Understanding Bitcoin’s P2SH (Pay to Script Hash) | Posted by Abhishek Chauhan | Coins | January 2024

What is Pay to Script Hash (P2SH)?

P2SH is a transaction method introduced to Bitcoin through Bitcoin Improvement Proposal 16 (BIP 16). Enables transactions against script hashes (addresses) instead of public key hashes. P2SH effectively shifts the responsibility for defining the terms of use of Bitcoin from the sender to the recipient. P2SH was also developed to overcome the limitations of Bitcoin’s original scripting system, adding flexibility and enabling more complex transaction types, including smart contracts and atomic swaps.

P2SH is not necessarily the same as multi-signature.
transaction. P2SH addresses most often represent multiple signatures.
It is a script, but can also refer to a script that encodes another type of script.
work.

Why do you need P2SH?

1. Complex transactions: P2SH facilitates complex transactions such as multi-signature transactions that require multiple private keys for authentication.
2. Enhanced Security: P2SH enhances privacy and security by hiding spending terms until the transaction is executed. It also solves the transaction malleability problem by separating the locking script from the unlocking script.
3. Efficiency and Scalability: P2SH improves Bitcoin’s efficiency and scalability by reducing the data stored on the blockchain.

Using P2SH in Bitcoin Transactions

P2SH is widely used for:

• Multi-Signature Wallet: Requires multiple signatures to authorize transactions, increasing security for enterprise-level or shared wallets.
• Escrow and time lock transactions: P2SH supports transactions involving neutral third parties or specific time-based terms.
• Time-locked transactions: Implement conditions that control when Bitcoin can be spent.
• Complex scripting requirements: This extends Bitcoin’s usefulness beyond standard transaction types by allowing scripts with specific conditions.
• Decentralized Applications (DApps): P2SH has played a key role in enabling DApps on the Bitcoin network, significantly expanding the scope of their applications.

Implementing P2SH with JavaScript

To implement P2SH transactions with JavaScript, you can use the following Bitcoin libraries: bitcoinjs-lib. Here’s a basic guide:

1. Preferences:

• Make sure Node.js is installed.
• install bitcoinjs-lib Using npm: npm install bitcoinjs-lib.

2. Create a multi-sig wallet:

• Generate a private key.
• Create a public key from your private key.
• Define the number of signatures required (e.g. 2/3 multi-signature wallet).

3. P2SH address configuration

• Generate an exchange script using your public key.
• Hash the usage script to generate a P2SH address.

4. Create transaction:

• Use your P2SH address to receive Bitcoin.
• To redeem Bitcoin, provide a redemption script along with the required number of signatures. Developers must ensure secure management of P2SH addresses and understand script validation for disbursing funds.

Example code:

The given code shows how to generate a 2/3 multisignature (multi-signature) P2SH address using: bitcoinjs-lib In JavaScript. This example includes steps to generate the required keys, create an exchange script, and configure the P2SH address.

const bitcoin = require('bitcoinjs-lib');
const network = bitcoin.networks.testnet; // use testnet for experimentation
// Generate three key pairs (simulating three different users)
const keyPair1 = bitcoin.ECPair.makeRandom( network );
const keyPair2 = bitcoin.ECPair.makeRandom( network );
const keyPair3 = bitcoin.ECPair.makeRandom( network );
// Extract the public keys
const pubkey1 = keyPair1.publicKey;
const pubkey2 = keyPair2.publicKey;
const pubkey3 = keyPair3.publicKey;
// Create a 2-of-3 multisig redeem script
const redeemScript = bitcoin.payments.p2ms(
m: 2, // 2 signatures required
pubkeys: (pubkey1, pubkey2, pubkey3),
network: network,
).output;
// Create the P2SH address
const p2sh = bitcoin.payments.p2sh(
redeem:  output: redeemScript, network ,
network: network,
);
console.log("P2SH Address:", p2sh.address);
// To spend funds sent to this P2SH address:
// You will need to provide at least two signatures from the three keys
// along with the redeem script when creating the spending transaction.

P2SH collision attack

Collision attacks related to P2SH include:

• Pre-image attack: The attacker looks for an input that produces a hash output (commit). For a 160-bit algorithm like HASH160, the odds are 1 in 2160.
• Second pre-image attack: An attacker has about a 1 in 2160 chance for HASH160 to generate a different input for an existing promise.
• Crash Attack: The risk is even greater if an attacker can influence the original input, as in a multi-signature setup. For HASH160, this probability is 1 in 280.

Risk Contextualization

As of early 2023, Bitcoin miners execute approximately 280 hash functions per hour. Although it uses a different hash function than HASH160, the existence of the Bitcoin network proves that collision attacks on 160-bit functions are technically possible, albeit expensive.

precautions

1. Use stronger hash functions: Modern Bitcoin addresses offer a collision resistance of at least 128 bits, significantly reducing risk.
2. Cryptographic protocols: Established protocols can prevent collision attacks.
3. Awareness and Caution: Wallet developers and users should favor new address types to mitigate these risks.

conclusion

P2SH changes the way transactions are performed on the Bitcoin network, providing a balance between flexibility, security, and efficiency. The ability to support complex transactions while maintaining the integrity of the blockchain is a testament to Bitcoin’s evolving nature.