If you have transferred Bitcoin from exchanges or cryptocurrency wallets then you may have been given the option of either SegWit or Native SegWit. Ultimately, they are two different types of bitcoin addresses that allow you to send and receive transactions.

They were first introduced in 2017 as an improvement over the legacy address, theses improvements include both faster transaction speeds and cheaper fees to name a few. Although they have similar names there are several key differences.

But don’t worry. In this detailed article, I will be explaining the two as well as their differences. So without further ado, let’s jump right in.

Why were Native SegWit and SegWit introduced?

Before we define the two terms we need to understand why they were introduced. Originally the address format for bitcoin transactions was the legacy P2PKH address.

Unfortunately, this original format had a maximum block size of just 1 MB and therefore this restricted the number of transactions it could handle and the overall network congestion was higher.

As a result, wait times and transaction fees were significant issues in Bitcoins’ early days. Therefore, in 2015 began the talks to address these issues with a change in the format of Bitcoin addresses.

At this point, SegWit was proposed with a portion of the transactions data signature being offloaded to a secondary layer to ease overall congestion on the main chain.

What is SegWit?

Launched in 2017 as a soft fork, SegWit (P2SH) is the second iteration of the Bitcoin address format. It reduced the size of transaction data by improving the efficiency of the digital signature.

This was achieved by separating portions of the data signature from the transaction. As a result, this came with several notable advantages over the legacy format.

Firstly, any address starting with three reduced transaction fees by 25% – 45%. This was because transactions were lighter therefore the transaction capacity of each block was increased.

Not to mention, it is compatible with all Bitcoin wallets.

What is Native SegWit?

Native SegWit also known as bech 32 is the latest cryptocurrency address configuration. This iteration further improved transaction speed, scalability and lowered the overall fees.

All in all, fees were reduced by 40-60%. Not to mention, the address format is converted to a more intuitive text string that is easier to read and thus reduces human error when sending or receiving Bitcoin.

The main downside of Native SegWit is that it is not compatible with some of the old Bitcoin software and applications.

What’s the difference between SegWit and Native SegWit?

Format 

The main difference between SegWit and Native SegWit is the format. Firstly, in most instances, SegWit addresses start with the number 3 whereas native SegWit starts with bc1.

Moreover, Native SegWit is converted to a more intuitive text format with all lowercase letters to improve readability.

Transaction cost

All in all, Native SegWit is cheaper. On average it reduces fees by 40-60% whereas SegWit only reduces them by 25-40%. Ultimately, Native Segwit has the highest block capacity out of all the address formats.

Wallet support

SegWit wins in this regard. It supports all prior versions of Bitcoin wallets whereas Native SegWit is not compatible with some of the older software.

Moreover, the number of exchanges that support Native SegWit is lower.

Security

Both of these formats offer great security. SegWit is secure as it separates the digital signature from the transaction. This makes it more difficult for hackers to track them.

When it comes to Native SegWit this option also provides additional security by providing an address format that reduces human error.

Conclusion

Overall, Native SegWit and SegWit are types two different types of formats of Bitcoin addresses. As Native SegWit is the new and improved version it is better in most regards.

From cheaper transaction fees to faster processing in my opinion it is better than SegWit. That being said, there is less compatibility but hopefully, with time this will improve over time.

I hope you found this article useful and thanks for reading it. Want to know if Bitcoin is unhackable? Click here to read my previous article.