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 [[segwit]]
 === Segregated Witness
 Segregated Witness (segwit) is an upgrade to the bitcoin consensus rules and network protocol, scheduled for implementation in the second half of 2016.
 In cryptography, the term "witness" is used to describe a solution to a cryptographic puzzle. In bitcoin terms, the witness satisfies a cryptographic condition placed on a Unspent Transaction Output (UTXO).
 In the context of bitcoin, a digital signature is _one type of witness_, but a witness is more broadly any solution that can satisfy the conditions imposed on a UTXO and unlock that UTXO for spending. The term “witness” is a more general term for an “unlocking script” or “scriptSig”.
 Before segwit’s introduction, every input in a transaction was followed by the witness data that unlocked it. The witness data was embedded in the transaction as part of each input, The term _segregated witness_ or _segwit_ for short, simply means separating the signature or unlocking script of a specific output. Think "separate scriptSig", or “separate signature” in the simplest form.
 Segregated Witness therefore is an architectural change to bitcoin that aims to move the witness data from the scriptSig (unlocking script) field of a transaction into separate a _witness_ data structure that accompanies a transaction. Clients may request transaction data with or without the accompanying witness data.
 In this section we will look at some of the benefits of segregated witness, describe the mechanism used to deploy and implement this architecture change and demonstrate the use of segregated witness in transactions and addresses.
 Segregated Witness is defined by the following Bitcoin Improvement Proposals (BIPs):
 BIP141 :: The main definition of Segregated Witness. https://github.com/bitcoin/bips/blob/master/bip-0141.mediawiki
 BIP143 :: Transaction Signature Verification for Version 0 Witness Program
 https://github.com/bitcoin/bips/blob/master/bip-0143.mediawiki
 BIP144 :: Peer Services - New network messages and serialization formats
 https://github.com/bitcoin/bips/blob/master/bip-0144.mediawiki
 BIP145 :: getblocktemplate Updates for Segregated Witness (for mining)
 https://github.com/bitcoin/bips/blob/master/bip-0145.mediawiki
 ==== Why Segregated Witness?
 Segregated witness is an architectural change that has several effects on the scalability, security, economic incentives and performance of bitcoin.
 Transaction malleability :: By moving the witness outside the transaction, the transaction hash used as an identifier no longer includes the witness data. Since the witness data is the only part of the transaction that can be modified by a third party (see <<transaction malleability>> and <<segwit_txid>>), removing it also removes the opportunity for transaction malleability attacks. With segregated witness, transaction hashes become immutable by anyone other than the creator of the transaction, which greatly improves the implementation of many other protocols that rely on advanced bitcoin transaction construction, such as payment channels, chained transactions and lightning networks.
 Script Versioning :: With the introduction of segregated witness scripts, every locking script is preceded by a _script version_ number, similar to how transactions and blocks have version numbers. The addition of a script version number allows the scripting language to be upgraded in a backwards compatible way (ie. using soft-fork upgrades), to introduce new script operands, syntax or semantics. The ability to upgrade the scripting language in a non-disruptive way will greatly accelerate the rate of innovation in bitcoin.
 Network and Storage Scaling :: The witness data is often a big contributor to the total size of a transaction. More complex scripts such as those used for multi-sig or payment channels are very large. In some cases these scripts account for the majority (more than 75%) of the data in a transaction. By moving the witness data outside the transaction, segregated witness improves bitcoin’s scalability. Nodes can prune the witness data after validating the signatures, or ignore it altogether when doing simplified payment verification. The witness data doesn’t need to be transmitted to all nodes and does not need to be stored on disk by all nodes.
 Signature Verification Optimization :: Segregated Witness upgrades the signature functions (CHECKSIG, CHECKMULTISIG etc), to reduce the algorithm's computational complexity. Before segwit, the algorithm used to produce a signature required a number of hash operations that was proportional to the size of the transaction. Data-hasing computations increased in O(n^2^) with respect to the number of signature operations, introducing a substantial computational burden on all nodes verifying the signature. With segwit, the algorithm is changed to reduce the complexity to O(n).
 Offline Signing Improvement :: Segregated Witness signatures incorporate the value (amount) referenced by each input in the hash that is signed. Previously, an offline signing device, such as a hardware wallet, would have to verify the amount of each input before signing a transaction. This was usually accomplished by streaming a large amount of data about the previous transactions referenced as inputs. Since the amount is now part of the commitment hash that is signed, an offline device does not need the previous transactions. If the amounts do not match (are misrepresented by a compromised online system), the signature will be invalid.
 ==== How Segregated Witness Works
 At first glance, segregated witness appears to be a change to how transactions are constructed and therefore a transaction-level feature, but it is not. In fact, segregated witness is also a change to how individual UTXO are spent and therefore is a per-output feature.
 A transaction can spend segregated witness outputs or traditional (inline-witness) outputs or both. Therefore, it does not make much sense to refer to a transaction as a “segregated witness transaction”. Rather we should refer to specific transaction inputs as “segregated witness inputs".
 When a transaction spends a UTXO, it must provide a witness. In a traditional UTXO, the locking script requires that witness data be provided _inline_ in the input part of the transaction that spends the UTXO. A segregated witness UTXO, however, specifies a locking script that can be satisfied with witness data outside of the input (segregated).
 ==== Soft-fork (backwards compatibility)
 Segregated witness is a significant change to the way outputs and transactions are architected. Such a change would normally require a simultaneous change in every bitcoin node and wallet, to change the consensus rules -- what is known as a hard fork. Instead, segregated witness is introduced with a much less disruptive change, which is backwards compatible, known as a soft fork. This type of upgrade allows non-upgraded software to ignore the changes and continue to operate without any disruption.
 Segregated witness outputs are constructed so that older systems that are not segwit-aware can still validate them. To an old wallet or node, a segregated witness output looks like an output that _anyone can spend_. Such outputs can be spent with an empty signature, therefore the fact that there is no signature inside the transaction (it is segregated), does not invalidate the transaction. Newer wallets & mining nodes however see the segregated witness output and expect to find a valid witness for it in the transaction’s witness data.
 ==== Segregated Witness Output and Transaction Examples
 Let’s look at some of our example transactions and see how they would change with segregated witness. We’ll first look at how a Pay-to-Public-Key-Hash (P2PKH) payment is transformed with segregated witness program. Then, we’ll look at the segregated witness equivalent for Pay-to-Script-Hash (P2SH) scripts. Finally, we’ll look at how both of the above segregated witness programs can be embedded inside a P2SH script.
 [[p2wpkh]]
 ===== Pay-to-Witness-Public-Key-Hash (P2WPKH)
 In <<cup_of_coffee>>, Alice created a transaction to pay Bob for a cup of coffee. That transaction created a Pay-to-Public-Key-Hash (P2PKH) output with a value of 0.015 BTC that was spendable by Bob. The output’s script looks like this:
 .Example P2PKH output script
 ----
 DUP HASH160 ab68025513c3dbd2f7b92a94e0581f5d50f654e7 EQUALVERIFY CHECKSIG
 ----
 With segregated witness, a Pay-to-Public-Key-Hash output, is created instead a Pay-to-Witness-Public-Key-Hash (P2WPKH), which looks like this:
 .Example P2WPKH output script
 ----
 0 ab68025513c3dbd2f7b92a94e0581f5d50f654e7
 ----
 As you can see, a segregated witness output’s locking script is much simpler than a traditional output. It consists of two values that are pushed on to the script evaluation stack. To an old (non-segwit-aware) bitcoin client, the two pushes would look like an output that anyone can spend and does not require a signature (or rather, can be spent with an empty signature). To a newer, segwit-aware client, the first number (0) is interpreted as a version number (the _witness version_) and the second part (20 bytes) is the equivalent of a locking script known as a _witness program_. The 20-byte witness program is simply the hash of the public key, as in a P2PKH script
 Now, let’s look at the corresponding transaction that Bob uses to spend this output. For the original script (non-segwit), Bob’s transaction would have to include a signature within the transaction input:
 .Decoded transaction showing a P2PKH output being spent with a signature
 ----
 [...]
 “Vin” : [
 "txid": "0627052b6f28912f2703066a912ea577f2ce4da4caa5a5fbd8a57286c345c2f2",
 "vout": 0,
     	 "scriptSig": “<Bob’s scriptSig>”,
 ]
 [...]
 ----
 However, to spend the segregated witness output, the transaction has no signature on that input. Instead, Bob’s transaction has an empty scriptSig and includes a segregated witness, outside the transaction itself:
 .Decoded transaction showing a P2WPKH output being spent with separate witness data
 ----
 [...]
 “Vin” : [
 "txid": "0627052b6f28912f2703066a912ea577f2ce4da4caa5a5fbd8a57286c345c2f2",
 "vout": 0,
     	 "scriptSig": “”,
 ]
 [...]
 “witness”: “<Bob’s witness data>”
 [...]
 ----
 ===== Wallet Construction of P2WPKH
 It is extremely important to note that P2WPKH should only be created by the payee (recipient) and not converted by the sender from a known public key, P2PKH script or address. The sender has no way of knowing if the recipient's wallet has the ability to construct segwit transactions and spend P2WPKH outputs.
 Additionally, P2WPKH outputs must be constructed from the hash of a _compressed_ public key. Uncompressed public keys are non-standard in segwit and may be explicitly disabled by a future soft fork. If the hash used in the P2WPKH came from an uncompressed public key, it may be unspendable and you may lose funds. P2WPKH outputs should be created by the payee's wallet by deriving a compressed public key from their private key.
 [WARNING]
 ====
 P2WPKH should be constructed by the payee (recipient), by converting a compressed public key to a P2WPKH hash. You should never transform a P2PKH script, bitcoin address or uncompressed public key to a P2WPKH witness script.
