Bitcoin revolutionized the concept of digital money with the help of blockchain technology. The cryptocurrency introduced a peer-to-peer approach for financial transactions, which created a decentralized electronic cash system. Most of the discussions about the remarkable functionality of Bitcoin revolve around blockchain technology and its identity as a peer-to-peer electronic cash system. The objective of this Bitcoin scripting guide is to help you dive deeper into the core of Bitcoin transactions, the Bitcoin Script. Crypto enthusiasts, as well as seasoned crypto experts, must know how the Bitcoin Scripting works to understand the true potential of Bitcoin.

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The Concept of Programmable Money

What is the first thing that comes to your mind when you think about Bitcoin? Most of the answers would be about Bitcoin being a decentralized approach to send cash from one person to another electronically without any intermediaries. You should know that the core objective of Bitcoin was to create an electronic cash system that empowered the Bitcoin owners. The answers to “What is scripting in Bitcoin?” provide a new perspective to Bitcoin transactions. Bitcoin Scripting is almost similar to introducing smart contract functionalities in the Bitcoin Blockchain.

The Bitcoin Script is a stack-based programming language that helps in creating more complex transactions that involve specific conditions. Bitcoin scripts are small programs which define the conditions in which a specific amount of Bitcoin tokens can be spent. You can send Bitcoin to someone with a locking script which describes how the Bitcoin can be redeemed in future. The recipient must use an unlocking script corresponding to the locking script for spending the received Bitcoin tokens. 

Working Mechanism of Bitcoin Scripting

The best way to understand how Bitcoin script works is through learning about the concept of stacks in programming. Have you heard of the LIFO data structure? It stands for Last-In, First-Out structure in a database. Think of a stack of plates in which you can add a plate only at the top and remove a plate only from the top. 

The Bitcoin script working mechanism is almost similar to the LIFO data structure. The validation of a Bitcoin script transaction involves combining the locking script and unlocking script and executing them on a virtual machine. It is important to remember that the locking script comes from the output of the previous transaction and the unlocking script comes from the input of the current transaction.

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Technical Details of How Bitcoin Script Works

The overview of the working mechanism of Bitcoin scripting only offers a simple way to understand the technology. You should also learn about the technical aspects of Bitcoin script execution process to familiarize with how it works. The following steps in the Bitcoin scripting process will shed more light on its significance in the crypto space.

  • The Two Scripts

The primary essence of the Bitcoin scripting language in blockchain is all about the two scripts that define Bitcoin scripting. The locking script or the ScriptPubKey is a part of information from the output of previous transaction. It provides the conditions that should be followed to spend the Bitcoins sent in the transaction.

The unlocking script or the ScriptSig includes part of information from the input of the existing transaction. The ScriptSig offers descriptions on the operations and data required to satisfy the requirements of ScriptPubKey. You can notice that the locking script serves as a lock on the Bitcoin tokens sent in a transaction while the unlocking script is the key to unlock the tokens. 

  • Combining and Executing the Scripts

The next crucial step in the working of Bitcoin Script is the concatenation process. The Bitcoin node verifying a transaction will take the ScriptSig from the input and combine it with the ScriptPubKey of the output it wants to spend. Execution of the combined script in a step-wise manner on the stack defines a crucial aspect in how Bitcoin scripting works.

  • Data Elements and Opcodes

The most important highlight in any Bitcoin scripting guide is about the utility of opcodes and data elements. Since Bitcoin Script is a stack-based programming language, it relies on predefined commands, known as opcodes or operation codes. The operation codes help in performing different actions on the data pushed on a stack. It is also important to acknowledge the use of data elements like signatures, hashes, and public keys in Bitcoin scripting.

The validity of a transaction depends on successful execution of the Bitcoin Script. You can confirm a successful execution when the top item on the stack at the end of execution is a non-zero value. On the other hand, an error or a ‘FALSE’ result upon completing execution means that the transaction is invalid.

