Project BeeTeaSea: Bitcoin Transaction Building Investigations

If you like what you see, please donate some BTC to bc1qf3gsvfk0yp9fvw0k8xvq7a8dk80rqw0apcy8kx or some ETH to 0x7e674C55f954d31B2f86F69d7A58B2BCe84Cf6b4

Resting on the shoulders of giants

I started investigating various libraries to understand the internals of Bitcoin Transaction Building.
There are many libs available, but after a couple of weeks of looking around, the best one, well written, understandable lib I have seen from which I shamelessly copied code from is https://pypi.org/project/bitcoin-utils/.
I think the author is Konstantinos Karasavvas, with also a great PDF I highly recommend.

This is a tutorial to learn - implementation is likely to be buggy. Learn from others, teach others, teach yourself.

Prerequisites

Have access to a local BTC node with RPC enabled (usually on port 8332).
I used a local node for BTC testnet - local storage is about 30 GB as of Sept 2021:

bitcoind -server -rpcuser=satoshi -rpcpassword=nakamoto -rpcbind=0.0.0.0:8332 -rpcport=8332 -rpcallowip=0.0.0.0/0 -whitelist=0.0.0.0/0 -testnet -datadir=D:\btcdb

I also used a local database - Postgres - but this is optional: one the transactions are built, you can submit them directly to the local node.

SQL Script

create table neo_idx_db.neo_idx_schema.idx_account (
    id varchar primary key, -- "TJ_BTC_1"
    index serial
);

create table neo_idx_db.neo_idx_schema.idx_wallet_all (
    account varchar,
    id varchar,
    address varchar,
    change bool,
    count serial,
    used bool default false,
    kdp varchar,
    total_amount integer,
    raw jsonb,
    primary key (account, id, address),
    foreign key (account) references neo_idx_db.neo_idx_schema.idx_account(id)
);

Getting fees

https://developer.bitcoin.org/reference/rpc/estimatesmartfee.html

Code

Let's walk through the various python scripts:

• addresses.py defines the various addresses types in BTC, namely P2PKH , P2SH, P2WPKH
• btc_rpc.py implements basics RPC endpoints to a bitcoin node to retrieve UTXOs and broadcast a signed transaction
• coin_selector.py is a very simple strategy to select the UTXOs necessary to build a transaction for a given amount. Much more complex algorithms can be implemented.
• constants.py defines constants used throughout the code, specifically the master seed - the one typically generated in a HSM.
• db.py to manage all queries/inserts to Postgres
• kdp.py a key-derivation path holder
• key_material.py converts ECDSA key-pairs into Bitcoin addresses
• script.py is a minimalistic implementation of the Bitcoin scripting language. I only implemented what I am using.
• singletons.py is a module where all singletons are defined (currently only the database)
• transactions.py defines the transaction inputs and outputs
• tx_signer.py signs the previous transaction. Usually done in a HSM.
• wallet_helper.py used by the wallet micro-service
• wallet_service.py is the micro-service to create a wallet and send a transaction

Demos

Follows are various demos of signed transactions. I will go through the first demo (P2PKH) in details - all the others follow the same pattern.

P2PKH sample

• Get an address and fund it via a faucet You can use the following code to get an address from scratch:

km  = KeyMaterial()
wif = km.to_wif() # 'cV7Uw6gXHJV18y1f5F3CWaCX3iUn3795HHZBWbK4BbnEhrD1TET5'
adr = km.address() # 'msL7EAbrj2Bnh13bzwzLsKAjP15siQKiys'

• List UTXOs

msL7EAbrj2Bnh13bzwzLsKAjP15siQKiys is used as a "from address" - which was funded via a bitcoin faucet.