 ====
 [[p2wsh]]
 ===== Pay-to-Witness-Script-Hash (P2WSH)
 The second type of witness program corresponds to a Pay-to-Script-Hash (P2SH) script. We saw this type of script in <<p2sh>>. In that example, P2SH was used by Mohammed's company to express a multi-signature script. Payments to Mohammed's company were encoded with a locking script like this:
 .Example P2SH output script
 ----
 HASH160 54c557e07dde5bb6cb791c7a540e0a4796f5e97e EQUAL
 ----
 The P2SH script above references the hash of a _redeem script_ that defines a 2-of-3 multi-signature requirement to spend funds. To spend this output, Mohammed's company would present the redeem script (whose hash matches the script hash in the P2SH output) and the signatures necessary to satisfy that redeem script, all inside the transaction input:
 .Decoded transaction showing a P2SH output being spent
 ----
 [...]
 “Vin” : [
 "txid": "abcdef12345...",
 "vout": 0,
     	 "scriptSig": “<SigA> <SigB> <2 PubA PubB PubC PubD PubE 5 CHECKMULTISIG>”,
 ]
 ----
 Now, let's look at how this entire example would be upgraded to segwit. If Mohammed's customers were using a segwit compatible wallet, they would make a payment, creating a Pay-to-Witness-Script-Hash (P2WSH) output that would look like this:
 .Example P2WSH output script
 ----
 0 9592d601848d04b172905e0ddb0adde59f1590f1e553ffc81ddc4b0ed927dd73
 ----
 Again, as with the example of P2WPKH, you can see that the segregated witness equivalent script is a lot simpler and omits the various script operands that you see in P2SH scripts. Instead, the segregated witness program consists of two values pushed to the stack: a witness version (0) and the 32-byte SHA256 hash of the redeem script.
 [TIP]
 ====
 While P2SH uses the 20-byte +RIPEMD160(SHA256(script))+ hash, the P2WSH witness program uses a 32-byte +SHA256(script)+ hash. This difference in the selection of the hashing algorithm is deliberate and used to differentiate between the two types of witness programs (P2WPKH and P2WSH) by the length of the hash, and to provide stronger security to P2WSH (128bits vs. 80bits of P2SH).
 ====
 Mohammed's company can spend outputs the Pay-to-Witness-Script-Hash output by presenting the correct redeem script and sufficient signatures to satisfy the redeem script. Both the redeem script and the signatures would be segregated _outside_ the spending transaction as part of the witness data. Within the transaction input, Mohammed's wallet would put an empty scriptSig:
 .Decoded transaction showing a P2WSH output being spent with separate witness data
 ----
 [...]
 “Vin” : [
 "txid": "abcdef12345...",
 "vout": 0,
     	 "scriptSig": “”,
 ]
 [...]
 “witness”: “<SigA> <SigB> <2 PubA PubB PubC PubD PubE 5 CHECKMULTISIG>”
 [...]
 ----
 ===== Differentiating between P2WPKH and P2WSH
 In the previous two sections, we demonstrated two types of witness programs: <<p2wpkh>> and <<p2wsh>>. Both types of witness programs consist of single byte version number followed by a longer hash. They look very similar, but are interpreted very differently: one is interpreted as a public key hash, which is satisfied by a signature and the other as a script hash, which is satisfied by a redeem script. The critical difference between them is the length of the hash:
 * The public key hash in P2WPKH is 20 bytes
 * The script hash in P2WSH is 32 bytes
 This is the one difference that allows a wallet to differentiate between the two types of witness programs. By looking at the length of the hash, a wallet can determine what type of witness program this is, P2WPKH or P2WSH.
 ==== Upgrading to Segregated Witness
 As we can see from the examples above, upgrading to segregated witness is a two-step process. First, wallets must create special segwit type outputs. Then, these outputs can be spent by wallets that know how to construct segregated witness transactions. In the examples above, Alice's wallet was segwit-aware and able to create special outputs with segregated witness scripts. Bob's wallet is also segwit-aware and able to spend those outputs. What may not be obvious from the example is that in practice, Alice's wallet needs to _know_ that Bob uses a segwit-aware wallet and can spend these outputs. Otherwise, if Bob's wallet is not upgraded and Alice tries to make segwit payments to Bob, Bob's wallet will not be able to detect these payments.
 [TIP]
 ====
 For P2WPKH and P2WSH payment types, both the sender and the recipient wallets need to be upgraded to be able to use segwit. Furthermore, the sender's wallet needs to know that the recipient's wallet is segwit-aware.
 ====
 Segregated witness will not be implemented simultaneously across the entire network. Rather, segregated witness is implemented as a backwards compatible upgrade, where _old and new clients can coexist_. Wallet developers will independently upgrade wallet software to add segwit capabilities. The P2WPKH and P2WSH payment types are intended for when both sender and recipient are segwit-aware. The traditional P2PKH and P2SH will continue to work for non-upgraded wallets. That leaves two important scenarios which are addressed in the next section:
 * Ability of a sender's wallet that is not segwit-aware to make a payment to a recipient's wallet that can process segwit transactions.
 * Ability of a sender's wallet that is segwit-aware to recognize and distinguish between recipients that are segwit-aware and ones that are not, by their _addresses_.
 ===== Embedding Segregated Witness Inside P2SH
 Let's assume, for example, that Alice's wallet is not upgraded to segwit, but Bob's wallet is upgraded and can handle segwit transactions. Alice and Bob can use "old" non-segwit transactions. But Bob would likely want to use segwit to reduce transaction fees, taking advantage of the discount that applies to witness data.
 In this case Bob's wallet can construct a P2SH address that contains a segwit script inside it. Alice's wallet sees this as a "normal" P2SH address and can make payments to it without any knowledge of segwit. Bob's wallet can then spend this payment with a segwit transaction, taking full advantage of segwit and reducing transaction fees.
 Both forms of witness scripts, P2WPKH and P2WSH, can be embedded in a P2SH address. The first is noted as P2SH(P2WPKH) and the second is noted as P2SH(P2WSH).
 ===== Pay-to-Witness-Public-Key-Hash inside Pay-to-Script-Hash
 The first form of witness script we will examine is P2SH(P2WPKH). This is a Pay-to-Witness-Public-Key-Hash witness program, embedded inside a Pay-to-Script-Hash script, so that it can be used by a wallet that is not aware of segwit.
 Bob's wallet constructs a Pay-to-Witness-Public-Key-Hash (P2WPKH) witness program with Bob's public key. This witness program is then hashed and the resulting hash is encoded as a Pay-to-Script-Hash (P2SH) script. The P2SH script is converted to a bitcoin address, one which starts with a "3", as we saw in the <<p2sh>> section.
 Bob's wallet starts with the P2WPKH witness program we saw earlier:
 .Bob's P2WPKH witness program
 ----
 0 ab68025513c3dbd2f7b92a94e0581f5d50f654e7
 ----
 The P2WPKH witness program consists of the witness version and Bob's 20-byte public key hash.
 Bob's wallet then hashes the above witness program, first with SHA256, then with RIPEMD160, producing another 20-byte hash:
 .HASH160 of the P2WPKH witness program
 ----
 660a5ab01c8468ac2e3cd58e9b17f8ba637867a4
 ----
 The hash of the witness program is then embedded in a P2SH script:
 .P2SH script containing the hash of a P2WPKH witness program
 ----
 HASH160 660a5ab01c8468ac2e3cd58e9b17f8ba637867a4 EQUAL
 ----
 Finally, the P2SH script is converted to a P2SH bitcoin address:
 .P2SH address
 ----
 3AzZFY4WJJZbVr2A6qBTbdkYRpMLbdg6gD
 ----
 Now, Bob can display this address for customers to pay for their coffee. Alice's wallet can make a payment to +3deadbeef+, just as it would to any other bitcoin address. Even though Alice's wallet has no support for segwit, the payment it creates can be spent by Bob with a segwit transaction.
 ===== Pay-to-Witness-Script-Hash inside Pay-to-Script-Hash
 Similarly, a P2WSH witness program for a multisig script or other complicated script can be embedded inside a Pay-to-Script-Hash script and address, making it possible for any wallet to make payments that are segwit compatible.
 As we saw in <<p2wsh>>, Mohammed's company is using segregated witness payments to multi-signature scripts. To make it possible for any client to pay his company, regardless of whether their wallets are upgraded for segwit, Mohammed's wallet can embed the P2WSH witness program inside a P2SH script.
 First, Mohammed's wallet creates the P2WSH witness program that corresponds to the multi-signature script, hashed with SHA256:
 .Mohammed's wallet creates a P2WSH witness program
 ----
 0 9592d601848d04b172905e0ddb0adde59f1590f1e553ffc81ddc4b0ed927dd73
 ----
 Then, the witness program itself is hashed with SHA256 and RIPEMD160, producing a new 20-byte hash, as used in traditional P2SH:
 .The HASH160 of the P2WSH witness program
 ----
 e3cca368764d7b32ed27a15b2e8d7d45d4edd2c6
 ----
 Next, Mohammed's wallet puts the hash into a P2SH script
 .P2SH script containing the hash of a P2WSH witness program
 ----
 HASH160 e3cca368764d7b32ed27a15b2e8d7d45d4edd2c6 EQUAL
 ----
 Finally, the wallet constructs a bitcoin address from this script:
 .P2SH bitcoin address
 ----
 3NTWTcFE88p26GTPoxcWef9Q5ncKt6CY2E
 ----
 Now, Mohammed's clients can make payments to this address without any need to support segwit. Mohammed's company can then construct segwit transactions to spend these payments, taking advantage of segwit features including lower transaction fees.
 ===== Segregated Witness Addresses
 After segwit is deployed on the bitcoin network, it will take some time until wallets are upgraded. It is quite likely therefore that segwit will mostly be used embedded in P2SH, as we saw in the previous section, at least for several months.
 Eventually however, almost all wallets will be able to support segwit payments. At that time it will no longer be necessary to embed segwit in P2SH. It is therefore likely that a new form of bitcoin address will be created, one that indicates the recipient is segwit-aware and which directly encodes a witness program. There have been a number of proposals for a segregated witness address scheme, but none have been actively pursued at this time.
 [[segwit_txid]]
 ===== Transaction Identifiers
 One of the greatest benefits of Segregated Witness is that it eliminates third-party transaction malleability.
