Bitcoin Address Type Fee Savings: Legacy vs SegWit vs Taproot

Transaction Fee Costs by Address Type

Bitcoin transaction fees depend directly on transaction weight, measured in virtual bytes (vBytes). Different address types produce different transaction sizes because of how they encode signatures, public keys, and scripts. Choosing the right address type is the simplest way to reduce fees without changing anything else about how you use Bitcoin.

Four address types dominate Bitcoin today: P2PKH (Legacy, addresses starting with 1), P2SH-P2WPKH (Nested SegWit, starting with 3), P2WPKH (Native SegWit, starting with bc1q), and P2TR ( Taproot, starting with bc1p). Each uses a different combination of script structure and witness data, which determines how much block space the transaction consumes.

Input and Output Sizes

Transaction size breaks down into three components: overhead (version, input/output counts, locktime), inputs (where coins come from), and outputs (where coins go). The witness discount introduced by SegWit (BIP 141) charges witness data at one-quarter the rate of non-witness data, making SegWit and Taproot inputs significantly cheaper.

Taproot outputs are 12 bytes larger than Native SegWit outputs because P2TR uses a 32-byte x-only public key in the output script, while P2WPKH uses a 20-byte hash. This means Taproot inputs save more than SegWit, but Taproot outputs cost more. The net effect depends on the input-to-output ratio of your transaction.

For a deeper look at how these sizes are calculated, see our Bitcoin transaction size reference.

Fee Comparison: 1-Input, 2-Output Transactions

The most common single-sig transaction shape is one input and two outputs (one payment, one change output). The following table shows the total size and fee cost at three common fee rates, assuming same-type inputs and outputs.

At 100 sat/vB, upgrading from Legacy to Native SegWit saves 8,500 sats per transaction. With Bitcoin at $60,000, that translates to roughly $5.10 per transaction. Over hundreds or thousands of transactions, the savings compound significantly.

Note: For simple single-sig transactions, Native SegWit (P2WPKH) is actually smaller than Taproot (P2TR) because of Taproot's larger outputs. Taproot's per-input savings only overtake the output penalty when transactions have multiple inputs.

Where Taproot Wins: Multi-Input and Multisig

Taproot's real advantage shows up in two scenarios: transactions with many inputs (such as UTXO consolidation or batched payments) and multisig spending.

Each P2TR input saves roughly 10.5 vB compared to P2WPKH. For a consolidation transaction with 10 inputs, that adds up to 105 vB of savings, easily offsetting the larger output size. For exchanges and payment processors that batch hundreds of UTXOs, Taproot reduces costs meaningfully at scale.

Multisig is where Taproot becomes transformative. Traditional 2-of-3 multisig using P2SH requires roughly 296 vB per input because it must include multiple signatures and the full redeem script. With Taproot key-path spending using MuSig2 or FROST, all participant keys and signatures are aggregated off-chain into a single 32-byte public key and a single 64-byte Schnorr signature. On-chain, this looks identical to a single-sig spend.

Key-path spending with MuSig2 reduces a 2-of-3 multisig input from 296 vB to 57.5 vB: an 81% reduction. Beyond fee savings, key-path spends also improve privacy because the blockchain cannot distinguish a MuSig2 cooperative spend from a regular single-sig transaction.

Why SegWit and Taproot Are Cheaper

The fee savings come from two mechanisms working together: the witness discount and more efficient cryptography.

BIP 141 introduced the weight unit system. Non-witness data (transaction headers, output scripts) costs 4 weight units per byte. Witness data (signatures, public keys in SegWit inputs) costs only 1 weight unit per byte: a 75% discount. Since fee rates are calculated in vBytes (weight / 4), moving signature data into the witness section dramatically reduces the effective cost.

Taproot adds a second advantage: Schnorr signatures (BIP 340) are 64 bytes compared to ECDSA's 71-72 bytes in DER encoding. Combined with the witness discount, each Taproot input saves roughly 10.5 vB over Native SegWit. Schnorr's linearity property also enables native key aggregation, which is what makes MuSig2 and FROST possible.

For a comprehensive explanation of these upgrades, see our research on Taproot and Schnorr signatures and Bitcoin address types from P2PKH to Taproot.

Adoption and Current Usage

As of mid-2026, SegWit adoption (transactions with at least one SegWit input) sits at roughly 85-90% of all Bitcoin transactions, a plateau reached around 2022. Most major wallets, exchanges, and payment processors have migrated to Native SegWit as their default.

