What's all this talk about Segwit and Legacy? Why do we have two different types of addresses in our wallet?
Let's go back to some time around 2008, there was one address to rule them all and they started with the number 1.
There was no such thing as a Legacy address, there were only Bitcoin addresses. And now, fast forward to about 2016 and 2017, it is around this time the Bitcoin block size debate started to heat up and the primary question was "Is a one megabyte block size large enough to accommodate all future years?".
Many talented developers tried to solve this and the solutions centered around taking a portion of the transaction and putting it on a second layer, therefore saving space on the main chain. This portion of the transaction is called the Witness Data and technically known as Segregated Witness.
Without driving into the divisive politics of the time, the BTC chain moved forward with two types of addresses:
Legacy address
SegWit address
To add a bit of confusion, Segwit has two types of address format. Here's you can tell the difference between the three types of Bitcoin addresses:
Legacy - Those are addresses that start with a number "1".
Nested SegWit - These are addresses that start with a number "3".
Native SegWit - Start will a "bc1".
All of these three addresses can be used to receive and send Bitcoin.
What's the difference of these addresses?
For starters, not all wallets support all three addresses types.
Legacy addresses are the original BTC address and you can expect all wallets to support sending and receiving to these type of address. However, not every wallet or service has upgraded to support the new SegWit address and therefore some wallets can only send to Legacy addresses. And if anyone wants to send you a Bitcoin (BTC) from a SegWit wallet address, your Legacy address will be fine and will able to receive it with no problem.
When using a SegWit address, the network fees will be lower because the transaction data included in the blockchain is smaller. This sounds great but the downside is not all wallets supports SegWit.
So which one should you use? If you are a die-hard fan of old schooler - Legacy should be the one you want.
If lower network fees sound good, then SegWit is your choice.
Image credits to : cryptovoucher.com
It is best to use Bitcoin Cash. In Bitcoin Cash there is no SegWit and therefore no such problems.