In traditional finance, you can send money to a recipient via third-parties like banks, PayPal, and other various money transfer services. You provide the third-parties with your funds, the recipient’s address, and your signature verifying you agree to the transfer.
Cryptography works differently, and most blockchain networks like Bitcoin eliminate third-parties in monetary transfer via Script computer language. It allows you to send and receive cryptocurrencies in a decentralized fashion, boosting transaction speeds and security, while diminishing transfer fees.
Script authenticates transactions through public and private keys. Public keys denote the Bitcoin address to which you are sending funds, and you need your public key to receive and spend money sent to you.
So, what is ScriptSig all about? Well, we established that you sign checks or transfer forms when transferring funds to people via traditional services, right? Even in mobile transfers, your account password authenticates your approval to disburse funds.
You also need to authenticate your ID when recovering and using funds sent to you. In banks, you sign withdrawal forms, and you use passwords for mobile withdrawal services.
Bitcoins allow you to spend money sent to you via ScripSig. In this article, we shall explore a basic, on-chain, bitcoin transaction and closely examine ScriptSig. Therefore, we’ll also need to touch on a few details about ScriptPubKey.
Transaction Input and the Essence of ScriptSig
Input refers to previous transactions through which you received or sent funds. It determines how many BTCs are available for spending. Various individuals can make multiple inputs in a single transaction, and the blockchain attributes every input of a transaction to each sender. Let’s focus on a single-input transaction between two parties.
To make an input, you must use ScriptSig to unlock funds that you want to spend. That is why we consider ScriptSig to be the first half of the Bitcoin transaction Script and ScriptPubKey as the second.
Suppose you want to send 5BTC to Edith. You need to have 5BTC plus the required BTC transaction fee available in your Bitcoin address, and the coins come from previous transactions. Essentially, the blockchain accounts for every coin via an immutable transaction history ledger.
The input transaction must always be greater than the output transaction because the sender pays the transaction costs. Bitcoin miners reject transactions that don’t factor in their fees. They also need you to validate that you own the bitcoins, and you can only unlock the funds via the ScriptSig.
Locking Funds for Transaction Output with ScriptPubKey
So, you need to specify you are sending 5BTCs to Edith’s Bitcoin address. You must also lock the funds in the decentralized atmosphere so that only Edith can unlock and spend the 5BTCs. Therefore, Script requires your digital signature to lock the funds for transfer to Edith.
You will first need to unlock the funds with your Bitcoin private keys, and then lock it for Edith to unlock. Use Edith’s public key to lock the money so that only she can unlock them.
When miners approve the transaction output, anyone on the blockchain can see that you (your public key) sent 5BTC to Edith. However, only Edith can access the funds with her private keys.
Therefore, a transaction output entails instructions for sending out bitcoins, and it depends on the second half of the Bitcoin script. The ScriptPubKey pairs the recipient’s public key (Bitcoin address) with the private keys needed for unlocking the funds.
The blockchain then executes the SHA 256 hashing algorithm.
Understanding Bitcoin Script
Bitcoin’s Script cryptography secures decentralized value transfer through the transparent use of ScriptSig/ScriptPubKey pairs.
Bitcoin addresses are just hashes, and the hashing algorithm follows a fourth-like scripting system. When the recipient is redeeming the coins, she uses both the public key and private key (digital signature.)
Her public key first verifies the transaction only when the Bitcoin address hashes with the ScriptPubKey.
Basically, the SHA 256 hashing algorithm authenticates the receiver’s Bitcoin address by ensuring the funding ScriptPubKey hashes with the script used for redeeming the coins sent.
Thereafter, Edith will need to sign the output transaction to unlock the 5BTC that you sent her. The ScriptSig unlocks these funds after the blockchain verifies her Bitcoin address. Therefore, ScriptSig refers to scripts that are sufficient to unlock bitcoins designated for a particular Bitcoin address.
The blockchain is transparent, and everyone can see you sent money to a particular recipients’ public key, and some people may successfully replicate the address to steal the funds.
However, it becomes almost impossible to unlock the funds without the authentic recipient’s private keys. No matter how many ScripPubKeys hash with a funding script, only one with the ScriptSig can spend the funds.
The ScriptSig Blockchain Mechanism
Bitcoin output transactions are coded to be:
- Turing incomplete: they cannot fall into endless loops. This prevents duplicate transactions.
- Stack-based: They follow a linear structure, and data pixels are piled on each other like you would stack-based structures only allows you to access the data in order of Last-in-First-out (LIFO). This helps follow the ScriptPubKey/ScriptSig sequence required for security.
The senders of funds may not know your public key, but they must know their recipient’s Bitcoin address, which is your public key’s hash.
The Benefits of Bitcoins Scripting Sequences
- The blockchain reimburses any change left after sending funds and paying transaction fees.
- Transactions are transparent.
- Transactions are secure.
- Transactions are fast.
- Transactions are irreversible.
Parting Shot
Most folks fear investing in bitcoins because they don’t understand how permission-less DeFi works. Comprehending how decentralized transfer and store of value work is challenging, but understanding the simple basics of cryptography can embolden you.
These digital assets are some of the most profitable investment vehicles in 2020 and predictably, 2021. In fact, bitcoins provide one of the most convenient, global payments, and you can trade securely with a stranger on the other side of the planet. However, you need to understand this technology to embrace it.
What do you think about the Script computer language? Would you like to share some more information about ScriptSig? Engage us in the comments section to join the discussion.