Taproot adoption has been more volatile. Usage peaked above 40% of transactions in early 2024, driven by Ordinals inscriptions and the Runes protocol launch at block 840,000 (April 2024). As inscription demand moderated, Taproot usage settled to approximately 15-20% of transactions. Wallet support continues to expand: most modern wallets now support both receiving to and spending from P2TR addresses.

To track current adoption rates, see our SegWit adoption tracker.

Which Address Type Should You Use?

For most users, Native SegWit (P2WPKH, bc1q) remains the best default in 2026. It offers the smallest transaction size for simple single-sig payments, has universal wallet and exchange support, and uses bech32 encoding with built-in error detection.

Switch to Taproot (P2TR, bc1p) if you regularly consolidate UTXOs, operate a multisig wallet with MuSig2 or FROST, or value the privacy benefits of indistinguishable spend types. Taproot also becomes the clear winner for complex scripts using Tapscript and Taptree structures, where only the executed branch is revealed on-chain.

Avoid Legacy (P2PKH) for new wallets entirely. If you are still using Legacy addresses, migrating to Native SegWit will save approximately 38% on every transaction.

For a guide on identifying and generating each address format, see our Bitcoin address format guide.

Avoiding On-Chain Fees Entirely

On-chain fee optimization matters, but the most effective way to reduce Bitcoin transaction costs for everyday payments is to move off-chain entirely. Spark enables instant Bitcoin and stablecoin transfers with near-zero fees by settling off-chain while remaining anchored to Bitcoin's base layer. For recurring payments, point-of-sale transactions, and micropayments where even SegWit fees are prohibitive, layer 2 protocols like Spark eliminate the fee concern altogether.

Frequently Asked Questions

How much do you save by switching from Legacy to SegWit?

Switching from P2PKH (Legacy) to P2WPKH (Native SegWit) reduces a standard 1-input, 2-output transaction from approximately 226 vB to 141 vB: a 38% reduction. At a fee rate of 50 sat/vB, that saves about 4,250 sats per transaction. Nested SegWit (P2SH-P2WPKH) provides a smaller ~27% savings while maintaining compatibility with systems that don't support bc1 addresses.

Is Taproot cheaper than SegWit for all transactions?

No. For simple 1-input, 2-output single-sig transactions, Native SegWit (P2WPKH) is actually ~13 vB smaller than Taproot (P2TR) because Taproot outputs are 12 bytes larger. Taproot becomes cheaper when transactions have multiple inputs, since each P2TR input saves ~10.5 vB compared to P2WPKH. Taproot also provides dramatic savings for multisig via MuSig2 key-path spending.

Why are Taproot outputs larger than SegWit outputs?

P2TR outputs contain a 32-byte x-only public key (34 bytes total in the scriptPubKey), while P2WPKH outputs contain a 20-byte hash (22 bytes total). The 12-byte difference per output exists because Taproot commits directly to a public key rather than a hash, which enables the key-path spending optimization and eliminates the need for public key revelation during spending.

What is the witness discount and how does it reduce fees?

The witness discount (BIP 141) assigns different costs to different parts of a transaction. Non-witness data costs 4 weight units per byte, while witness data costs only 1 weight unit per byte. Fee rates are quoted in sat/vB, where 1 vB = weight / 4. Since SegWit and Taproot move signatures and public keys into the witness section, this 75% discount on that data directly reduces the effective fee.

How much does Taproot save on multisig transactions?

With MuSig2 or FROST key-path spending, Taproot reduces a 2-of-3 multisig input from ~296 vB (Legacy P2SH) to ~57.5 vB: an 81% reduction. This works because Schnorr signatures support key aggregation, combining all participant keys and signatures into a single key-signature pair that is indistinguishable from a single-sig spend on-chain.

Should I consolidate my Legacy UTXOs during low fee periods?

Yes. If you hold UTXOs in Legacy (P2PKH) addresses, consolidating them during low-fee periods and sending to a Native SegWit or Taproot address locks in the savings for all future spends from those coins. Use a fee rate below 10 sat/vB for consolidation when possible. Our consolidation calculator can help estimate the optimal timing and cost.

What percentage of Bitcoin transactions use SegWit and Taproot?

As of mid-2026, approximately 85-90% of Bitcoin transactions include at least one SegWit input. Taproot usage varies between 15-20% under normal conditions, though it spiked above 40% during the Ordinals and Runes activity surge in early 2024. Legacy-only transactions account for roughly 10-15% and continue to decline slowly as older wallets and services upgrade.

This tool is for informational purposes only and does not constitute financial advice. Transaction sizes are approximate and assume standard single-sig spending conditions. Actual sizes vary based on signature length, number of inputs and outputs, and script complexity. Fee rates fluctuate continuously. Always verify current fee conditions before broadcasting transactions.