One of the biggest hurdles for blockchain and digital assets to overcome is the simplification of cryptocurrency wallets and addresses. Crypto addresses in particular, can be quite overwhelming for someone new to the sector, as they are quite complicated to look at.
Thankfully, there are already some solutions to the complicated appearance of crypto addresses, such as Ethereum Naming Service (ENS) and Solana Name Service, which turns your address into something simple like a name.
But what exactly is a crypto address and how do transactions work on various blockchain networks when using them? We’ll cover all that and more, let’s jump in.
What is a Crypto Address?
A crypto address is like a bank account number or email address, but there’s much more to it than that. It is a unique identifier that is generally made up of numbers and letters, and depending on the blockchain network, it may be case sensitive. Crypto addresses are also generally viewable by the public using something like a block explorer.
Your crypto wallet is then made up of a variety of crypto addresses, either for various blockchain networks or within one. When you’re looking to send cryptocurrencies to someone or somewhere, you will need their crypto address. Likewise, when you want to receive digital assets, you’ll need to give the sender your crypto address.
You have both a public address and private keys for your cryptocurrencies. The public address is one you can freely share to receive funds, while the private keys are your access code used to prove ownership and allow funds to be moved. You will likely never visually see your private keys, but you will see your public address frequently.
Sending Crypto on Bitcoin, Ethereum, and Solana
Now that we’ve outlined what a crypto address is, we are going to take a look at how the process of sending crypto goes for three major networks in Bitcoin, Ethereum, and Solana.
For each network, we’ll take a look at how the addresses work on the network (is it always the same vs dynamic), how much basic types of transactions cost, how long the transaction might take, and any other nuances related to that specific network.
Bitcoin (BTC) Addresses
We’ll start with Bitcoin and its crypto addresses seeing as it’s the original cryptocurrency. Most Bitcoin addresses are 26-35 characters but some of the newer address formats can be as long as 90 characters (we’ll get to that in a moment).
When Bitcoin first launched, all of the crypto addresses began with a “1”. These are a Pay-to-Public-Key-Hash (P2PKH) script type and are case-sensitive, while also being referred to as “legacy” addresses at this point.
The next stage in Bitcoin crypto addresses is called SegWit and uses a Pay-to-Script-Hash (P2SH) script type and is also case-sensitive. The addresses begin with a “3”. Transaction fees using SegWit addresses are lower than using legacy addresses, and can be integrated with the Lightning Network.
Bech32 or Native Segwit is the next step in Bitcoin addresses, and Bech32 addresses start with “bc1”. These addresses have even lower fees while also most effectively using block space. Most notably, these addresses are not case sensitive because they only use lowercase letters.
The most advanced type of Bitcoin address is called a Taproot address, but they aren’t as mainstream as the previous types, yet. Taproot addresses are case-insensitive like Native Segwit, and begin with “bc1p”. They allow for lower costs on transactions and smart contracts.
Source: Cointelegraph
Sending and Receiving on Bitcoin
It may be a bit confusing that there are four different types of addresses for Bitcoin, but it’s worth noting that you can use any address type to send to any of the other types, as they’re all still compatible with each other. The advantage to using a newer address type is the lower transaction costs.
When you go to send Bitcoin using the Bitcoin network, you’ll need your recipient’s crypto address. Likewise, if you’re looking to receive Bitcoin, you’ll need to give them your Bitcoin address. Depending on you and your recipient’s preferences, and the frequency of the transactions, you may end up just giving each other one Bitcoin address to send Bitcoin to.
However, technically speaking, every time you go to receive Bitcoin, your Bitcoin wallet can generate a new receiving address for you to use. This is for privacy purposes, as if you keep using the same receiving address, it is public information that can be seen and used.
Using a new receiving address will have the Bitcoin show up at the same place as if you use a previous one, but when looking at a block explorer, someone wouldn’t be able to tell that both addresses are in the same wallet. The only real time it may be worth recycling an old Bitcoin address is if you’re withdrawing funds from a centralized exchange, as it can be annoying to add a new address every time you want to withdraw.
Bitcoin Transaction Costs
Bitcoin has always been fairly expensive when it comes to sending it anywhere, which is why the Lightning Network and other layer-2 solutions are so important.