 Before segwit, transactions could have their signatures subtly modified by third parties, changing their transaction ID (hash) without changing any fundamental properties (inputs, outputs, amounts). This created opportunities for Denial-of-Service attacks as well as attacks against poorly written wallet software that assumed unconfirmed transaction-hashes were immutable.
 With the introduction of Segregated Witness, transactions have two identifiers, +txid+ and +wtxid+. The traditional transaction ID +txid+ is the double-SHA256 hash of the serialized transaction, without the witness data. A transaction +wtxid+ is the double-SHA256 hash of the new serialization format of the transaction with witness data.
 The traditional +txid+ is calculated in exactly the same way as with a non-segwit transaction. However, since the segwit transaction has empty scriptSig's in every input, there is no part of the transaction that can be modified by a third party. Therefore, in a segwit transaction, the +txid+ is immutable by a third party, even when the transaction is unconfirmed.
 The +wtxid+ is like an "extended" ID, in that the hash also incorporates the witness data. If a transaction is transmitted without witness data, then the +wtxid+ and +txid+ are identical. Note than since the +wtxid+ includes witness data (signatures) and since witness data may be malleable, the +wtxid+ should be considered malleable until the transaction is confirmed. Only the +txid+ of a segwit transaction can be considered immutable by third parties and only if _all_ the inputs of the transaction are segwit inputs.
 [TIP]
 ====
 Segregated Witness transactions have two IDs: +txid+ and +wtxid+. The +txid+ is the hash of the transaction without the witness data and the +wtxid+ is the hash inclusive of witness data. The +txid+ of a transaction where all inputs are segwit inputs, is not susceptible to third-party transaction malleability
 ====
 ==== Segregated Witness' New Signing Algorithm
 Segregated Witness modifies the semantics of the four signature verification functions (CHECKSIG, CHECKSIGVERIFY, CHECKMULTISIG and CHECKMULTISIGVERIFY), changing the way a transaction commitment hash is calculated.
 Signatures in bitcoin transactions are applied on a _commitment hash_ which is calculated from the transaction data, locking specific parts of the data indicating the signer's commitment to those values. For example, in a simple SIGHASH_ALL type signature, the commitment hash includes all inputs and outputs.
 Unfortunately, the way the commitment hash was calculated introduced the possibility that a node verifying the signature can be forced to perform a significant number of hash computations. Specifically, the hash operations increase in O(n^2^) with respect to the number of signature operations in the transaction. An attacker could therefore create a transaction with a very large number of signature operations, causing the entire bitcoin network to have to perform hundreds or thousands of hash operations to verify the transaction.
 Segwit represented an opportunity to address this problem by changing the way the commitment hash is calculated. For segwit version 0 witness programs, signature verification occurs using an improved commitment hash algorithm as specified in Bitcoin Improvement Proposal 143 (BIP143).
 The new algorithm achieves two important goals. Firstly, the number of hash operations increases by a much more gradual O(n) to the number of signature operations, reducing the opportunity to create Denial-of-Service attacks with overly complex transactions. Secondly, the commitment hash now also includes the value (amounts) of each input as part of the commitment. This means that a signer can commit to a specific input value without needing to "fetch" and check the previous transaction referenced by the input. In the case of offline devices, such as hardware wallets, this greatly simplifies the communication between the host and the hardware wallet, removing the need to stream previous transactions for validation. A hardware wallet can accept the input value "as stated" by an untrusted host. Since the signature is invalid if that input value is not correct, the hardware wallet doesn't need to validate the value before signing the input.
 ==== Economic Incentives for Segregated Witness
 Bitcoin mining nodes and full nodes incur costs for the resources used to support the bitcoin network and the blockchain. As the volume of bitcoin transactions increases, so does the cost of resources (CPU, network bandwidth, disk space, memory). Miners are compensated for these costs through fees that are proportional to the size (in bytes) of each transaction. Non-mining full nodes are not compensated, so they incur these costs because they have a need to run an authoritative fully-validating full-index node, perhaps because they use the node to operate a bitcoin business.
 Without transaction fees, the growth in bitcoin data would arguably increase dramatically. Fees are intended to align the needs of bitcoin users with the burden their transactions impose on the network, through a market-based price discovery mechanism.
 The calculation of fees based on transaction size treats all the data in the transaction as equal in cost. But from the perspective of full nodes and miners, some parts of a transaction carry much higher costs. Every transaction added to the bitcoin network affects the consumption of four resources on nodes:
 Disk Space :: Every transaction is stored in the blockchain, adding to the total size of the blockchain. The blockchain is stored on disk, but the storage can be optimized by “pruning” older transactions.
 CPU :: Every transaction must be validated, which requires CPU time.
 Bandwidth :: Every transaction is transmitted (through flood propagation) across the network at least once. Without any optimization in the block propagation protocol, transactions are transmitted again as part of a block, doubling the impact on network capacity
 Memory :: Nodes that validate transactions keep the UTXO index or the entire UTXO set in memory to speed up validation. Because memory is at least one order of magnitude more expensive than disk, growth of the UTXO set contributes disproportionately to the cost of running a node.
 As you can see from the list above, not every part of a transaction has an equal impact on the cost of running a node or on the ability of bitcoin to scale to support more transactions. The most expensive part of a transaction are the newly created outputs, as they are added to the in-memory UTXO set. By comparison, signatures (aka witness data) add the least burden to the network and the cost of running a node, because witness data are only validated once and then never used again. Furthermore, immediately after receiving a new transaction and validating witness data, nodes can discard that witness data. If fees are calculated on transaction size, without discriminating between these two types of data, then the market incentives of fees are not aligned with the actual costs imposed by a transaction. In fact, the current fee structure actually encourages the opposite behavior, because witness data is the largest part of a transaction.
 The incentives created by fees matter because they affect the behavior of wallets. All wallets must implement some strategy for assembling transactions that takes into considerations a number of factors, such as privacy (reducing address re-use), fragmentation (making lots of loose change) and fees. If the fees are overwhelmingly motivating wallets to use as few inputs as possible in transactions, this can lead to UTXO picking and change address strategies that inadvertently bloat the UTXO set.
 Transactions consume UTXO in their inputs and create new UTXO with their outputs. A transaction, therefore, that has more inputs than outputs will result in a decrease in the UTXO set, whereas a transaction that has more outputs than inputs will result in an increase in the UTXO set. Let’s consider the _difference_ between inputs and outputs and call that the “Net new UTXO”. That’s an important metric, as it tells us what impact a transaction will have on the most expensive network-wide resource, the in-memory UTXO set. A transaction with positive Net-new-UTXO, adds to that burden. A transaction with a negative Net-new-UTXO reduces the burden. We would therefore want to encourage transactions that are either negative Net-new-UTXO or neutral with zero Net-new-UTXO.
 Let’s look at an example of what incentives are created by the transaction fee calculation, with and without segregated witness. We will look at two different transactions. Transaction A is a 3-input, 2-output transaction, which has a Net-new-UTXO metric of -1, meaning it consumes one more UTXO than it creates, reducing the UTXO set by one. Transaction B is a 2-input, 3-output transaction, which has a Net-new-UTXO metric of 1, meaning it adds one UTXO to the UTXO set, imposing additional cost on the entire bitcoin network. Both transactions use multi-signature (2-of-3) scripts, to demonstrate how complex scripts increase the impact of segregated witness on fees. Let’s assume a transaction fee of 30 satoshi per byte and a 75% fee discount on witness data:
 Without Segregated Witness
 Transaction A fee: 25,710 satoshi
 Transaction B fee: 18,990 satoshi
 With Segregated Witness
 Transaction A fee: 8,130 satoshi
 Transaction B fee: 12,045 satoshi
 Both transactions are less expensive when segregated witness is implemented. But comparing the costs between the two transactions, we see that before segregated witness, the fee is higher for the transaction that has a negative Net-new-UTXO. After segregated witness, the transaction fees align with the incentive to minimize new UTXO creation, by not inadvertently penalizing transactions with many inputs.
 Segregated witness therefore has two main effects on the fees paid by bitcoin users. Firstly, segwit reduces the overall cost of transactions by discounting witness data and increasing the capacity of the bitcoin blockchain. Secondly, segwit’s discount on witness data correcting a misalignment of incentives that may have inadvertently created more bloat in the UTXO set.
 === Proposed Future Scripting and Transaction Improvements
 ==== Confidential Transactions
 ==== Schnorr Signatures
 ==== Merkleized Abstract Syntax Trees (Pay-to-Merkle-Root)
 ==== Covenants
--- a/appdx-pycoin.asciidoc
+++ b/appdx-pycoin.asciidoc
@ -340,7 +340,7 @@ Dogecoin address : DFpN6QqFfUm3gKNaxN6tNcab1FArL9cZLE
 ==== Transaction Utility (TX)
-((("transaction utility (tx)")))The command-line utility +tx+ will display transactions in human-readable form, fetch base transactions from pycoin's transaction cache or from web services (blockchain.info, blockr.io, and biteasy.com are currently supported), merge transactions, add or delete inputs or outputs, and sign transactions.
+((("transaction utility (tx)")))The command-line utility +tx+ will display transactions in human-readable form, fetch base transactions from pycoin's transaction cache or from web services (blockchain.info and biteasy.com are currently supported), merge transactions, add or delete inputs or outputs, and sign transactions.
 Following are some examples.
