Blockchain course | 2024 Knowledge Engineering Department

Understanding Bitcoin’s Scripting Language

1 Objective
The objective of this lab assignment is to gain a deeper understanding of Bitcoin Script and how
it operates within the Bitcoin network.

2 Prerequisites
2.1 Introduction to Bitcoin and Bitcoin Script
Bitcoin is a decentralized digital currency that allows peer-to-peer transactions without the need
for intermediaries like banks. It operates on a distributed ledger called the blockchain, which
records all transactions in a secure and transparent manner. One of the key features of Bitcoin is
its scripting language, known as Bitcoin Script, which plays a crucial role in defining the rules for
spending bitcoins.

Bitcoin Addresses: Bitcoin addresses are used to receive and send bitcoins. They are derived from
public keys, which are in turn derived from private keys. A typical Bitcoin address is a long string
of alphanumeric characters, and it serves as a destination for receiving funds.

Bitcoin Transactions:Bitcoin transactions are the fundamental building blocks of the Bitcoin net-
work. Each transaction contains inputs and outputs. Inputs reference unspent transaction outputs
(UTXOs) from previous transactions and provide the necessary funds for the new transaction.
Outputs specify the destinations and amounts of the transferred funds.

Bitcoin Script: Bitcoin Script is a stack-based, non-Turing-complete programming language used

to define the spending conditions for Bitcoin transactions. It consists of a set of opcodes that
perform various operations on the data stack. Bitcoin Script is embedded in transaction outputs
and is evaluated by nodes on the network to determine if a transaction is valid.

2.2 Tutorial: Understanding Bitcoin Script Basics

In this lab assignment, we will explore Bitcoin Script and its role in creating secure and customiz-
able spending conditions for Bitcoin transactions. Before we delve into the tasks, let’s cover some
basics of Bitcoin Script.

Bitcoin Script Opcodes Bitcoin Script uses various opcodes to perform operations on the data
stack. Here are some essential Bitcoin Script opcodes:

• OP_DUP: Duplicates the top item on the stack.

• OP_HASH160: Applies a SHA-256 hash followed by RIPEMD-160 hash to the top item.
• OP_EQUALVERIFY: Compares the top two items for equality and fails if they are not equal.
• OP_CHECKSIG: Checks the signature against the public key and fails if invalid.

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• OP_CHECKMULTISIG: Checks multiple signatures against multiple public keys.

• OP_CHECKLOCKTIMEVERIFY: Checks if the transaction’s locktime has been reached.

Creating Bitcoin Script Bitcoin Script is typically used in two main types of transactions: Pay-to-
Public-Key-Hash (P2PKH) and Pay-to-Script-Hash (P2SH). P2PKH scripts lock funds to a single
public key, while P2SH scripts allow more complex spending conditions using a script hash.
In this tutorial, we’ll focus on creating a simple P2PKH script to lock and unlock funds.

P2PKH Script Example Below is an example of a P2PKH script in Python, this script generates
a random private key, derives the public key, and calculates the corresponding Bitcoin address:
# P2PKH Script
from bitcoin import *
from bitcoin.wallet import CBitcoinSecret, P2PKHBitcoinAddress

# Generate a random private key

private_key = CBitcoinSecret.from_secret_bytes(os.urandom(32))

# Derive the public key and Bitcoin address

public_key = private_key.pub
address = P2PKHBitcoinAddress.from_pubkey(public_key)

print("Private Key:", private_key)

print("Public Key:", public_key.hex())
print("Bitcoin Address:", address)
Now that you have a basic understanding of Bitcoin and Bitcoin Script, let’s proceed with the
lab assignment tasks.

3 Tools and Resources

You will need the following tools and resources for this lab assignment:
• A Bitcoin testnet wallet (for testing purposes).
• Bitcoin Script documentation and examples (provided as reference).
• A code editor and development environment (e.g., Python, JavaScript, or any language of
your choice).
• Access to a Bitcoin testnet faucet for receiving testnet BTC.

4 Task 1: Basic Script Execution

4.1 Introduction
In this task, we will start by explaining the fundamental structure of Bitcoin transactions and how
scripts are used to lock and unlock funds.

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4.2 Task
Your first task is to create a simple Bitcoin script that locks funds to a specific address using the
Pay-to-Public-Key-Hash (P2PKH) script. You will be provided with a testnet address.

4.3 Requirements
• Create a P2PKH Script: In Python, you can create a P2PKH script as follows:

# P2PKH Script
from bitcoin import *
from bitcoin.wallet import CBitcoinSecret, P2PKHBitcoinAddress

# Generate a random private key

private_key = CBitcoinSecret.from_secret_bytes(os.urandom(32))

# Derive the public key and Bitcoin address

public_key = private_key.pub
address = P2PKHBitcoinAddress.from_pubkey(public_key)

print("Private Key:", private_key)

print("Public Key:", public_key.hex())
print("Bitcoin Address:", address)

• Lock Funds: Use a Bitcoin testnet faucet to send testnet BTC to the generated Bitcoin
address.
• Spend Locked Funds: Write a Python script to spend the locked funds:

# Spend Locked Funds

from bitcoin import *
from bitcoin.wallet import CBitcoinSecret, P2PKHBitcoinAddress

# Private key and Bitcoin address from the previous step

private_key = CBitcoinSecret.from_secret_bytes(...)
address = P2PKHBitcoinAddress.from_pubkey(...)

