A blockchain address is used to send and receive funds of digital assets on a blockchain network. It is a string of text that uniquely identifies the source or destination of a transaction. Every blockchain will have wallet addresses that are created by a cryptographic operation on a computer.
Addresses can identify the cryptocurrency used. For example, all Bitcoin addresses start with 1, 3 or bc1. All Ethereum addresses start with 0x. Addresses can vary in length, but a Bitcoin address is generally 34 characters.
In Bitcoin’s infancy, it was possible to send and receive funds to an IP address, but this was stopped after it became apparent that this method was vulnerable to hacking. Early Bitcoin addresses are in what is known as the P2PKH format, and begin with 1. They are also known as legacy addresses, and generally come with higher transaction fees.
After this, came P2SH addresses. They start with 3 and support the Segwit update to the Bitcoin blockchain. This removed signature data on Bitcoin transactions and resulted in lower transaction fees. They also provided more security by allowing for multisignature (multisig) addresses, which require multiple keys to authorise a transaction on the Bitcoin network. All addresses on Bybit are multisig.
The newest addition to the types of Bitcoin addresses is Bech32. They are fully compatible with Segwit. An advantage to these addresses is that they are not case sensitive, meaning they are less prone to input error. Also, they come with lower transaction fees than PS2H addresses. However, they are still not too commonly used.
Because of the transparent nature of blockchains, many addresses are widely shared publicly, including ones owned by Bitcoin creator Satoshi Nakamoto. Whales that conduct large transactions of cryptocurrencies often have their addresses shared on social media. Additionally, increasing amounts of people in different walks of life are publicly sharing addresses as a means of receiving payments for their services.
Some may confuse an blockchain address and a wallet. An address is essentially an invoice for a transaction on a blockchain network. A wallet on the other hand is where you store your funds. They can be hot wallets (online), or cold wallets (offline). Therefore, a wallet can actually contain multiple addresses.