I'm interested to note that most people working with Bitcoin don't even consider how many different types of addresses actually exist. And there are four, each solving its own tasks.

The oldest and most familiar is P2PKH, starting with a one. These addresses are everywhere; it's classic. It works simply: the payer sends funds to the hash of the recipient's public key, not the key itself. It sounds complicated, but the point is that it enhances privacy — even if the address becomes known, the public key itself remains hidden. Plus, the data is more compact in the blockchain.

Then came P2SH — addresses starting with a three. Gavin Andresen introduced them in 2012 specifically for more complex scenarios, like multi-signatures. Here, the address is linked to the hash of a script, not just a key. The sender only needs to know the script hash, and when spending the output, the actual script must be provided. This gave the network much more flexibility and opened up possibilities for innovation.

Bech32 — a newer format, starting with bc1q. It was developed by Pieter Wuille and Greg Maxwell, hence the name: B from the developers' last names and ech from the error detection algorithm. The algorithm is smart — it distinguishes between the digit one and the letter l, zero and the letter o. This reduces the risk of errors when entering addresses. The format supports SegWit and has better error detection capabilities.

And the newest — Taproot, starting with bc1p. This is an evolution of the SegWit idea, designed to save space in the block and reduce fees. Taproot compresses data even more, increases transaction efficiency, and provides better privacy.

Why do wallet addresses change after each use? It’s about security and privacy. If you constantly use the same address, the entire transaction history will be linked to it — anyone can trace all movements of funds. A new address each time — and the history remains hidden. Plus, if one private key is compromised, only the funds on the associated address are at risk; the rest stay secure.

Technically, this works through elliptic curves — Bitcoin uses the secp256k1 algorithm. Each new address is generated with a new key pair, a process that is very fast thanks to the algorithm’s efficiency.

Modern wallets usually use HD Wallets — hierarchical deterministic wallets. Instead of storing each private key separately, an HD Wallet generates the entire chain of addresses from a single seed according to standards BIP32 and BIP44. This simplifies backups — you save one seed and can restore all addresses and funds. Plus, it supports a hierarchical structure — you can create multiple sub-wallets for different purposes. This provides a better user experience, security, and privacy all at once.

So, types of Bitcoin addresses are not just different formats but an evolution of solutions for specific tasks — from basic security to scalability and privacy.