--- a/ch01.asciidoc
+++ b/ch01.asciidoc
@ -47,7 +47,7 @@ Although these earlier digital currencies worked, they were centralized and, as
 ((("bitcoin","development of")))((("Nakamoto, Satoshi")))Bitcoin was invented in 2008 with the publication of a paper titled((("Bitcoin: A Peer-to-Peer Electronic Cash System. (Nakamoto)"))) "Bitcoin: A Peer-to-Peer Electronic Cash System,"footnote:["Bitcoin: A Peer-to-Peer Electronic Cash System", Satoshi Nakamoto https://bitcoin.org/bitcoin.pdf] written under the alias of Satoshi Nakamoto. Nakamoto combined several prior inventions such as((("b-money")))((("HashCash"))) b-money and HashCash to create a completely decentralized electronic cash system that does not rely on a central authority for currency issuance or settlement and validation of transactions. The key innovation was to use a distributed computation system (called a((("proof-of-work algorithm"))) "proof-of-work" algorithm) to conduct a global "election" every 10 minutes, allowing the decentralized network to arrive at _consensus_ about the state of transactions. This elegantly solves the issue of double-spend where a single currency unit can be spent twice. Previously, the double-spend problem was a weakness of digital currency and was addressed by clearing all transactions through a central clearinghouse. 
-((("bitcoin network","origin of")))The bitcoin network started in 2009, based on a reference implementation published by Nakamoto and since revised by many other programmers. The implementation of the proof-of-work algorithm (mining) that provides security and resilience for bitcoin has increased in power exponentially, and now exceeds that combined processing power of the world's top super-computers. Bitcoin's total market value is estimated at between $5 billion and $10 billion US dollars, depending on the bitcoin-to-dollar exchange rate. The largest transaction processed so far by the network was $150 million US dollars, transmitted instantly and processed without any fees.
+((("bitcoin network","origin of")))The bitcoin network started in 2009, based on a reference implementation published by Nakamoto and since revised by many other programmers. The implementation of the proof-of-work algorithm (mining) that provides security and resilience for bitcoin has increased in power exponentially, and now exceeds that combined processing power of the world's top super-computers. Bitcoin's total market value is estimated at between $10 billion and $15 billion US dollars, depending on the bitcoin-to-dollar exchange rate. The largest transaction processed so far by the network was $150 million US dollars, transmitted instantly and processed without any fees.
 Satoshi Nakamoto withdrew from the public in April of 2011, leaving the responsibility of developing the code and network to a thriving group of volunteers. The identity of the person or people behind bitcoin is still unknown. However, neither Satoshi Nakamoto nor anyone else exerts individual control over the bitcoin system, which operates based on fully transparent mathematical principles, open source code and consensus among participants. The invention itself is groundbreaking and has already spawned new science in the fields of distributed computing, economics, and econometrics. 
@ -108,7 +108,7 @@ Paper Wallet:: ((("bitcoin wallet", "paper")))The keys controlling bitcoin can a
 Another way to categorize bitcoin wallets is by their degree of autonomy and how they interact with the bitcoin network:
-Full node client:: ((("full nodes")))A full client, or "full node," is a client that stores the entire history of bitcoin transactions (every transaction by every user, ever), manages the users' wallets, and can initiate transactions directly on the bitcoin network. A full node handles all aspects of the protocol and can independently validate the entire blockchain and any transaction. A full-node client consumes substantial computer resources (e.g. more than 60GB of disk, 2GB of RAM) but offers complete autonomy and independent transaction verification.
+Full node client:: ((("full nodes")))A full client, or "full node," is a client that stores the entire history of bitcoin transactions (every transaction by every user, ever), manages the users' wallets, and can initiate transactions directly on the bitcoin network. A full node handles all aspects of the protocol and can independently validate the entire blockchain and any transaction. A full-node client consumes substantial computer resources (e.g. more than 125GB of disk, 2GB of RAM) but offers complete autonomy and independent transaction verification.
 Lightweight client:: ((("lightweight client")))A lightweight client, also known as a simple-payment-verification (SPV) client connects to bitcoin full nodes (mentioned above) for access to the bitcoin transaction information, but stores the user wallet locally and independently creates, validates and transmits transactions. Lightweight clients interact directly with the bitcoin network, without an intermediary. 
--- a/ch02.asciidoc
+++ b/ch02.asciidoc
@ -3,7 +3,7 @@
 === Transactions, Blocks, Mining, and the Blockchain
-((("bitcoin","implementation of", id="ix_ch02-asciidoc0", range="startofrange")))The bitcoin system, unlike traditional banking and payment systems, is based on de-centralized trust. Instead of a central trusted authority, in bitcoin, trust is achieved as an emergent property from the interactions of different participants in the bitcoin system. In this chapter, we will examine bitcoin from a high level by tracking a single transaction through the bitcoin system and watch as it becomes "trusted" and accepted by the bitcoin mechanism of distributed consensus and is finally recorded on the blockchain, the distributed ledger of all transactions. Subsequent chapters will delve into the technology behind transactions, the network, and mining. 
+((("bitcoin","implementation of", id="ix_ch02-asciidoc0", range="startofrange")))The bitcoin system, unlike traditional banking and payment systems, is based on decentralized trust. Instead of a central trusted authority, in bitcoin, trust is achieved as an emergent property from the interactions of different participants in the bitcoin system. In this chapter, we will examine bitcoin from a high level by tracking a single transaction through the bitcoin system and watch as it becomes "trusted" and accepted by the bitcoin mechanism of distributed consensus and is finally recorded on the blockchain, the distributed ledger of all transactions. Subsequent chapters will delve into the technology behind transactions, the network, and mining. 
 ==== Bitcoin Overview
@ -16,13 +16,12 @@ image::images/msbt_0201.png["Bitcoin Overview"]
 Each example in this chapter is based on an actual transaction made on the bitcoin network, simulating the interactions between the users (Joe, Alice, Bob and Gopesh) by sending funds from one wallet to another. While tracking a transaction through the bitcoin network to the blockchain, we will use a((("blockchain explorer websites"))) _blockchain explorer_ site to visualize each step. A blockchain explorer is a web application that operates as a bitcoin search engine, in that it allows you to search for addresses, transactions, and blocks and see the relationships and flows between them.
-Popular blockchain explorers include: ((("blockchain.info website")))((("blockexplorer.com")))((("blockr.io website")))((("insight.bitpay.com")))((("blockcypher.com")))
+Popular blockchain explorers include: ((("blockchain.info website")))((("blockexplorer.com")))((("insight.bitpay.com")))((("blockcypher.com")))
 * https://blockexplorer.com[Bitcoin Block Explorer]
 * https://live.blockcypher.com[BlockCypher Explorer]
 * https://blockchain.info[blockchain.info]
 * https://insight.bitpay.com[BitPay Insight]
 * https://blockr.io[blockr Block Reader]
 Each of these has a search function that can take a bitcoin address, transaction hash, block number, or block hash and retrieve corresponding information from the bitcoin network. With each transaction or block example, we will provide a URL so you can look it up yourself and study it in detail.
--- a/ch03.asciidoc
+++ b/ch03.asciidoc
@ -1,7 +1,7 @@
 [[ch03_bitcoin_client]]
 === Bitcoin Core: The Reference Implementation
-Bitcoin is an _open source_ project and the source code is available under an open (MIT) license, free to download and use for any purpose. Open source means more than simply free to use. It also means that bitcoin is developed by an open community of volunteers. At first, that community consisted of only Satoshi Nakamoto. By 2016, bitcoin's source code has more than 340 contributors with about a dozen developers working on the code almost full time and several dozen more on a part-time basis. Anyone can contribute to the code - including you!
+Bitcoin is an _open source_ project and the source code is available under an open (MIT) license, free to download and use for any purpose. Open source means more than simply free to use. It also means that bitcoin is developed by an open community of volunteers. At first, that community consisted of only Satoshi Nakamoto. By 2016, bitcoin's source code has more than 400 contributors with about a dozen developers working on the code almost full time and several dozen more on a part-time basis. Anyone can contribute to the code - including you!
 ((("bitcoin client", id="ix_ch03-asciidoc0", range="startofrange")))((("bitcoin client","Bitcoin Core", id="ix_ch03-asciidoc1", range="startofrange")))((("Bitcoin Core client", id="ix_ch03-asciidoc2", range="startofrange")))((("Satoshi client", see="Bitcoin Core client")))
 When bitcoin was created by Satoshi Nakamoto, the software was actually completed before the white paper <<satoshi_whitepaper>>. Satoshi wanted to make sure it worked before writing about it. That first implementation, then simply known as "Bitcoin" or "Satoshi client", has been heavily modified and improved. It has evolved into what is known as _Bitcoin Core_, to differentiate it from other compatible implementations. Bitcoin Core is the _reference implementation_ of the bitcoin system, meaning that it is the authoritative reference on how each part of the technology should be implemented. Bitcoin Core implements all aspects of bitcoin, including wallets, a transaction and block validation engine, and a full network node in the peer-to-peer bitcoin network.
@ -214,14 +214,14 @@ $ which bitcoin-cli
 Bitcoin's peer-to-peer network is composed of network "nodes", run mostly by volunteers and some of the businesses that build bitcoin applications. Those running bitcoin nodes have a direct and authoritative view of the bitcoin blockchain, with a local copy of all the transactions, independently validated by their own system. By running a node, you don't have to rely on any third party to validate a transaction. Moreover, by running a bitcoin node you contribute to the bitcoin network by making it more robust.
-Running a node, however, requires a permanently connected system with enough resources to process all bitcoin transactions. Depending on whether you choose to index all transactions and keep a full copy of the blockchain, you may also need a lot of disk space and RAM. In early 2016, a full-index node needs 2GB of RAM and 80GB of disk space. Bitcoin nodes also transmit and receive bitcoin transactions and blocks, consuming Internet bandwidth. If your Internet connection is limited, has a low data cap, or is metered (charged by the gigabit), you should probably not run a bitcoin node on it, or run it in a way that constrains its bandwidth (see <<constrained_resources>>).
+Running a node, however, requires a permanently connected system with enough resources to process all bitcoin transactions. Depending on whether you choose to index all transactions and keep a full copy of the blockchain, you may also need a lot of disk space and RAM. In late 2016, a full-index node needs 2GB of RAM and 125GB of disk space so that it has room to grow. Bitcoin nodes also transmit and receive bitcoin transactions and blocks, consuming Internet bandwidth. If your Internet connection is limited, has a low data cap, or is metered (charged by the gigabit), you should probably not run a bitcoin node on it, or run it in a way that constrains its bandwidth (see <<constrained_resources>>).
