Crypto derivatives exchange BitMEX announced on Thursday (December 12) that it now allows its customers to withdraw Bitcoin from their accounts using all three Bitcoin address formats (i.e. P2PKH, P2SH, and Bech32).
In a blog post published earlier today, BitMEX first explained that Bitcoin uses three address formats:
- Pay to Public Key Hash (P2PKH) — this was Bitcoin’s original address format; addresses begin with ‘1’, e.g. 17VZNX1SN5NtKa8UQFxwQbFeFc3iqRYhem
- Pay to Script Hash (P2SH) — this format became available in April 2012; addresses begin with ‘3’, e.g. 3EktnHQD7RiAE6uzMj2ZifT9YgRrkSgzQX
- Bech32 (native SegWit) — this is the native SegWit address format; addresses begin with ‘bc1’, e.g. bc1qar0srrr7xfkvy5l643lydnw9re59gtzzwf5mdq
It then went on to say that although it is now possible to withdraw to addresses in any of these three formats, customers still need to make Bitcoin deposits using the “Pay to Script Hash” (P2SH) format due to their “multi-signature wallet solution.”
In other words, the Bech32 address format—described in Bitcoin Improvement Proposal 173)—that BitMEX has implemented can only be used for receiving addresses when making Bitcoin withdrawals from BitMEX.
BitMEX then summarized the advantages of using the Bech32 address format:
- “More efficient use of blockweight (and therefore lower fees)”
- “Improved error detection”
- “More efficient QR codes”
BitMEX says that the main benefit of Bech32 is that it can deliver reduced transaction fees when you spend bitcoin that was previously sent to a Bech32 address:
Therefore this upgrade will not directly result in fee savings when customers withdraw from BitMEX, however in the next transaction, when the bitcoin already withdrawn from BitMEX is spent again, our customers may benefit from lower transaction fees.
And then explain where the savings come from:
When spending from a non-native address using SegWit, one must add around 20 bytes of overhead. When using native SegWit-style addresses (Bech32), this overhead is no longer necessary. The absence of this overhead generates the savings.
As for the future, BitMEX says that it next plans to upgrade its “current non-SegWit P2SH multi-signature wallet solution” by “enabling SegWit (non-native)”.
Featured Image Credit: Photo via Pexels.com. Table Courtesy of BitMEX Research.