Bech32 Encoding (BIP 173)

The launch of Native SegWit brought with it the first major change to Bitcoin address formats since the beginning. Bech32 (defined in BIP 173) replaced the old Base58Check encoding for all native witness outputs.

1. Anatomy of a Bech32 Address

A typical P2WPKH address looks like this: bc1q9w3m7y7e4u7y7e4u7y7e4u7y7e4u7y7e4u

• bc: The Human Readable Part (HRP). Stands for Bitcoin (Mainnet).

• 1: The Separator. It separates the prefix from the data.

• q: The Witness Version. 'q' represents Version 0.

• Data: The 20-byte hash, encoded in base32.

2. Base32 Alphabet

Bech32 uses a 32-character alphabet: qpzry9x8gf2tvdw0s3jn54khce6mua7l

• Notice it does not use 1, b, i, or o to avoid confusion.

• It is Case-Insensitive. While lowercase is standard, uppercase BC1Q... is also valid and means the same thing.

3. The BCH Checksum

Bech32 uses a sophisticated Bose-Chaudhuri-Hocquenghem (BCH) checksum.

• Unlike Base58, which can only tell you if there is an error, Bech32 can often tell a wallet where the error is.

• This makes it much safer for users who are manually typing addresses.

4. Why use Base32 instead of Base58?

1. Compact QR Codes: Base32 uses only alphanumeric characters that fit into the "Alphanumeric Mode" of QR codes, making them 15-20% smaller.

2. Ease of Use: It is easier to read over a phone or radio because there are no capital letters to specify.

3. Efficiency: Base32 is mathematically simpler to compute than the large-integer division required for Base58.

Feature	Base58 (Legacy)	Bech32 (Modern)
Ambiguity	High (0/O, l/I)	Zero
Case Sensitive	Yes	No
Checksum Strength	Strong	Extreme
QR Code Size	Larger	Smaller

In the final section, we will build a Python P2WPKH Auditor.