Learning-Bitcoin-from-the-Command-Line/8_3_Scripting_a_Multisig.md

8.3: Scripting a Multisig

NOTE: This is a draft in progress, so that I can get some feedback from early reviewers. It is not yet ready for learning.

Ever since §6.1: Sending a Transaction to a Multisig, we've been casually noting that the bitcoin-cli interface wraps its multisig transaction in a P2SH transaction. In fact, this is the standard methodology for creating multisigs on the Blockchain. You'll now see how that works, in depth.

Understand the Multisig Code

Multisig transactions are created in Bitcoin using the OP_CHECKMULTISIG code.

OP_CHECKMULTISIG expects a long string of arguments that looks like this: 0 ... sigs ... <m> ... addresses ... <n> OP_CHECKMULTISIG. When OP_CHECKMULTISIG is run, it does the following:

1. Pop the first value from the stack (<n>).
2. Pop "n" values from the stack as Bitcoin addresses (hashed public keys).
3. Pop the next value from the stack (<m>).
4. Pop "m" values from the stack as potential signatures.
5. Pop a 0 from the stack due to a mistake in the original coding.
6. Compare the signatures to the Bitcoin adddresses.
7. Push a True or False depending on the result.

The operands of OP_MULTISIG are typically divided, with the 0 and the signatures coming from the unlocking script and everything else being laid out in the locking script.

The requirement for that 0 as the first operand for OP_CHECKMULTISIG is a consensus rule. Because the original version of OP_CHECKMULTISIG accidentally popped an extra item off the stack, Bitcoin must forever follow that rule, lest complex redemption scripts from that time period accidentally be broken, rendering old funds unredeemable.

What is a consensus rule? These are the rules that the Bitcoin nodes follow to work together. In large part they're defined by the Bitcoin Core code. These rules include lots of obvious mandates, such as the limit to how many Bitcoins are created for each block and the rules for how transactions may be respent. However, they also include fixes for bugs that have appeared over the years, because once a bug has been introduced into the Bitcoin codebase, it must be continually supported, lest old Bitcoins become unspendable.

Create a Raw Multisig

As discussed in §8.1: Building a Bitcoin Script with P2SH, multisigs are one of the standard Bitcoin transaction types. A transaction can be created with a locking script that uses the raw OP_CHECKMULTISIG command, and it will be accepted into a block. This is the classic methodology for using multisigs in Bitcoin.

As an example, we can revisit the multisig created in §6.1 and build a new locking script for it using this methodology. As you may recall, that was a 1-of-2 multisig built from $address1 and $address2.

An OP_CHECKMULTISIG locking script requires the "m" (1), the addresses, and the "n" (2). You can write the following scriptPubKey:

1 $address1 $address2 2 OP_CHECKMULTISIG

WARNING: For classic OP_CHECKMULTISIG signatures, "n" must be ≤ 3 for the transaction to be standard.

The scriptSig for a standard multisig address must then submit the missing operands for OP_CHECKMULTISIG: a 0 followed by "m" signatures. You could submit either of the following:

0 $signature1

Or:

0 $signature2

Run a Raw Multisig Script

In order to reuse the multisig UTXO, run the scriptSig and scriptPubKey as follows:

Script: 0 $signature1 1 $address1 $address2 2 OP_CHECKMULTISIG
Stack: [ ]

You place all the constants on the stack:

Script: OP_CHECKMULTISIG
Stack: [ 0 $signature1 1 $address1 $address2 2 ]

Then, the OP_CHECKMULTISIG begins to run. First, the "2" is popped:

Script: OP_CHECKMULTISIG
Stack: [ 0 $signature1 1 $address1 $address2 ]

Then, the "2" tells OP_CHECKMULTISIG to pop two addresses:

Script: OP_CHECKMULTISIG
Stack: [ 0 $signature1 1 ]

Then, the "1" is popped:

Script: OP_CHECKMULTISIG
Stack: [ 0 $signature1 ]

Then, the "1" tells OP_CHECKMULTISIG to pop one signature:

Script: OP_CHECKMULTISIG
Stack: [ 0 ]

Then, one more item is mistakenly popped:

Script: OP_CHECKMULTISIG
Stack: [ ]

Then, OP_CHECKMULTISIG completes its operation by comparing the "m" signatures to the "n" addresses:

Script:
Stack: [ True ]

Understand the Limitations of Raw Multisig Scripts

Unfortunately, the technique of embedding a raw multisig into a transaction has some notable drawbacks:

1. Because there's no standard address format for multisigs, each sender has to: enter a long and cumbersome multisig script; have software that allows this; and be trusted not to mess it up.
2. Because multisigs can be much longer than typical locking scripts, the blockchain incurs more costs. This requires higher transaction fees from the sender and creates more nuisance for every node.

These were generally problems with any sort of complex Bitcoin script, but they quickly became very real problems when applied to multisigs, which were some of the first complex scripts to be widely used on the Bitcoin network. P2SH transactions were created to solve these problems, starting in 2012.

What is a P2SH multisig? P2SH multisigs were the first implementation of P2SH transactions, in 2012. They simply package up a standard multisig transaction into a standard P2SH transaction. This allows for address standardization; reduced data storage; and increased "m" and "n" counts.

Create a P2SH Multisig

P2SH multisigs are the modern methodology for creating multisigs on the Blockchains. What follows is a new example that uses the same 1-of-2 multisig, but now packages it in a P2SH using the technique described in §8.1. This offers a practical first example of how P2SHes really work.

Create the Lock for the P2SH Multisig

To create a P2SH multisig, follow the standard steps for creating a P2SH locking script:

1. Serialize 1 $address1 $address2 2 OP_CHECKMULTISIG (<serializedMultiSig>) then SHA-256 and RIPEMD-160 hash it (<hashedMultisig>).
2. Save <serializedMultiSig> for future reference as the redeemScript.
3. Produce a P2SH Multisig locking script that includes the hashed script (OP_HASH160 <hashedMultisig> OP_EQUAL).
4. Create a transaction using that scriptPubKey.

Run the First Round of P2SH Validation

To unlock the P2SH multisig, first confirm the script:

1. Produce an unlocking script of 0 $signature1 <serializedMultiSig> or 0 $signature2 <serializedMultiSig>.
2. Concatenate that with the locking script of OP_HASH160 <hashedMultisig> OP_EQUAL.
3. Validate 0 $signature1 <serializedMultiSig> OP_HASH160 <hashedMultisig> OP_EQUAL or 0 $signature2 <serializedMultiSig> OP_HASH160 <hashedMultisig> OP_EQUAL.

Run the Second Round of P2SH Validation

Then, run the multisig script:

1. Deserialize <serializedMultiSig> to 1 $address1 $address2 2 OP_CHECKMULTISIG.
2. Concatenate that with the earlier operands in the unlocking script, 0 $signature1 or 0 $signature2.
3. Validate 0 $signature1 1 $address1 $address2 2 OP_CHECKMULTISIG or 0 $signature2 1 $address1 $address2 2 OP_CHECKMULTISIG.

Now you know how the multisig transaction in §6.1 was actually created, how it was validated for spending, and why that redeemScript was so important.

Summary: Creating Multisig Scripts

Multisigs are a standard transaction type, but they're a bit cumbersome to use, so they're regularly incorporated in P2SH transactions, as was the case in §6.1, when we created our first multisigs. The result is cleaner, smaller, and more standardized — but more importantly, it's a great real-world example of how P2SH scripts really work.