The type of Bitcoin address you use directly affects the size of your transaction — and therefore how much you pay in fees. Switching from a legacy P2PKH address to a native SegWit bech32 address can reduce your transaction size by 37%, cutting your fee by the same amount at the same sat/vB rate.
Legacy P2PKH Addresses (1xxx)
Legacy addresses start with '1' and create the largest transactions. A standard 1-in/2-out P2PKH transaction is about 225 vbytes. At 20 sat/vB, that is 4,500 satoshis. Legacy addresses offer maximum compatibility but the highest fees.
P2SH-P2WPKH Addresses (3xxx)
These 'wrapped SegWit' addresses start with '3' and are compatible with all wallets, including older ones that cannot parse native SegWit. A 1-in/2-out P2SH-P2WPKH transaction is about 167 vbytes — 26% smaller than legacy. At 20 sat/vB: 3,340 satoshis.
Native SegWit bech32 (bc1q...)
Native SegWit P2WPKH addresses start with 'bc1q' and produce the most efficient standard transactions at ~141 vbytes — 37% smaller than legacy. At 20 sat/vB: 2,820 satoshis. Most modern wallets and exchanges support bech32.
Taproot bech32m (bc1p...)
Taproot P2TR addresses start with 'bc1p' and provide the smallest single-signature spends at ~111 vbytes — a 51% saving versus legacy. At 20 sat/vB: 2,220 satoshis. Taproot also enables advanced features like Schnorr signatures, MAST, and improved Lightning Network privacy.
Understanding satoshi per byte (sat/vB) is the key to efficient Bitcoin transactions. Set your fee rate based on mempool conditions, use SegWit or Taproot addresses to reduce transaction size, and never pay more than the market demands.
Continue reading: Bitcoin Fee Rate History