Nested SegWit or Native SegWit: What to Choose?

Hey everyone! So, with Bitcoin addresses, there are four main types: 1- Legacy (P2PKH): these start with a 1 2- Nested SegWit (P2SH): these kick off with a 3 3- Native SegWit (bech32): these start with bc1 4- Taproot (P2TR): these begin with bc1p 1- Legacy is the OG, pretty self-explanatory. 4- Taproot? Yeah, that's kind of tricky for those just starting out. I'm curious though, what are the pros and cons of using Nested SegWit? And what about Native SegWit? I’m not interested in just theory here; I want to know how it really works in practice. Like how wallets handle it, sending and receiving satoshis, that kind of stuff. I’m a bit of a newbie and I feel like Nested SegWit might be the way to go for me.

Pay-to-taproot addresses are not complex for newbies. You only use a wallet that supports it and use it as the receiving address. Nothing more. If you are the type that like consolidating your inputs, like after DCAing for a long time, the best for low fee consolidation is pay-to-taproot. If you are the type that have many outputs in transactions, like paying many workers salary, segwit version o (bc1q) is better. If the transaction you are seeing is having the same inputs and outputs, segwit version 0 is better. Is better that I am referring too is the one that has low fee.

It may worth mentioning that not all addresses starting with 3 are segwit. Addresses that start with 3 are p2sh (pay to script hash) and they can be nested segwit, multi-signature, time locked and so on. With using nested segwit addresses instead of legacy addresses, you can decrease the transaction fee up to 38% and with using native segwit addresses, you can decrase the transaction fee up to 53%.

The both sigwit addresses have an advantage of reducing the transaction fees. The nested segwit address is called a Pay-to-script-Hash (P2SH) and it’s  suitable for multi sig Wallet and can reduce transaction fees by 26%. It is compatible with both new and old softwares. The problem is not all software can get its message verified. The native segwit is the mostly widely use address version because just like P2SH addresses it reduces transaction fee but this time more than Nested. It reduces the fees by almost 52%. It’s only major disadvantage is that it is not compatible with old wallets. Just like it said above it is best when sending to multiple addresses from one address You can read about them here en.bitcoin.it

A P2SH address isn't necessarily a segwit address. Whether a P2SH address is segwit or not depends on the script and I said in my previous post, an address starting with 3 can be a multi-signature address, time locked address, etc. A nested segwit address is called P2WPKH-P2SH. Also note that the percentage of fee reduction isn't always 26% and that depends on number of inputs and outputs. Again, it depends on number of inputs and outputs.

You basically gain no advantage on using Nested SegWit today. Its main purpose is to aid the adaption of SegWit without breaking compatibility with most clients which isn't much of an issue today. You should switch to Native SegWit for lesser absolute fee because the major disadvantage of "not supported by others" was a thing of the past now. Today, I rarely see any services or wallets that can't send to 'bc1q' addresses; if there is, it should be avoided for being 5-years outdated. That's still subjected to the services that you're using though. Additionally, since you're a newbie, you're not prone to sending Altcoins to a Native SegWit address compared to a Nested SegWit. Since the latter may still be supported by some Altcoin clients or exchange, the former is Bitcoin-exclusive.

Now i have it clearer. Thank you very much.

Native Segwit (Bech32) has its address type starts with bc1q. If you only make an on-chain transaction, it is similar to other address types, no complex exists. If you are not dependent on exchanges for your Bitcoin addresses, you don't have to use Nested Segwit addresses. Some non custodial wallets like Electrum wallet stop default generation for Legacy or Nested Segwit address. Electrum wallet in latest versions by default setting, only generate Native Segwit addresses for users (Bech32, bc1q). You can use Bitcoin Transaction Size Calculators to see differences of different address types, with same inputs and outputs for one transaction. https://jlopp.github.io/bitcoin-transaction-size-calculator/ https://bitcoindata.science/plot-your-transaction-in-mempool.html https://bitcoinops.org/en/tools/calc-size/

It is worth pointing to that nested segwit is not the same as legacy, but according to what you quoted above, it means that you know about that as well. Since I have been using Electrum, I have not seen it having nested segwit in the past, it was either legacy or native segwit is chosen, but Electrum removed legacy and made native segwit the default.

You are right, the fee reduction will depend on the  number of inputs and outputs (the more inputs and outputs,  the higher is the reduction). However,  native segwit will always be cheaper than nested segwit. There is no reason to use nested segwit anymore if you are focused in fees reduction. Just go for taproot or native segwit.

Electrum did not remove the legacy wallet option if I recall correctly. You can still make a legacy wallet with electrum, but it's not the default as you know, native segwit is. Nested segwit addresses are just segwit with Base58 addresses for the benefit of those ancient services which don't support segwit transactions and addresses.

Both on mobile and desktop Electrum, you can choose to generate either legacy or native segwit before on version 4.0.9 and below. But now, you have to use the console to generate legacy seed phrase on Electum. But using command line in console is only available on desktop Electrum. To generate it, typing this on the console will generate 12 word legacy seed phrase.