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Example of Bitcoin Scripting Transaction

After learning the technical aspects of Bitcoin scripting, you might be curious to know an example. The most popular Bitcoin script example is the Pay-to-Public-Key-Hash or P2PKH transaction script. P2PKH involves the simplest Bitcoin transaction in which you send Bitcoin to another Bitcoin address. This Bitcoin script sequence ensures that only the person with the private key for the public key hash can unlock the transaction to spend Bitcoin tokens.

Diverse Ways to Use Bitcoin Scripts

Bitcoin Scripts don’t provide a single option to send Bitcoin from one address to another. You can explore many other use cases or variations of Bitcoin Scripts that showcase the utility of programmable money. Bitcoin Script offers the opportunity to adopt the following use cases of Bitcoin at a large scale.

  • Time-Locked Transactions

The list of different use cases of Bitcoin scripting also draws attention towards the possibility of using Bitcoin in time-locked transactions. You will find two types of Bitcoin scripts for time-locked transactions, such as CheckLockTimeVerify and CheckSequenceVerify. The two scripts help in locking Bitcoin tokens or funds for a specific time or until a specific block height is achieved.

The CLTV Bitcoin Script follows the BIP65 standard and locks funds for a specific time period or block number limit. It uses a timestamp or block number as the conditions for unlocking the script. CLTV script is the best pick for creating wills and special payment channels or locking funds to allow them to mature over time. 

The CSV script created with the BIP68 standard is almost the same as CLTV. CSV finds applications in advanced layer-2 protocols such as the Lightning Network to ensure contract fairness and enforcing expiration. 

  • Conditional Payments

Even if the Bitcoin script working mechanism does not show any signs of Turing completeness, it can manage conditional logic. Therefore, Bitcoin scripts can be the best picks for conditional payments where a key or a secret can unlock funds.

  • Pay-to-Script Hash 

The Pay-to-Script Hash or P2SH is a BIP15 standard Bitcoin Script which is ideal for complex payments. It helps in relieving the burden of the full script from the shoulders of the sender. The sender can only send tokens to the hash of the script and the recipient can reveal the actual script during spending. The P2SH script represents complex transactions as standard address payments, thereby reducing transaction size and enhancing privacy. 

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Why is Bitcoin Script Not Turing Complete?

The discussions about Bitcoin Script also draw attention towards possibilities of similarity with Solidity, the programming language of Ethereum. To no one’s surprise, Bitcoin Script is largely different from Solidity as it is not Turing complete. Why has Bitcoin Script omitted a common trait of expressive programming languages? The use of Bitcoin scripting language in blockchain does not involve execution of complex conditional statements and arbitrary loops. While many of you may think that this is a limitation of Bitcoin Script, it is extremely important for the security of Bitcoin.

Malicious actors can use scripts that run infinite loops to create transactions that take up a huge share of computational resources of the network. The predictable and finite execution path of every Bitcoin script ensures that nodes can easily verify different transactions. As a programming language with fewer complexities, Bitcoin Script will ensure reduced number of potential vulnerabilities and bugs. 

Advantages and Limitations of Bitcoin Scripting

Bitcoin scripting introduces the possibilities for using smart contracts on the Bitcoin blockchain. Despite its simplicity, the Bitcoin scripting process offers various advantages. The foremost benefit of Bitcoin scripting is the assurance of better security and flexibility to execute sophisticated transactions. Most important of all, Bitcoin scripting will expand the room for innovation with the Bitcoin blockchain. However, it is also important to address the notable limitations of Bitcoin scripting such as debugging challenges and larger size of transactions. 

Final Thoughts 

Bitcoin scripting is a perfect example of using innovation to enhance the Bitcoin blockchain. The Bitcoin Script is not only a programming language but also a way to introduce the concept of programmable money with Bitcoin. One of the notable things you can learn from this Bitcoin scripting guide is the fact that Bitcoin Script is not Turing complete and that guarantees a lot of benefits. The biggest thing to know about Bitcoin scripting is that it will transform Bitcoin from a store of value to an electronic cash system with diverse utilities. Learn more about Bitcoin Script and discover new insights on its use cases right now.

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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!