The average transaction fee for Bitcoin is about $6 USD, but the average cost per transaction is closer to $60 USD. It would likely take about 10-30 minutes for the deposit to be confirmed and in your account.
Conversely, if you were to send Bitcoin on the Lightning Network it wouldn’t cost you anything in transaction fees. It would also be in your Lightning capable wallet nearly instantly.
Ethereum (ETH) Addresses
Compared to Bitcoin, Ethereum addresses are much simpler. They all begin with “0x” and are 40 alphanumeric characters long, while not being case-sensitive. Ethereum smart contracts also use the same format, but have no private keys associated with them which means that the contract itself can’t send or receive funds on Ethereum.
Furthermore, Ethereum has Unstoppable Domains and Ethereum Naming Services, which are both ways to simplify Ethereum (and other network) addresses.
With Unstoppable Domains, you can mint an address such as “Cryptocurrencyhelp.wallet”, and then add various addresses to it for different blockchain networks. A sender can then just type in “Cryptocurrencyhelp.wallet” into the recipient address field of a crypto wallet, and it will derive the correct address to send the funds to.
Ethereum Naming Service works almost the same, but is ostensibly just for Ethereum, whereas Unstoppable Domains lets you use the domain for Bitcoin, Ethereum, Litecoin, and much more.
Sending and Receiving on Ethereum
Unlike Bitcoin, with Ethereum you will only ever have one receiving address for your wallet, unless you create another wallet. This means that once you put the address into an exchange for withdrawals, or give it to a friend to send you funds, it will always be the same address. Likewise — barring your friend telling you to use a different address — you’ll always send to the same address.
You may end up buying an Ethereum Naming Service domain such as “name.eth”, in which case you can then start to give out that as your address rather than sending them your 40 character one. However, the underlying address attached to the domain will remain the same.
Ethereum Transaction Costs
Ethereum isn’t quite as expensive as Bitcoin when it comes to sending funds, with the average gas fee being about $1 USD. However, this is just for basic sending of funds from one wallet to another. If you want to do anything decentralized finance (DeFi) related to Ethereum, the fees are pretty high. Below is a snapshot of Ethereum gas fees.
Source: Etherscan
The high cost of Ethereum transactions is why Layer-2 solutions such as Polygon (MATIC), Arbitrum (ARB), Optimism (OP), and Base (BASE) have all been developed and become popular. They allow you to do all the same things as you can on the Ethereum base layer, but with much lower transaction fees.
Solana (SOL) Addresses
Unlike both Bitcoin and Ethereum, Solana addresses have no set format, meaning they all start differently, there is no “0x” like with Ethereum or “bc1” with Bitcoin.
Solana addresses are fixed at 32 bytes of data which is between 32 and 44 characters. Generally Solana addresses are 44 characters.
Solana uses Base58 to encode their public and private key addresses, and the public addresses are case-sensitive like many of the early Bitcoin addresses were. But like Ethereum, you only get one address for Solana, there aren’t multiple crypto addresses that can be generated and be part of the same wallet like with Bitcoin.
Like Ethereum, Solana has Solana Name Service, which works just like Ethereum Naming Service, but you get an address that ends in “.sol” such as “name.sol”.
Sending and Receiving on Solana
Since Solana is like Ethereum when it comes to singular addresses, sending and receiving on the Solana network is much the same. You either give someone your address to send you SOL and other Solana ecosystem tokens, or you are given one to send to. In either case, the address should remain static throughout your dealings unless you choose to use a separate wallet.
Similarly, you could choose to buy a Solana Naming Service address and begin to give that out in lieu of sending your full Solana crypto wallet address.
Solana Transaction Costs
Part of Solana’s attraction to companies like Visa is the extremely low cost of transactions when using the network. By having extremely low transaction fees, it allows many users of the network to save money but still participate in DeFi, which would be more expensive to do on a network like Ethereum. As you can see in the image below, Solana transaction costs are almost negligible, with the average fee being 0.00025 SOL (about 4 cents USD).
Source: Solscan
Closing Thoughts
Crypto addresses can be a confusing topic, but they all work in similar ways when it comes to sending and receiving funds. The format may differ from network to network, but their overall functionality is the same.
Some networks have made it easier to create human-readable addresses, helping to push forward adoption of digital asset technologies. It will be interesting to see how crypto addresses progress on each of these networks as the sector becomes more mainstream.