 [TIP]
 ====
-((("Bitcoin Core","runtime requirement for")))((("runtime requirements for Bitcoin Core")))Bitcoin Core keeps a full copy of the blockchain by default, with every transaction that has ever occurred on the bitcoin network since its inception in 2009. This dataset is several gigabytes in size and is downloaded incrementally over several hours or days, depending on the speed of your CPU and Internet connection. Bitcoin Core will not be able to process transactions or update account balances until the full blockchain dataset is downloaded. Make sure you have enough disk space, bandwidth, and time to complete the initial synchronization. You can configure Bitcoin Core to reduce the size of the blockchain by discarding old blocks (see <<constrained_resources>>) but it will still download the entire dataset before discarding data.
+((("Bitcoin Core","runtime requirement for")))((("runtime requirements for Bitcoin Core")))Bitcoin Core keeps a full copy of the blockchain by default, with every transaction that has ever occurred on the bitcoin network since its inception in 2009. This dataset is dozens of gigabytes in size and is downloaded incrementally over several days or weeks, depending on the speed of your CPU and Internet connection. Bitcoin Core will not be able to process transactions or update account balances until the full blockchain dataset is downloaded. Make sure you have enough disk space, bandwidth, and time to complete the initial synchronization. You can configure Bitcoin Core to reduce the size of the blockchain by discarding old blocks (see <<constrained_resources>>) but it will still download the entire dataset before discarding data.
 ====
-Despite these resource requirements, thousands of volunteers run bitcoin nodes. Some are running on systems as simple as a Raspberry Pi (a $35 USD computer the size of a pack of cards). Many volunteers also run bitcoin nodes on rented servers, usually some variant of Linux. A _Virtual Private Server_ (VPS) or _Cloud Computing_ server instance can be used to run a bitcoin node. Such servers can be rented for $12 to $18 USD per month from a variety of providers.
+Despite these resource requirements, thousands of volunteers run bitcoin nodes. Some are running on systems as simple as a Raspberry Pi (a $35 USD computer the size of a pack of cards). Many volunteers also run bitcoin nodes on rented servers, usually some variant of Linux. A _Virtual Private Server_ (VPS) or _Cloud Computing_ server instance can be used to run a bitcoin node. Such servers can be rented for $25 to $50 USD per month from a variety of providers.
 Why would you want to run a node? Here are some of the most common reasons for running a node:
--- a/ch04.asciidoc
+++ b/ch04.asciidoc
@ -5,7 +5,7 @@ You may have heard that bitcoin is based on _cryptography_, which is a branch of
 === Introduction
-((("bitcoin","establishing ownership of")))Ownership of bitcoin is established through _digital keys_, _bitcoin addresses_, and _digital signatures_. The digital keys are not actually stored in the network, but are instead created and stored by users in a file, or simple database, called a _wallet_. The digital keys in a user's wallet are completely independent of the bitcoin protocol and can be generated and managed by the user's wallet software without reference to the blockchain or access to the Internet. Keys enable many of the interesting properties of bitcoin, including de-centralized trust and control, ownership attestation, and the cryptographic-proof security model. 
+((("bitcoin","establishing ownership of")))Ownership of bitcoin is established through _digital keys_, _bitcoin addresses_, and _digital signatures_. The digital keys are not actually stored in the network, but are instead created and stored by users in a file, or simple database, called a _wallet_. The digital keys in a user's wallet are completely independent of the bitcoin protocol and can be generated and managed by the user's wallet software without reference to the blockchain or access to the Internet. Keys enable many of the interesting properties of bitcoin, including decentralized trust and control, ownership attestation, and the cryptographic-proof security model. 
 Every bitcoin transaction requires a valid digital signature to be included in the blockchain, which can only be generated with a secret key; therefore, anyone with a copy of that key has control of the bitcoin in that account. The digital signature used to spend funds is also referred to as a _witness_, a term used in cryptography. The witness data in a bitcoin transaction testifies to the true ownership of the funds being spent.
@ -271,7 +271,7 @@ image::images/msbt_0405.png["pubkey_to_address"]
 [[base58]]
 ==== Base58 and Base58Check Encoding
-In order to represent long numbers in a compact way, using fewer symbols, many computer systems use mixed-alphanumeric representations with a base (or radix) higher than 10. For example, whereas the traditional decimal system uses the 10 numerals 0 through 9, the hexadecimal system uses 16, with the letters A through F as the six additional symbols. A number represented in hexadecimal format is shorter than the equivalent decimal representation. Even more compact,((("Base-64 representation"))) Base-64 representation uses 26 lower-case letters, 26 capital letters, 10 numerals, and two more characters such as "\+" and "/" to transmit binary data over text-based media such as email. Base-64 is most commonly used to add binary attachments to email. Base58 is a text-based binary-encoding format developed for use in bitcoin and used in many other cryptocurrencies. It offers a balance between compact representation, readability, and error detection and prevention. Base58 is a subset of Base64, using the upper- and lowercase letters and numbers, but omitting some characters that are frequently mistaken for one another and can appear identical when displayed in certain fonts. Specifically, Base58 is Base64 without the 0 (number zero), O (capital o), l (lower L), I (capital i), and the symbols "\+" and "/". Or, more simply, it is a set of lower and capital letters and numbers without the four (0, O, l, I) just mentioned.
+In order to represent long numbers in a compact way, using fewer symbols, many computer systems use mixed-alphanumeric representations with a base (or radix) higher than 10. For example, whereas the traditional decimal system uses the 10 numerals 0 through 9, the hexadecimal system uses 16, with the letters A through F as the six additional symbols. A number represented in hexadecimal format is shorter than the equivalent decimal representation. Even more compact,((("Base-64 representation"))) Base-64 representation uses 26 lower-case letters, 26 capital letters, 10 numerals, and two more characters such as "`+`" and "/" to transmit binary data over text-based media such as email. Base-64 is most commonly used to add binary attachments to email. Base58 is a text-based binary-encoding format developed for use in bitcoin and used in many other cryptocurrencies. It offers a balance between compact representation, readability, and error detection and prevention. Base58 is a subset of Base64, using the upper- and lowercase letters and numbers, but omitting some characters that are frequently mistaken for one another and can appear identical when displayed in certain fonts. Specifically, Base58 is Base64 without the 0 (number zero), O (capital o), l (lower L), I (capital i), and the symbols "`+`" and "/". Or, more simply, it is a set of lower and capital letters and numbers without the four (0, O, l, I) just mentioned.
 [[base58alphabet]]
 .bitcoin's Base58 alphabet
@ -457,7 +457,7 @@ K = 04F028892BAD7ED57D2FB57BF33081D5CFCF6F9ED3D3D7F159C2E2FFF579DC341A&#x21b5;
 [[comp_pub]]
 ===== Compressed public keys
-Compressed public keys were introduced to bitcoin to reduce the size of transactions and conserve disk space on nodes that store the bitcoin blockchain database. Most transactions include the public key, required to validate the owner's credentials and spend the bitcoin. Each public key requires 520 bits (prefix \+ x \+ y), which when multiplied by several hundred transactions per block, or tens of thousands of transactions per day, adds a significant amount of data to the blockchain.((("compressed public keys", id="ix_ch04-asciidoc16", range="startofrange")))((("public keys","compressed", id="ix_ch04-asciidoc17", range="startofrange")))
+Compressed public keys were introduced to bitcoin to reduce the size of transactions and conserve disk space on nodes that store the bitcoin blockchain database. Most transactions include the public key, required to validate the owner's credentials and spend the bitcoin. Each public key requires 520 bits (prefix + x + y), which when multiplied by several hundred transactions per block, or tens of thousands of transactions per day, adds a significant amount of data to the blockchain.((("compressed public keys", id="ix_ch04-asciidoc16", range="startofrange")))((("public keys","compressed", id="ix_ch04-asciidoc17", range="startofrange")))
 As we saw in the section <<pubkey>>, a public key is a point (x,y) on an elliptic curve. Because the curve expresses a mathematical function, a point on the curve represents a solution to the equation and, therefore, if we know the _x_ coordinate we can calculate the _y_ coordinate by solving the equation y^2^ mod p = (x^3^ + 7) mod p. That allows us to store only the _x_ coordinate of the public key point, omitting the _y_ coordinate and reducing the size of the key and the space required to store it by 256 bits. An almost 50% reduction in size in every transaction adds up to a lot of data saved over time!
--- a/ch07.asciidoc
+++ b/ch07.asciidoc
@ -0,0 +1,603 @@
 [[ch07]]
 [[adv_transactions]]
 == Advanced Transactions and Scripting
 [[ch07_intro]]
 === Introduction
 In the previous chapter, we introduced the basic elements of bitcoin transactions and looked at the most common type of transaction script, the Pay-to-Public-Key-Hash script. In this chapter we will look at more advanced scripting and how we can use it to build transactions with complex conditions.
 First, we will look at _multi-signature_ scripts. Next we will examine the second most common transaction script, _Pay-to-Script-Hash_, which opens up a whole world of complex scripts. Then, we will examine new script operators that add a time-dimension to bitcoin, through _timelocks_.
 [[multisig]]
 === Multi-Signature
 ((("multi-signature scripts")))((("transactions","multi-signature scripts")))Multi-signature scripts set a condition where N public keys are recorded in the script and at least M of those must provide signatures to release the encumbrance. This is also known as an M-of-N scheme, where N is the total number of keys and M is the threshold of signatures required for validation. For example, a 2-of-3 multi-signature is one where three public keys are listed as potential signers and at least two of those must be used to create signatures for a valid transaction to spend the funds. ((("multi-signature scripts","limits on")))At this time, standard multi-signature scripts are limited to at most 15 listed public keys, meaning you can do anything from a 1-of-1 to a 15-of-15 multi-signature or any combination within that range. The limitation to 15 listed keys might be lifted by the time this book is published, so check the((("isStandard() function"))) +isStandard()+ function to see what is currently accepted by the network.
