- Bitcoin Transactions
- General format of a Bitcoin transaction
- Inputs
- Format of a Transaction Input
- Outputs
- Format of a Transaction Output
- Transaction Validation
- Puzzles and Solutions
- Pay to Public Key (P2PK)
- Pay to Public Key Hash (P2PKH)
- Pay to R-Puzzle Hash (P2RPH)
- Pay to Multi Signature (P2MS)
- Other Puzzle Types
Bitcoin Transactions
A Bitcoin transaction consists of a version number, a locktime value, a list of inputs and a list of outputs.
The primary functionality of a Bitcoin transaction is to transfer custody of bitcoin from one to another.
A Bitcoin transaction can also serve as a vehicle for smart contracts, recording data, attestation and many other secondary functionalities.
A transaction can be created and iterated inside a Payment Channel using nLocktime and nSequence interlocks, or sent directly to The Bitcoin Network for inscription into a block. A transaction uses unspent transaction outputs (UTXOs) as inputs and distributes their value to new outputs. UTXOs are the ‘coins’ in which all bitcoins are stored.
Transactions are not encrypted, so it is possible to browse and view every transaction ever collected into a block. Once transactions have been seen and validated by a majority of block creating nodes in the Bitcoin network, they can be considered settled. When they are eventually mined into a block, miners collaboratively agree on the order in which they were seen by the network.
Transactions are referenced using their TXID which is a double SHA-256 hash of the fully serialised transaction.
Transaction outputs are puzzle scripts called ScriptPubKeys which are typically used to lock the contained bitcoin value, sometimes also called locking script. Outputs are redeemed by making them inputs to new transactions and providing a ScriptSig (sometimes called unlocking script) which is a valid solution that unlocks the bitcoin held in the ScriptPubKey (locking script). Outputs may have zero value in bitcoin, but may carry value in another form such as data or tokens. Scripts can be complex and specialised and may have more than one way to be redeemed.
All transactions are captured on the ledger in blocks on the blockchain, and can be viewed with a block explorer. This can be useful for seeing the technical details of transactions in action and for verifying payments.
General format of a Bitcoin transaction
The following outlines the elements that are serialised to build a valid Bitcoin transaction.
| Field | Description | Size | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Version no | currently 2 | 4 bytes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In-counter | positive integer VI = VarInt | 1 — 9 bytes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| list of inputs | Input Structure | qty with variable length per input | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Out-counter | positive integer VI = VarInt | 1 — 9 bytes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| list of outputs | Output Structure | qty with variable length per output | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| nLocktime | if non-zero and sequence numbers are Transaction Inputs and Outputs Each Bitcoin transaction is comprised of Inputs and Outputs. Inputs provide the funds to be spent in the transaction, and Outputs define where those funds should be allocated. InputsAn input is a reference to an output from a previous transaction, and a transactions can include between 1 and 2 32 inputs. All of the new transaction’s input value (that is, the total coin value of the previous outputs referenced by the new transaction’s inputs) are added up, and the total (less any transaction_fees) is consumed by the outputs of the new transaction. Previous tx is the TXID of a previous transaction. Index is the specific output in the referenced transaction. ScriptSig is the first half of a script which is provided when a UTXO is spent as an input to a transaction. An input ScriptSig may contain many components. To redeem a P2PKH script the input must provide a public key and an ECDSA signature. The Public key is doubled hashed (First SHA-256 then RIPEMD-160) and the resultant hash must match the hash embedded in the ScriptPubKey of the output being redeemed. The public key is then used to verify the redeemer’s signature. Dependent on the SIGHASH flags used, the signature may cover a hash representing part or all of the transaction. Combined with the public key, this proves the transaction was created by a person or process that controls the keys needed to spend the bitcoin in the input. Format of a Transaction InputOtherwise known as a TXIN, the following table outlines the required elements of a valid transaction input.
