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Author: Admin | 2025-04-28
Contracts are transactions which use the decentralized Bitcoin system to enforce financial agreements. Bitcoin contracts can often be crafted to minimize dependency on outside agents, such as the court system, which significantly decreases the risk of dealing with unknown entities in financial transactions.Introduction¶The following subsections will describe a variety of Bitcoin contracts already in use. Because contracts deal with real people, not just transactions, they are framed below in story format.Besides the contract types described below, many other contract types have been proposed. Several of them are collected on the Contracts page of the Bitcoin Wiki.Escrow And Arbitration¶Charlie-the-customer wants to buy a product from Bob-the-businessman, but neither of them trusts the other person, so they use a contract to help ensure Charlie gets his merchandise and Bob gets his payment.A simple contract could say that Charlie will spend satoshis to an output which can only be spent if Charlie and Bob both sign the input spending it. That means Bob won’t get paid unless Charlie gets his merchandise, but Charlie can’t get the merchandise and keep his payment.This simple contract isn’t much help if there’s a dispute, so Bob and Charlie enlist the help of Alice-the-arbitrator to create an escrow contract. Charlie spends his satoshis to an output which can only be spent if two of the three people sign the input. Now Charlie can pay Bob if everything is ok, Bob can refund Charlie’s money if there’s a problem, or Alice can arbitrate and decide who should get the satoshis if there’s a dispute.To create a multiple-signature (multisig) output, they each give the others a public key. Then Bob creates the following P2SH multisig redeem script:OP_2 [A's pubkey] [B's pubkey] [C's pubkey] OP_3 OP_CHECKMULTISIG(Opcodes to push the public keys onto the stack are not shown.)OP_2 and OP_3 push the actual numbers 2 and 3 onto the stack. OP_2 specifies that 2 signatures are required to sign; OP_3 specifies that 3 public keys (unhashed) are being provided. This is a 2-of-3 multisig pubkey script, more generically called a m-of-n pubkey script (where m is the minimum matching signatures required and n in the number of public keys provided).Bob gives the redeem script to Charlie, who checks to make sure his public key and Alice’s public key are included. Then he hashes the redeem script to create a P2SH redeem script and pays the satoshis to it. Bob sees the payment get added to the block chain and ships the merchandise.Unfortunately, the merchandise gets slightly damaged in transit. Charlie wants a full refund, but Bob thinks a 10% refund is sufficient. They turn to Alice to resolve the issue. Alice asks for photo evidence from Charlie along with a copy of
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