 The general form of a locking script setting an M-of-N multi-signature condition is:
 ----
 M <Public Key 1> <Public Key 2> ... <Public Key N> N CHECKMULTISIG
 ----
 where N is the total number of listed public keys and M is the threshold of required signatures to spend the output.
 A locking script setting a 2-of-3 multi-signature condition looks like this:
 ----
 2 <Public Key A> <Public Key B> <Public Key C> 3 CHECKMULTISIG
 ----
 The preceding locking script can be satisfied with an unlocking script containing pairs of signatures and public keys:
 ----
 <Signature B> <Signature C>
 ----
 or any combination of two signatures from the private keys corresponding to the three listed public keys.
 The two scripts together would form the combined validation script:
 ----
 <Signature B> <Signature C> 2 <Public Key A> <Public Key B> <Public Key C> 3 CHECKMULTISIG
 ----
 When executed, this combined script will evaluate to TRUE if, and only if, the unlocking script matches the conditions set by the locking script. In this case, the condition is whether the unlocking script has a valid signature from the two private keys that correspond to two of the three public keys set as an encumbrance.
 [[multisig_bug]]
 ===== A bug in CHECKMULTISIG execution
 There is a bug in CHECKMULTISIG's execution that requires a slight workaround. When CHECKMULTISIG executes, it should consume M+N+2 items on the stack as parameters. However, due to the bug, CHECKMULTISIG will pop an extra value or one value more than expected.
 Let's look at this in greater detail using the validation example above.
 ----
 <Signature B> <Signature C> 2 <Public Key A> <Public Key B> <Public Key C> 3 CHECKMULTISIG
 ----
 First, CHECKMULTISIG pops the top item which is +N+, in this example "3". Then it pops +N+ items, which are the public keys that can sign. In this example, public keys A, B, and C. Then, it pops one item which is +M+, the quorum (how many signatures are needed). Here M = 2. At this point, CHECKMULTISIG should pop the final +M+ items, which are the signatures and see if they are valid. But, unfortunately, a bug in the implementation causes CHECKMULTISIG to pop one more item (M+1 total) than it should. The extra item is disregarded when checking the signatures so it has no direct effect on CHECKMULTISIG itself. However, an extra value must be present because if it is not present, when CHECKMULTISIG attempts to pop on an empty stack, it will cause a stack error and script failure (marking the transaction as invalid). Because the extra item is disregarded it can be anything, but customarily +0+ is used.
 Because this bug became part of the consensus rules, it must now be replicated forever. Therefore, the correct script validation would look like this:
 ----
 0 <Signature B> <Signature C> 2 <Public Key A> <Public Key B> <Public Key C> 3 CHECKMULTISIG
 ----
 Thus the unlocking script actually used in multisig is not:
 ----
 <Signature B> <Signature C>
 ----
 but instead it is:
 ----
 0 <Signature B> <Signature C>
 ----
 From now on, if you see a multisig unlocking script, you should expect to see an extra +0+ in the beginning, whose only purpose is as a workaround to a bug that accidentally became a consensus rule.
 [[p2sh]]
 === Pay-to-Script-Hash (P2SH)
 ((("multi-signature scripts","P2SH and", id="ix_ch05-asciidoc17", range="startofrange")))((("Pay-to-script-hash (P2SH)", id="ix_ch05-asciidoc18", range="startofrange")))((("transactions","Pay-to-script-hash", id="ix_ch05-asciidoc19", range="startofrange")))Pay-to-script-hash (P2SH) was introduced in 2012 as a powerful new type of transaction that greatly simplifies the use of complex transaction scripts. To explain the need for P2SH, let's look at a practical example.
 In <<ch01_intro_what_is_bitcoin>> we introduced Mohammed, an electronics importer based in Dubai. Mohammed's company uses bitcoin's multi-signature feature extensively for its corporate accounts. Multi-signature scripts are one of the most common uses of bitcoin's advanced scripting capabilities and are a very powerful feature. Mohammed's company uses a multi-signature script for all customer payments, known in accounting terms as "accounts receivable," or AR. With the multi-signature scheme, any payments made by customers are locked in such a way that they require at least two signatures to release, from Mohammed and one of his partners or from his attorney who has a backup key. A multi-signature scheme like that offers corporate governance controls and protects against theft, embezzlement, or loss.
 The resulting script is quite long and looks like this:
 ----
 2 <Mohammed's Public Key> <Partner1 Public Key> <Partner2 Public Key> <Partner3 Public Key> <Attorney Public Key> 5 CHECKMULTISIG
 ----
 Although multi-signature scripts are a powerful feature, they are cumbersome to use. Given the preceding script, Mohammed would have to communicate this script to every customer prior to payment. Each customer would have to use special bitcoin wallet software with the ability to create custom transaction scripts, and each customer would have to understand how to create a transaction using custom scripts. Furthermore, the resulting transaction would be about five times larger than a simple payment transaction, because this script contains very long public keys. The burden of that extra-large transaction would be borne by the customer in the form of fees. Finally, a large transaction script like this would be carried in the UTXO set in RAM in every full node, until it was spent. All of these issues make using complex locking scripts difficult in practice.
 Pay-to-script-hash (P2SH) was developed to resolve these practical difficulties and to make the use of complex scripts as easy as a payment to a bitcoin address. With P2SH payments, the complex locking script is replaced with its digital fingerprint, a cryptographic hash. When a transaction attempting to spend the UTXO is presented later, it must contain the script that matches the hash, in addition to the unlocking script. In simple terms, P2SH means "pay to a script matching this hash, a script that will be presented later when this output is spent."
 In P2SH transactions, the locking script that is replaced by a hash is referred to as the((("redeem script"))) _redeem script_ because it is presented to the system at redemption time rather than as a locking script. <<without_p2sh>> shows the script without P2SH and <<with_p2sh>> shows the same script encoded with P2SH.
 [[without_p2sh]]
 .Complex script without P2SH
 |=======
 | Locking Script | 2 PubKey1 PubKey2 PubKey3 PubKey4 PubKey5 5 CHECKMULTISIG
 | Unlocking Script | Sig1 Sig2
 |=======
 [[with_p2sh]]
 .Complex script as P2SH
 |=======
 | Redeem Script | 2 PubKey1 PubKey2 PubKey3 PubKey4 PubKey5 5 CHECKMULTISIG
 | Locking Script | HASH160 <20-byte hash of redeem script> EQUAL
 | Unlocking Script | Sig1 Sig2 <redeem script>
 |=======
 As you can see from the tables, with P2SH the complex script that details the conditions for spending the output (redeem script) is not presented in the locking script. Instead, only a hash of it is in the locking script and the redeem script itself is presented later, as part of the unlocking script when the output is spent. This shifts the burden in fees and complexity from the sender to the recipient (spender) of the transaction.
 Let's look at Mohammed's company, the complex multi-signature script, and the resulting P2SH scripts.
 First, the multi-signature script that Mohammed's company uses for all incoming payments from customers:
 ----
 2 <Mohammed's Public Key> <Partner1 Public Key> <Partner2 Public Key> <Partner3 Public Key> <Attorney Public Key> 5 CHECKMULTISIG
 ----
 If the placeholders are replaced by actual public keys (shown here as 520-bit numbers starting with 04) you can see that this script becomes very long:
 ----
 2
 04C16B8698A9ABF84250A7C3EA7EEDEF9897D1C8C6ADF47F06CF73370D74DCCA01CDCA79DCC5C395D7EEC6984D83F1F50C900A24DD47F569FD4193AF5DE762C58704A2192968D8655D6A935BEAF2CA23E3FB87A3495E7AF308EDF08DAC3C1FCBFC2C75B4B0F4D0B1B70CD2423657738C0C2B1D5CE65C97D78D0E34224858008E8B49047E63248B75DB7379BE9CDA8CE5751D16485F431E46117B9D0C1837C9D5737812F393DA7D4420D7E1A9162F0279CFC10F1E8E8F3020DECDBC3C0DD389D99779650421D65CBD7149B255382ED7F78E946580657EE6FDA162A187543A9D85BAAA93A4AB3A8F044DADA618D087227440645ABE8A35DA8C5B73997AD343BE5C2AFD94A5043752580AFA1ECED3C68D446BCAB69AC0BA7DF50D56231BE0AABF1FDEEC78A6A45E394BA29A1EDF518C022DD618DA774D207D137AAB59E0B000EB7ED238F4D800 5 CHECKMULTISIG
 ----
 This entire script can instead be represented by a 20-byte cryptographic hash, by first applying the SHA256 hashing algorithm and then applying the RIPEMD160 algorithm on the result. The 20-byte hash of the preceding script is:
 ----
 54c557e07dde5bb6cb791c7a540e0a4796f5e97e
 ----
 A P2SH transaction locks the output to this hash instead of the longer script, using the locking script:
 ----
 HASH160 54c557e07dde5bb6cb791c7a540e0a4796f5e97e EQUAL
 ----
 which, as you can see, is much shorter. Instead of "pay to this 5-key multi-signature script," the P2SH equivalent transaction is "pay to a script with this hash." A customer making a payment to Mohammed's company need only include this much shorter locking script in his payment. When Mohammed wants to spend this UTXO, they must present the original redeem script (the one whose hash locked the UTXO) and the signatures necessary to unlock it, like this:
 ----
 <Sig1> <Sig2> <2 PK1 PK2 PK3 PK4 PK5 5 CHECKMULTISIG>
 ----
 The two scripts are combined in two stages. First, the redeem script is checked against the locking script to make sure the hash matches:
 ----
 <2 PK1 PK2 PK3 PK4 PK5 5 CHECKMULTISIG> HASH160 <redeem scriptHash> EQUAL
 ----
 If the redeem script hash matches, the unlocking script is executed on its own, to unlock the redeem script:
 ----
 <Sig1> <Sig2> 2 PK1 PK2 PK3 PK4 PK5 5 CHECKMULTISIG
 ----
 Almost all the scripts described in this chapter can only be implemented as Pay-to-Script-Hash scripts. They cannot be used directly in the locking script of a UTXO.
