Glossary

Wrapped SegWit

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Wrapped SegWit is a design implementation included in the SegWit upgrade meant to enable wallets and other Bitcoin software to more easily support SegWit. In order to achieve this, the two native SegWit scripts, P2WPKH and P2WSH, are used as the “redeemScript” of a P2SH transaction, yielding wrapped SegWit script types of P2SH-P2WPKH and P2SH-P2WSH respectively.

This design allows older wallets which do not support SegWit to send to SegWit outputs as long as they support sending to P2SH addresses. Users who receive bitcoin to wrapped SegWit addresses are still able to save on transaction fees by using the Witness field, albeit to a lesser extent than if they use native SegWit scripts.

Like all P2SH addresses, wrapped SegWit addresses will begin with a ‘3’ and use Base58 encoding, whereas native SegWit addresses will begin with a ‘bc1’ and use Bech32 encoding.

Related Terms
Pay-to-Script-Hash (P2SH)
Pay-to-Script-Hash (P2SH) is a type of transaction which allows for the spending of bitcoin based on the satisfaction of any script provided by the sender. P2SH is used for multisig and SegWit transactions.
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SegWit
Segregated Witness (SegWit) is a soft-fork upgrade to Bitcoin which was activated in 2017. SegWit fixed the problem of transaction malleability, and paved the way for the implementation of the Lightning Network and many other upgrades.
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Redeem Script
A redeem script is the script used to unlock bitcoin sent to a P2SH address. A P2SH transaction locks bitcoin to the hash of a redeem script.
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Pay-to-Witness-Public-Key-Hash (P2WPKH)
Pay-to-Witness-Public-Key-Hash (P2WPKH) is a type of ScriptPubKey which is used to lock bitcoin to a SegWit address.
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Encoding
The Bitcoin Protocol uses several different encoding schemes to represent data to users. The encoding schemes are chosen based on the data type, in order to optimise for human readability and conserve disk space.
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