We need to list the unspents for that address - using the cURL command below to your local node:

curl --user satoshi:nakamoto --data '{"jsonrpc":"2.0","method":"scantxoutset","params":["start", ["addr(msL7EAbrj2Bnh13bzwzLsKAjP15siQKiys)"]]}' http://localhost:8332 > data/msL7EAbrj2Bnh13bzwzLsKAjP15siQKiys.json

This call returns:

{
  "result": {
    "success": true,
    "txouts": 26140974,
    "height": 2090979,
    "bestblock": "0000000000000046f7abd2f74868bc7eb7198afe88dd9b7912183f927274d8b4",
    "unspents": [
      {
        "txid": "7980a37147ebc919d2e6e69c380964f98bf2fa101d5b597d528bff504d613ab2",
        "vout": 0,
        "scriptPubKey": "76a914819464048dc9f20dcdf727fc8e9bdec88af8c3c388ac",
        "desc": "addr(msL7EAbrj2Bnh13bzwzLsKAjP15siQKiys)#qn92p7cr",
        "amount": 0.01552063,
        "height": 2090979
      }
    ],
    "total_amount": 0.01552063
  },
  "error": null,
  "id": null
}

The total spendable amount for that UTXO is 1552063 (sum of all 'amount' in the unspent block) satoshis.

• Update input_tx with txid 7980a37147ebc919d2e6e69c380964f98bf2fa101d5b597d528bff504d613ab2 on line 35 in test_p2pkh.py
• Update total_amount in test_p2pkh.py - this amount has to be lower than 1552063
• Note the destination address
• Execute test_p2pkh.py
• Broacast the signed tx using https://live.blockcypher.com/btc/pushtx/ using Bitcoin Testnet or alternatively push it via cURL
• See the result

P2SH example

Code can be seen under folder demos

• Get an address and fund it via a faucet
• List UTXOs

curl --data '{"jsonrpc":"2.0","method":"scantxoutset","params":["start", ["addr(mzgi4XGAS75rLSPduj6otCs5ygHQX99w49)"]]}' http://localhost:8332

• Same as above
• See the result

P2WPKH example (from Segwit to P2PKH)

Code can be seen under folder demos

• Get an address and fund it via a faucet
• List UTXOs

curl --data '{"jsonrpc":"2.0","method":"scantxoutset","params":["start", ["addr(mzgi4XGAS75rLSPduj6otCs5ygHQX99w49)"]]}' http://your-btc-node:8332

• See the result

P2WPKH example (from P2PKH to Segwit)

Code can be seen under folder demos

• See the result

P2WPKH example (from Segwit to Segwit)

Code can be seen under folder demos

• See the result

P2SH with Meta Data example

This one allows you to add metadata to a transaction, such as a travel rule reference id or any off-chain reference id.
The transaction built can be decoded, and the decoded json part showing the metadata looks like:

 {
  "addresses": null,
  "data_hex": "5452502d5245462d546869657272792d3132333435",
  "data_string": "TRP-REF-Thierry-12345",
  "script": "6a155452502d5245462d546869657272792d3132333435",
  "script_type": "null-data",
  "value": 0
}

You can also check out this link that shows:

Send the tx via curl

curl --user satoshi:nakamoto --data '{"jsonrpc": "1.0", "id": "curltest", "method": "sendrawtransaction", "params": ["0200000001b23a614d50ff8b527d595b1d10faf28bf96409389ce6e6d219c9eb4771a38079000000006a47304402202b6d9340ce7727457833da9cdd2618b57fc55e296ba8ed82f7a740859d1a411702201d64780b30a9652e57571c7a2042b0a7bff93345978622c687d2216dcdad9ee60121033e7f16dae1acb7c7a1b07b5722a029ebdd8b7770bd62bab2e843c9b9b512e861ffffffff0220a10700000000001976a914d242ab0bc57addff6871ad4439b3858247d17a9c88ac8fe60f00000000001976a914819464048dc9f20dcdf727fc8e9bdec88af8c3c388ac00000000"]}' -H 'content-type: text/plain;' http://localhost:8332

Two other useful links:

• To decode the signed transaction: https://live.blockcypher.com/btc/decodetx/
• To broadcast the signed transaction: https://live.blockcypher.com/btc/pushtx/

Micro-service

I also wrote a wallet helper - that you can access via REST, locally, to help create accounts and wallets as well as creating a transfer. See the wallet service

Coin selection

I recommend to read Mark Erhardt's Master Thesis called "An Evaluation of Coin Selection Strategies". One of the easiest strategy would be to list the UTXOs ordered by oldest (more blocks) and increasing size. A simple implementation.