The input sufficiently describes where and how to get the bitcoin amount to be redeemed. If it is the (only) input of the first transaction of a block, it is called the Coinbase message and includes information about which block it was mined in and a miner configurable data element. OutputsAn output contains a piece of Bitcoin Script which can be used to lock bitcoins, requiring a certain set of keys or information to be provided to unlock them. Outputs can also be used to inscribe data onto the ledger. This ScriptPubKey is the second half of a full script and is only completed when the output is spent. There can be more than one output, and they share the combined value of the inputs. The Value of each output is the number of Satoshis that the script unlocks when solved. Because each output from one transaction can only ever be referenced once by an input of a subsequent transaction, the entire value of the combined inputs needs to be allocated to the transaction outputs. Any Satoshis left unallocated are considered to be paid in mining fees and are awarded to the miner whose node generates the block that the transaction is included in. If a user’s input is larger than the value they want to send, the transaction must create at least two outputs, one sending the required funds to the destination, and one sending the change back to the user. Outputs can have a value of zero satoshis. Currently, these outputs are limited to False Return scripts and are typically used to carry other information or tokens for Application layer protocols. Format of a Transaction OutputOtherwise known as a TXOUT, the following table outlines the required elements of a valid transaction output.
The output’s scriptPubKey sets the conditions to release this bitcoin amount later. The sum of the output values of the first transaction is the value of the mined bitcoins for the block plus possible transactions fees of the other transactions in the block. Transaction ValidationTo verify that inputs are authorized to collect the values of referenced outputs, Bitcoin uses a Forth-like scripting system. The input’s scriptSig and the referenced output’s scriptPubKey are evaluated (in that order), with scriptPubKey using the values left on the stack by the scriptSig. The input is authorized if scriptPubKey returns true. Through the scripting system, the sender can create very complex conditions that must be met in order to claim the output’s value. For example, it’s possible to create an output that can be claimed by anyone without any authorization. It’s also possible to require that an input be signed by ten different keys or be redeemable with a password instead of a key. Puzzles and SolutionsThe flexible scripting language enabled by the Bitcoin protocol allows a multitude of different transaction types to be created. Each scriptSig/scriptPubKey pair is validated by the network miners and mined into a block if the script returns true. Some commonly used Bitcoin puzzle types are described below: Pay to Public Key (P2PK)When redeeming coins that have been sent to a Bitcoin public key the script validates that the provided signature was generated by the private key that also corresponds to the public key.
Pay to Public Key Hash (P2PKH)A Bitcoin address is only a hash, so the sender can’t provide a full public key in scriptPubKey. When redeeming coins that have been sent to a Bitcoin address, the recipient provides both the signature and the public key. The script verifies that the provided public key does hash to the hash in scriptPubKey, and then it also checks the signature against the public key.
Pay to R-Puzzle Hash (P2RPH)NOTE: Since the discovery of a transaction malleation exploit which allows a message hash and signature to be modified to redirect R-Puzzle inputs to modified outputs, the advised method for using R-Puzzles is to include two signatures generating using different SIGHASH types in order to create a distinct message hash. Take care to generate each signature with a different k value. scriptPubKey: OP_OVER OP_3 OP_SPLIT OP_NIP OP_1 OP_SPLIT OP_SWAP OP_SPLIT OP_DROP OP_HASH160 OP_EQUALVERIFY OP_TUCK OP_CHECKSIGVERIFY OP_CHECKSIG scriptSig: Bitcoins locked in an R-Puzzle script require the spending party to sign using a known value for ‘k’ rather than a random number. To redeem the script, the spending party provides both the signature and the public key. The script verifies that the provided signature was signed using the correct k-value, then checks the signature against the public key. Because the public key is not checked as part of the script solution, it is possible to sign the transaction using any keypair. This can be useful when dealing with tokens that are associated with a Bitcoin address as the pubkey that corresponds to that address can be used to sign the transaction without the requirement for there to be bitcoin in the address. The technique is also relevant for Metanet node signing as the Metanet keys can be signed with an R-Puzzle without needing a separate signature.
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