While creating a new Bitcoin wallet in the bluewallet app, there are three options:
- HD SegWit (BIP84 Bech32 Native)
- SegWit (P2SH)
- HD SegWit (BIP49 P2SH)
Can someone explain each option and their trade-offs?
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The main trade-offs among the three Bitcoin wallet options available in BlueWallet App are related to transaction fees, compatibility, error detection, and privacy.
If you prioritize having the lowest transaction fees (smaller transaction size), better error detection and improved address readability, go for the HD SegWit (BIP84 Bech32 Native) wallet. However, not all wallets and services support Bech32 addresses yet, which could lead to compatibility issues.
If you need better compatibility with older wallets and services, choose either the HD SegWit (BIP49 P2SH) or SegWit (P2SH) wallet. HD SegWit (BIP49 P2SH) uses an HD wallet, which makes it easier to backup and restore. The SegWit (P2SH) wallet in BlueWallet has one more significant privacy drawback, namely that it is limited to a single receiving address.
You can find further explanations for all of these wallet types also on the BlueWallet website at: https://bluewallet.io/docs/create-bitcoin-wallet/
SegWit HD (BIP84 Bech32 - Native) Is the latest bitcoin address type. It will save the most on fees and it will give you multiple addresses for best practice when it comes to protect your privacy.
SegWit HD (BIP49 PS2H - Wrapped) It is a compromise to the new addresses type above, it provides better compatibility with older address types and most services like exchanges, but a smaller save on fees.
SegWit (P2SH) This is a single address wallet, in case you want a wallet with just one address. The others will give you a new address every time you make a transaction. This is not good for privacy for instance, only use it if you know what you are doing.