Mastering Bitcoin, 3rd Edition

Chapter 7. Authorization and Authentication

When you receive bitcoins, you have to decide who will have permission to spend them, called authorization. You also have to decide how full nodes will distinguish the authorized spenders from everyone else, called authentication. Your authorization instructions and the spender proof of authentication will be checked by thousands of independent full nodes, which all need to come to the same conclusion that a spend was authorized and authenticated in order for the transaction containing it to be valid.

The original description of Bitcoin used a public key for authorization. Alice paid Bob by putting his public key in the output of a transaction. Authentication came from Bob in the form of a signature that committed to a spending transaction, such as from Bob to Carol.

The actual version of Bitcoin that was originally released provided a more flexible mechanism for both authorization and authentication. Improvements since then have only increased that flexibility. In this chapter, we’ll explore those features and see how they’re most commonly used.

Transaction Scripts and Script Language

The original version of Bitcoin introduced a new programming language called Script, a Forth-like stack-based language. Both the script placed in an output and the legacy input script used in a spending transaction are written in this scripting language.

Script is a very simple language. It requires minimal processing and cannot easily do many of the ...