# Create a transaction input (UTXO)

txid = ’...’ # Transaction ID of the UTXO you want to spend
output_index = ... # Index of the output in the transaction
txin = create_txin(txid, output_index)

# Create a transaction output to the desired destination

destination_address = ’...’ # Recipient’s address
amount_to_send = ... # Amount to send in satoshis
txout = create_txout(amount_to_send, destination_address)

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# Create the transaction

tx = create_signed_transaction([txin], [txout], [private_key])

# Broadcast the transaction

broadcast_tx(tx)

4.4 Evaluation
Your code will be evaluated to check if it successfully locks and unlocks funds. We will discuss the
results and any issues you encountered.

5 Task 2: Multisignature Transactions

5.1 Introduction
In this task, we will introduce the concept of multisignature (multisig) scripts and their use cases
in Bitcoin.

5.2 Task
Your second task is to create a 2-of-2 multisig script using provided public keys.

5.3 Requirements
• Create a 2-of-2 Multisig Script: Write scripts to create a 2-of-2 multisig address, lock
funds to it, and then spend those funds.

# 2-of-2 Multisig Script

from bitcoin import *
from bitcoin.wallet import CBitcoinSecret, P2SHBitcoinAddress

# Generate two random private keys

private_key1 = CBitcoinSecret.from_secret_bytes(os.urandom(32))
private_key2 = CBitcoinSecret.from_secret_bytes(os.urandom(32))

# Derive the public keys

public_key1 = private_key1.pub
public_key2 = private_key2.pub

# Create a 2-of-2 multisig redeem script

redeem_script = CScript([OP_2, public_key1, public_key2, OP_2, OP_CHECKMULTISIG])

# Create a P2SH address from the redeem script

address = P2SHBitcoinAddress.from_redeemScript(redeem_script)

print("Private Key 1:", private_key1)

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print("Private Key 2:", private_key2)

print("Redeem Script:", redeem_script.hex())
print("Multisig Address:", address)

• Lock Funds: Use a Bitcoin testnet faucet to send testnet BTC to the generated multisig
address.
• Spend Locked Funds: Write a Python script to spend the locked funds from the multisig
address:

# Spend Funds from Multisig Address

from bitcoin import *
from bitcoin.wallet import CBitcoinSecret, P2SHBitcoinAddress

# Private keys and multisig address from the previous step

private_key1 = CBitcoinSecret.from_secret_bytes(...)
private_key2 = CBitcoinSecret.from_secret_bytes(...)
address = P2SHBitcoinAddress.from_redeemScript(...)

# Create a transaction input (UTXO)

txid = ’...’ # Transaction ID of the UTXO you want to spend
output_index = ... # Index of the output in the transaction
txin = create_txin(txid, output_index)

# Create a transaction output to the desired destination

destination_address = ’...’ # Recipient’s address
amount_to_send = ... # Amount to send in satoshis
txout = create_txout(amount_to_send, destination_address)

# Create the transaction

tx = create_signed_transaction([txin], [txout], [private_key1, private_key2], redeem_sc

# Broadcast the transaction

broadcast_tx(tx)

5.4 Evaluation
Your ability to create and spend funds from a multisig address will be evaluated. We will also
discuss the security benefits of multisig addresses.

6 Task 3: Analysis and Reflection

6.1 Introduction
In the final task, analyze the security implications and potential use cases of the scripts you have
created.

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6.2 Task
Write a report summarizing your experiences and insights gained from this lab assignment. Discuss
the advantages and limitations of Bitcoin Script.

6.3 Evaluation
Your reflections and understanding of the practical applications of Bitcoin Script will be evaluated.

7 Submission regulation
• Students create a folder <Group’s ID> containing the contents following:
– <Code> folder: contains the whole project.
– Executable file (optinal).
– <Report.pdf> file(at most 15 pages, single page, 12pt font) that includes:
∗ Information about team members.
∗ Project structure.
∗ Any other remarks about your design or implementation.
∗ All links and books related to your submission must be mentioned.
∗ DO NOT insert your source code in the report.
∗ Description of how your system operates: Provide a detailed explanation of the func-
tioning and flow of your system, highlighting key components and interactions.
∗ Challenges encountered during implementation: Discuss any technical, design-related,
or logistical hurdles you faced and how you overcame them.
∗ Lessons learned: Share insights and knowledge gained throughout the project and
explain how it contributed to your personal growth.
∗ The report can be written in Vietnamese or English.
• Compress the above folder into Group’s ID.zip for submission.
• Submission with wrong regulation will result in a "0" (zero).
• Plagiarism and Cheating will result in a "0" (zero) for the entire course and will be subject
to appropriate referral to the Management Board for further action.

Good luck with your lab assignment!

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