# 11.3: Empowering Bitcoin with Scripts > **NOTE:** This is a draft in progress, so that I can get some feedback from early reviewers. It is not yet ready for learning. Bitcoin Scripts can go far beyond the relatively simple financial instruments detailed to date. They're also the foundation of most more complex usages of the Bitcoin network, as demonstrated by these real-world examples of off-chain functionality, drawn from the Lightning Network examples in BIP 112. ## Lock for the Lightning Network The [Lightning Network](https://rusty.ozlabs.org/?p=450) is a payment channel that allows users to take funds off-chain and engage in numerous microtransactions before finalizing the payment channel and bringing the funds back into Bitcoin. Benefits include lower fees and faster transaction speeds. [BIP 112](https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki) contains a few examples of how transactions could be locked in the Lightning Network. ### Lock with Revocable Commitment Transactions The trick with Lightning is that it's off-chain. The participants jointly lock funds on Bitcoin with an n-of-n multisignature, then they engage in a number of transactions between themselves. Each new "commitment transaction" splits those joint funds in a different way; it's partially signed but _it isn't put on the blockchain_. So how do you keep one of the participants from reverting back to an old transaction that's more beneficial to them? That's where revocation comes in, as is demonstrated in the following example from BIP 112, which was intended as a stepping stone toward Lightning. You give the participant who would be harmed by reversion to a revoked transaction the ability to reclaim the funds himself if the another participant illegitamately tried to use the revoked transaction. For example, presume that Alice updated the commitment transaction to give more of the funds to Bob (effectively: she sent funds to Bob via the Lightning network). As part of this new transaction, she gives Bob a `revokeHash` which can be used to claim the funds from the previous transaction, before Alice gave Bob the new funds. The locking script from that revoked commitment transaction looks as follows: ``` OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG ``` Theoretically, this transaction should never be spent at the point. Bob has no incentive to because he has the newer transaction, after Alice sent him the new funds. Alice has no incentive too, because she loses the funds if she tries. So no one puts the transaction onto the blockchain, and the off-chain transactions continue. But what if Alice tried to cheat? She puts the transaction back onto the blockchain even though it's been revoked. Now the locking script comes to the rescue! #### Run the Lock Script for Cheating Alice, with Revocation Code Alice could try to use revocation code that she gave to Bob to immediately claim the funds. She sends in ` `: ``` Script: OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: OP_HASH160 Stack: [ ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: OP_EQUAL Stack: [ True ] ``` The `OP_EQUAL` feeds the `IF` statement. Because Alice uses the hash, she gets into the branch that allows her to redeem the funds immediately, collapsing the rest of the script down to `` (within the conditional) and `OP_CHECKSIG` (afterward). ``` Script: OP_CHECKSIG Running: True IF Stack: [ ] ``` Curses! Only Bob can sign immediately with the hash! ``` Script: OP_CHECKSIG Stack: [ ] Script: Running: OP_CHECKSIG Stack: [ False ] ``` #### Run the Lock Script for Cheating Alice, without Revocation Code So what if Alice instead tries to use her own signature, without the revocation code? ``` Script: 0 OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ 0 ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: 0 OP_HASH160 Stack: [ <0Hash> ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ <0Hash> ] Script: IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: <0Hash> OP_EQUAL Stack: [ False ] ``` We now collapse down to the `ELSE` statement and what comes after the conditional ``` Script: <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP OP_CHECKSIG Running: False IF Stack: [ ] Script: OP_CHECKSEQUENCEVERIFY OP_DROP OP_CHECKSIG Stack: [ <+24Hours> ] ``` And then Alice is foiled again because 24 hours haven't gone by! ``` Script: OP_DROP OP_CHECKSIG Running: <+24Hours> OP_CHECKSEQUENCEVERIFY Stack: [ <+24Hours> ] — Script EXITS ``` #### Run the Lock Script for Virtuous Bob What this means is that Bob has 24 hours to reclaim his funds if Alice ever tries to cheat, using the `` and his signature: ``` Script: OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: OP_HASH160 OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: OP_HASH160 Stack: [ ] Script: OP_EQUAL IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Stack: [ ] Script: IF ELSE <+24Hours> OP_CHECKSEQUENCEVERIFY OP_DROP ENDIF OP_CHECKSIG Running: OP_EQUAL Stack: [ True ] Script: OP_CHECKSIG Running: True IF Stack: [ ] Script: OP_CHECKSIG Stack: [ ] Script: Running: OP_CHECKSIG Stack: [ True ] ``` #### Run the Lock