and lower transaction malleability concerns due to removal of witness data
Compatibility with the Lightning Network
Disadvantages of Using Native SegWit
Not all major crypto platforms support the ‘bech32’ format, which may limit the ability to send and receive Bitcoin on a Native SegWit address
Overall adoption levels of Native SegWit remain below legacy and SegWit
How to Identify a Native SegWit Address
A Native SegWit address will begin with the characters ‘bc1’ due to its use of the ‘bech32’ format
SegWit Address vs. Native SegWit Address
Native SegWit and SegWit addresses have some similarities and differences. It's important for Bitcoin users to understand what differentiates the two as both address types can appear in Bitcoin wallets.
Generally, SegWit addresses:
Being with '3'
Are backward-compatible with the legacy format
Have increased transaction efficiency vs. Legacy, faster processing times, lower fees, widespread adoption
Are not as lightweight as Native SegWit addresses
While Native SegWit addresses:
Are in ‘Bech’32 format, which means addresses begin with ‘bc1’
Are backward-compatible with SegWit and Legacy formats
Have increased transaction efficiency vs. Legacy and SegWit, faster processing times, lower fees
Are not as fully supported as SegWit