 ==== Pay-to-script-hash addresses
 ((("addresses, bitcoin","Pay-to-Script-Hash (P2SH)")))((("Pay-to-script-hash (P2SH)","addresses")))Another important part of the P2SH feature is the ability to encode a script hash as an address, as defined in BIP-13. P2SH addresses are Base58Check encodings of the 20-byte hash of a script, just like bitcoin addresses are Base58Check encodings of the 20-byte hash of a public key. P2SH addresses use the version prefix "5", which results in Base58Check-encoded addresses that start with a "3". For example, Mohammed's complex script, hashed and Base58Check-encoded as a P2SH address becomes +39RF6JqABiHdYHkfChV6USGMe6Nsr66Gzw+. Now, Mohammed can give this "address" to his customers and they can use almost any bitcoin wallet to make a simple payment, as if it were a bitcoin address. The 3 prefix gives them a hint that this is a special type of address, one corresponding to a script instead of a public key, but otherwise it works in exactly the same way as a payment to a bitcoin address.
 P2SH addresses hide all of the complexity, so that the person making a payment does not see the script.
 ==== Benefits of pay-to-script-hash
 ((("Pay-to-script-hash (P2SH)","benefits of")))The pay-to-script-hash feature offers the following benefits compared to the direct use of complex scripts in locking outputs:
 * Complex scripts are replaced by shorter fingerprints in the transaction output, making the transaction smaller.
 * Scripts can be coded as an address, so the sender and the sender's wallet don't need complex engineering to implement P2SH.
 * P2SH shifts the burden of constructing the script to the recipient, not the sender.
 * P2SH shifts the burden in data storage for the long script from the output (which is in the UTXO set) to the input (stored on the blockchain).
 * P2SH shifts the burden in data storage for the long script from the present time (payment) to a future time (when it is spent).
 * P2SH shifts the transaction fee cost of a long script from the sender to the recipient, who has to include the long redeem script to spend it.
 ==== Redeem script and validation
 ((("pay-to-script-hash (P2SH)","isStandard validation")))((("pay-to-script-hash (P2SH)","redeem script for")))Prior to version 0.9.2 of the Bitcoin Core client, pay-to-script-hash was limited to the standard types of bitcoin transaction scripts, by the +isStandard()+ function. That means that the redeem script presented in the spending transaction could only be one of the standard types: P2PK, P2PKH, or multi-sig nature, excluding +RETURN+ and P2SH itself.
 As of version 0.9.2 of the Bitcoin Core client, P2SH transactions can contain any valid script, making the P2SH standard much more flexible and allowing for experimentation with many novel and complex types of transactions.
 Note that you are not able to put a P2SH inside a P2SH redeem script, because the P2SH specification is not recursive. While it is technically possible to include +RETURN+ in a redeem script, as nothing in the rules prevents you from doing so, it is of no practical use as executing +RETURN+ during validation will cause the transaction to be marked invalid.
 Note that because the redeem script is not presented to the network until you attempt to spend a P2SH output, if you lock an output with the hash of an invalid redeem script it will be processed regardless. The UTXO will be successfully locked. However, you will not be able to spend it because the spending transaction, which includes the redeem script, will not be accepted because it is an invalid script. This creates a risk, because you can lock bitcoin in a P2SH that cannot be spent later. The network will accept the P2SH locking script even if it corresponds to an invalid redeem script, because the script hash gives no indication of the script it represents.
 [WARNING]
 ====
 ((("Pay-to-Script-Hash (P2SH)","locking scripts")))P2SH locking scripts contain the hash of a redeem script, which gives no clues as to the content of the redeem script itself. The P2SH transaction will be considered valid and accepted even if the redeem script is invalid. You might accidentally lock bitcoin in such a way that it cannot later be spent.(((range="endofrange", startref="ix_ch05-asciidoc19")))(((range="endofrange", startref="ix_ch05-asciidoc18")))(((range="endofrange", startref="ix_ch05-asciidoc17")))(((range="endofrange", startref="ix_ch05-asciidoc0")))
 ====
 [[op_return]]
 === Data Recording Output (RETURN)
 ((("ledger, storing unrelated information in")))((("RETURN operator")))((("transactions","storing unrelated information in")))Bitcoin's distributed and timestamped ledger, the blockchain, has potential uses far beyond payments. Many developers have tried to use the transaction scripting language to take advantage of the security and resilience of the system for applications such as((("digital notary services")))((("smart contracts")))((("stock certificates"))) digital notary services, stock certificates, and smart contracts. Early attempts to use bitcoin's script language for these purposes involved creating transaction outputs that recorded data on the blockchain; for example, to record a digital fingerprint of a file in such a way that anyone could establish proof-of-existence of that file on a specific date by reference to that transaction.
 ((("blockchains","storing unrelated information in")))The use of bitcoin's blockchain to store data unrelated to bitcoin payments is a controversial subject. Many developers consider such use abusive and want to discourage it. Others view it as a demonstration of the powerful capabilities of blockchain technology and want to encourage such experimentation. Those who object to the inclusion of non-payment data argue that it causes "blockchain bloat," burdening those running full bitcoin nodes with carrying the cost of disk storage for data that the blockchain was not intended to carry. Moreover, such transactions create UTXO that cannot be spent, using the destination bitcoin address as a free-form 20-byte field. Because the address is used for data, it doesn't correspond to a private key and the resulting UTXO can _never_ be spent; it's a fake payment. These transactions that can never be spent are therefore never removed from the UTXO set and cause the size of the UTXO database to forever increase, or "bloat."
 In version 0.9 of the Bitcoin Core client, a compromise was reached with the introduction of the +RETURN+ operator. +RETURN+ allows developers to add 80 bytes of nonpayment data to a transaction output. However, unlike the use of "fake" UTXO, the +RETURN+ operator creates an explicitly _provably unspendable_ output, which does not need to be stored in the UTXO set. +RETURN+ outputs are recorded on the blockchain, so they consume disk space and contribute to the increase in the blockchain's size, but they are not stored in the UTXO set and therefore do not bloat the UTXO memory pool and burden full nodes with the cost of more expensive RAM.
 +RETURN+ scripts look like this:
 ----
 RETURN <data>
 ----
 The data portion is limited to 80 bytes and most often represents a hash, such as the output from the SHA256 algorithm (32 bytes). Many applications put a prefix in front of the data to help identify the application. For example, the http://proofofexistence.com[Proof of Existence] digital notarization service uses the 8-byte prefix +DOCPROOF+, which is ASCII encoded as +44 4f 43 50 52 4f 4f 46+ in hexadecimal.
 Keep in mind that there is no "unlocking script" that corresponds to +RETURN+ that could possibly be used to "spend" an +RETURN+ output. The whole point of +RETURN+ is that you can't spend the money locked in that output, and therefore it does not need to be held in the UTXO set as potentially spendable—+RETURN+ is _provably un-spendable_. +RETURN+ is usually an output with a zero bitcoin amount, because any bitcoin assigned to such an output is effectively lost forever. If an +RETURN+ is referenced as an input in a transaction, the script validation engine will halt the execution of the validation script and marking the transaction as invalid. The execution of +RETURN+, essentially causes the script to "RETURN" with a FALSE and halt. Thus, if you accidentally reference an +RETURN+ output as an input in a transaction, that transaction is invalid.
 A standard transaction (one that conforms to the +isStandard()+ checks) can have only one +RETURN+ output. However, a single +RETURN+ output can be combined in a transaction with outputs of any other type.
 Two new command-line options have been added in Bitcoin Core as of version 0.10. The option +datacarrier+ controls relay and mining of RETURN transactions, with the default set to "1" to allow them. The option +datacarriersize+ takes a numeric argument specifying the maximum size in bytes of the RETURN data, 40 bytes by default.
 [NOTE]
 ====
 RETURN was initially proposed with a limit of 80 bytes, but the limit was reduced to 40 bytes when the feature was released. In February 2015, in version 0.10 of Bitcoin Core, the limit was raised back to 80 bytes. Nodes may choose not to relay or mine RETURN, or only relay and mine RETURN containing less than 80 bytes of data.
 ====
 === Timelocks
 Timelocks are restrictions on transactions or outputs that only allow spending after a point in time. Bitcoin has had a transaction-level timelock feature from the beginning. It is implemented by the nLocktime filed in a transaction. Two new timelock features were introduced in late 2015 and mid-2016 that offer UTXO-level timelocks. These are +CHECKLOCKTIMEVERIFY+, and CHECKSEQUENCEVERIFY.
 Timelocks are useful for post-dating transactions and locking funds to a date in the future. More importantly, timelocks extend bitcoin scripting into the dimension of time, opening the door for complex multi-step smart contracts. We will examine the use of timelocks for smart contracts in <<state_channels>>.
 ==== Transaction Locktime (nLocktime)
 From the beginning, bitcoin has had a transaction-level timelock feature. ((("locktime")))((("transactions","nLockTime")))Transaction locktime is a transaction-level setting (a field in the transaction data structure) that defines the earliest time that a transaction is valid and can be relayed on the network or added to the blockchain. Locktime is also known as nLockTime from the variable name used in the Bitcoin Core codebase. It is set to zero in most transactions to indicate immediate propagation and execution. If nLockTime is nonzero and below 500 million, it is interpreted as a block height, meaning the transaction is not valid and is not relayed or included in the blockchain prior to the specified block height. If it is above 500 million, it is interpreted as a Unix Epoch timestamp (seconds since Jan-1-1970) and the transaction is not valid prior to the specified time. Transactions with nLockTime specifying a future block or time must be held by the originating system and transmitted to the bitcoin network only after they become valid. If a transaction is transmitted to the network before the specified nLockTime, the transaction will be rejected by the first node as invalid and will not be relayed to other nodes. The use of nLockTime is equivalent to postdating a paper check.