Script for Virtuous Alice All of the commitment scripts are locked with this same transaction, whether they've been revoked or not. That means that the newest commitment script, which is the currently valid one, is locked with it as well. In this situation Alice has never sent a new transaction to Bob and thus never sent him the `revokeCode`. She can now close down the Lightning channel at this point. She puts the transaction on the chain and she waits 24 hours. Bob can't do anything about it because he doesn't have the recovation code. Then, after the wait, Alice reclaims her funds. (Bob does the last thing with his last valid transaction.) ### Lock with Hashed Time-Lock Contracts BIP 112 also offers a slightly more complex mechanism for protecting Lightning-like transactions: a [hashed timelock contract](https://en.bitcoin.it/wiki/Hashed_Timelock_Contracts), or HTLCs. This is what allows singular transactions to actually become a network and is what's actually used as the basis of the Lightning network. #### Lock the Recipient's Transaction Take as an example the following commitment transaction created for new funds that Alice has received: ``` OP_HASH160 OP_DUP OP_EQUAL IF <+24Hours> OP_CHECKSEQUENCEVERIFY OP_2DROP ELSE OP_EQUAL OP_NOTIF OP_CHECKLOCKTIMEVERIFY OP_DROP ENDIF ENDIF OP_CHECKSIG ``` The key to this is the `secretHash`, which is what allows a transaction to span the network. Each of several transactions is locked with the `secretHash`, allowing a transmission between two otherwise unconnected people on the Lightning network. When the transaction has spanned from its originator to its intended recipient, the `secretCode` is revealed, which allows all the participants to create a `secretHash` and unlock the whole network of payments: after the `secretCode` has been revealed, Alice can claim the funds 24 hours after the transaction is put on the Bitcoin network. However, as with the previous example, the hash could alternatively be a `revokeHash` that was supplied after the transaction was supplanted by a new one. Bob can relcaim the funds in that situation _or if_ an absolute timeout has occurred. #### Lock the Sender's Transaction Due to the additional complexity of HTLCs, an additional commitment transaction is required for the sender of every HTLC transaction: ``` OP_HASH160 OP_DUP OP_EQUAL OP_SWAP OP_EQUAL OP_ADD IF ELSE OP_CHECKLOCKTIMEVERIFY <+24Hours> OP_CHECKSEQUENCEVERIFY OP_2DROP ENDIF OP_CHECKSIG ``` The initial part of their Script is quite clever and so worth running: ``` Initial Script: OP_HASH160 OP_DUP OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Stack: [ ] Initial Script: OP_HASH160 OP_DUP OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Stack: [ ] Initial Script: OP_DUP OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Running: OP_HASH160 Stack: [ ] Initial Script: OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Running: OP_DUP Stack: [ ] Initial Script: OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Running: OP_DUP Stack: [ ] Initial Script: OP_EQUAL OP_SWAP OP_EQUAL OP_ADD Running: OP_DUP Stack: [ ] Initial Script: OP_SWAP OP_EQUAL OP_ADD Running: OP_EQUAL Stack: [ ] Initial Script: OP_EQUAL OP_ADD Running: OP_SWAP Stack: [ ] Initial Script: OP_EQUAL OP_ADD Stack: [ ] Initial Script: OP_ADD Running: OP_EQUAL Stack: [ ] Initial Script: OP_ADD Running: OP_EQUAL Stack: [ ] Initial Script: Running: OP_ADD Stack: [ ] ``` Running through the script, it becomes obvious that the initial checks determine if the hash was either the `secretCode` or the `revokeCode`. If so, Alice can take the funds in the first block. If not, Bob can take the funds, but only after Alice has had her chance, and both the 24 hour timeout and the absolute timeout have passed. #### Understand HTLCs HTLCs are quite complex, and you may not entirely understand them from just this overview. Rusty Russell's [overview](https://rusty.ozlabs.org/?p=462) of them has more and there's even more in his [Deployable Lightning](https://github.com/ElementsProject/lightning/blob/master/doc/deployable-lightning.pdf) paper. But don't worry if some of the intricacies still escape you, particularly the interrelations of the two scripts. For the purposes of this tutorial, there are two important lessons for HTLCs: * Understand that a very complex structure like an HTLC can be created with Bitcoin Script. * Analyze how to run each of the HTLC scripts. It's worth your time running each of the two HTLC scripts through each of its permutations, one stack item at a time. ### Summary: Empowering Bitcoin with Scripts We're closing our examination of Bitcoin Scripts with a look at how truly powerful they can be. In 20 opcodes or less, a Bitcoin Script can form the basis of an entire off-chain payment channel. Similarly, two-way pegged sidechains are the product of less than twenty opcodes, as briefly noted in [BIP 112](https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki). If you've ever seen complex Bitcoin functionality or Bitcoin-adjacent systems, they were problem built on Bitcoin Scripts. And now you have all the tools to do the same yourself.