Datatypes that can be made into sets must have a defined order. And since set(address) is a valid data type, what is the ordering of addresses?
If you make an instance of type set(address), how are the addresses ordered?
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The address data type is ordered lexicographically, so that tz2... comes before tz3... and tz2a... comes before tz2b... etc. But originated accounts, addresses that start with KT1, come after any implicit accounts, those that start with tz. So all addresses starting with KT1 are ordered lexicographically but they come after all tz addresses.
This ordering is described here.