 <<locktime_limitations>>
 ===== Transaction Locktime Limitations
 nLocktime has the limitation that while it makes it possible to spend some outputs in the future, it does not make it impossible to spend them until that time. Let's explain that with the following example:
 Alice signs a transaction spending one of her outputs to Bob's address, and sets the transaction nLocktime to 3 months in the future. Alice sends that transaction to Bob to hold. With this transaction Alice and Bob know that:
 * Bob cannot transmit the transaction to redeem the funds until 3 months have elapsed.
 * Bob may transmit the transaction after 3 months
 However:
 * Alice can create another transaction, double-spending the same inputs without a locktime. Thus, Alice can spend the same UTXO before the 3 months have elapsed
 * Bob has no guarantee that Alice won't do that.
 It is important to understand the limitations of transaction nLockTime. The only guarantee is that Bob will not be able to redeem it before 3 months have elapsed. There is no guarantee that Bob will get the funds. To achieve such a guarantee, the timelock restriction must be placed on the UTXO itself and be part of the locking script, rather than on the transaction. This is achieved by the next form of timelock, below.
 ==== Check Lock Time Verify (CLTV)
 In December of 2015, a new form of timelock was introduced to bitcoin as a soft-fork upgrade. Based on a specification in Bitcoin Improvement Proposal 65 (BIP-65), a new script operator _CHECKLOCKTIMEVERIFY_ (known also as _CLTV_) was added to the scripting language. +CLTV+ is a per-output timelock, rather than a per-transaction timelock as is the case with nLocktime. This allows for much greater flexibility in the way timelocks are applied.
 In simple terms, by adding the +CLTV+ opcode in the redeem script of an output it restricts the output, so that it can only be spent after the specified time has elapsed.
 [TIP]
 ====
 While nLocktime is a transaction level timelock, CLTV is an output based timelock.
 ====
 +CLTV+ doesn't replace nLocktime, but rather restricts specific UTXO such that they can only be spent in a future transaction with nLocktime set to a greater or equal value.
 The +CLTV+ opcode takes one parameter as input, expressed as a number in the same format as nLocktime (either a block height or Unix epoch time). As indicated by the +VERIFY+ suffix, +CLTV+ is the type of opcode that halts execution of the script if the outcome is +FALSE+. If it results in TRUE, execution continues.
 In order to lock a output with +CLTV+, you insert it into the redeem script of the output, in the transaction that creates the output. For example, if Alice is paying Bob's address, the output would normally contain a P2PKH script like this:
 ----
 DUP HASH160 <Bob's Public Key Hash> EQUALVERIFY
 ----
 To lock it to a time, say 3 months from now, the transaction would be a P2SH transaction with a redeem script like this:
 ----
 <now + 3 months> CHECKLOCKTIMEVERIFY DROP DUP HASH160 <Bob's Public Key Hash> EQUALVERIFY
 ----
 where +<now {plus} 3 months>+ is a block height or time value estimated 3 months from the time the transaction is mined: current block height {plus} 12,960 (blocks) or current Unix epoch time {plus} 7,760,000 (seconds). For now, don't worry about the +DROP+ opcode that follows +CHECKLOCKTIMEVERIFY+, it will be explained shortly.
 When Bob tries to spend this UTXO, he constructs a transaction which references the UTXO as an input. He uses his signature and public key in the unlocking script of that input and sets the transaction nLocktime to be equal or greater to the timelock in the +CHECKLOCKTIMEVERIFY+ Alice set. Bob then broadcasts the transaction on the bitcoin network.
 Bob's transaction is evaluated as follows. If the +CHECKLOCKTIMEVERIFY+ parameter Alice set is less than or equal the spending transaction's nLocktime, script execution continues (acts as if a NOP opcode was executed). Otherwise, script execution halts and the transaction is deemed invalid.
 More precisely, +CHECKLOCKTIMEVERIFY+ fails and halts execution (marking the transaction invalid) if:
 .CHECKLOCKTIMEVERIFY validation conditions (Source: BIP-65)
 ====
 1. the stack is empty; or
 1. the top item on the stack is less than 0; or
 1. the lock-time type (height vs. timestamp) of the top stack item and the nLockTime field are not the same; or
 1. the top stack item is greater than the transaction's nLockTime field; or
 1. the nSequence field of the input is 0xffffffff;
 ====
 [NOTE]
 ====
 CLTV and nLocktime use the same format to describe timelocks, either a block height or the time elapsed in seconds since Unix epoch. Critically, when used together, the format of nLocktime must match that of CHECKLOCKTIMEVERIFY in the inputs - they must both reference either block height or time in seconds.
 ====
 After execution, if CHECKLOCKTIMEVERIFY is satisfied, the time-parameter that preceded it remains as the top item on the stack and may need to be dropped, with +DROP+, for correct execution of subsequent script opcodes. You will often see +CHECKLOCKTIMEVERIFY+ followed by +DROP+ in scripts for this reason.
 By using nLocktime in conjunction with +CLTV+, the scenario described in <<locktime_limitations>> changes. Because Alice locked the UTXO itself, it is now impossible for either Bob or Alice to spend it before the 3-month locktime has expired.
 By introducing timelock functionality directly in the scripting language, +CLTV+ allows us to develop some very interesting complex scripts.
 BIP-65 (CHECKLOCKTIMEVERIFY):: https://github.com/bitcoin/bips/blob/master/bip-0065.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0065.mediawiki]
 ==== Relative Timelocks
 nLocktime and CLTV are both _absolute timelocks_ in that the specify an absolute point in time. The next two timelock features we will examine are _relative timelocks_ in that they specify, as a condition of spending an output, an elapsed time from the confirmation of the output in the blockchain.
 Relative timelocks are useful because they allow a chain of two or more interdependent transactions to be held off chain, while imposing a time constraint on one transaction that is dependent on the elapsed time from the confirmation of a previous transaction. In other words, the clock doesn't start counting until the UTXO is recorded on the blockchain. This functionality is especially useful in bi-directional state channels and Lightning network, as we will see in <<state_channels>>.
 Relative timelocks, like absolute timelocks are implemented with both a transaction-level feature and a script-level opcode. The transaction-level relative timelock is implemented as a consensus rule on the value of nSequence, a transaction field which is set in every transaction input. Script-level relative timelocks are implemented with the CHECKSEQUENCEVERIFY opcode.
 Relative timelocks are implemented according to the specifications in the following BIPs:
 BIP-68 Relative lock-time using consensus-enforced sequence numbers:: https://github.com/bitcoin/bips/blob/master/bip-0068.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0068.mediawiki]
 BIP-112 CHECKSEQUENCEVERIFY:: https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki]
 BIP-68 and BIP-112 were activated in May 2016 as a soft-fork upgrade to the consensus rules.
 ==== Relative Timelock with nSequence
 Relative timelocks can be set on each input of a transaction, by setting the nSequence field in each input.
 ===== Original meaning of nSequence
 The nSequence field was originally intended (but never properly implemented) to allow modification of transactions in the mempool. In that use, a transaction containing inputs with nSequence value below 2^32^ (0xFFFFFFFF) indicated a transaction that was not yet "finalized". Such a transaction would be held in the mempool until it was replaced by another transaction spending the same inputs with a higher nSequence value. Once a transaction was received whose inputs had an nSequence value of 2^32^ it would be considered "finalized" and mined.
 The original meaning of nSequence was never properly implemented and the value of nSequence is customarily set to 2^32^ in transactions that do not utilize timelocks. For transactions with nLocktime or CHECKLOCKTIMEVEIRFY, the nSequence value must be set to less than 2^32^. Customarily, it is set to 2^32^ - 1 (0xFFFFFFFE).
 Programmatically, that means that if the most significant bit (1<<31) is not set, it is a flag that means "relative locktime". Otherwise (bit 1<<31 set), the nSequnce value is reserved for other uses such as enabling CHECKLOCKTIMEVERIFY, nLocktime, Opt-In-Replace-By-Fee and other future developments.
 ===== nSequence as consensus-enforced relative timelock
 Since the activation of BIP-68, the new consensus rules apply for any transaction containing an input whose nSequence value is less than 2^31^ (bit 1<<31 is not set).
 Transactions can contain inputs with nSequence values less than 2^31^. Any such input is interpreted as having a relative timelock. Meaning that the transaction which includes it is only valid once the input has aged by the relative timelock amount. For example, a transaction with one input with nSequence relative timelock of 30 blocks is only valid when at least 30 blocks have elapsed from the time the UTXO referenced in the input was mined. Since nSequence is a per input field, a transaction may contain any number of timelocked inputs, all of which must have sufficiently aged for the transaction to be valid. A valid transaction can include both timelocked inputs (nSequence < 2^31^) and inputs without a relative timelock (nSequence >= 2^31^).
 The nSequence value is specified in either blocks or seconds, but in a slightly different format than we saw used in nLocktime. A type-flag is used to differentiate between values counting blocks and values counting time in seconds. The type flag is set in the 23rd least significant bit (ie. value 1<<22). If the type-flag is set, then the nSequence value is interpreted as a multiple of 512 seconds. If the type-flag is not set, the nSequence value is interpreted as a number of blocks.
 When interpreting nSequence as a relative timelock, only the 16 least significant bits are considered. Once the flags (bits 32 and 23) are evaluted, the nSequence value is usually "masked" with a 16-bit mask (eg. nSequence & 0x0000FFFF).
 The following diagram shows the binary layout of the nSequence value, as defined by BIP-68:
 .BIP-68 definition of nSequence encoding
 image::nSequence_encoding.png["BIP-68 definition of nSequence encoding"]
 Relative timelocks based on consensus enforcement of the nSequence value are defined in BIP-68:
 BIP-68 Relative lock-time using consensus-enforced sequence numbers:: https://github.com/bitcoin/bips/blob/master/bip-0068.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0068.mediawiki]
 ==== Relative timelocks with CHECKSEQUENCEVERIFY (CSV)
 Just like CLTV and nLocktime, there is a script opcode for relative timelocks that leverages the nSequence value in scripts. That opcode is +CHECKSEQUENCEVERIFY+ commonly referred to as +CSV_ for short.
 The CSV opcode when evaluated in a UTXO's redeem script, allows spending only in a transaction whose input nSequence value is lower than the CSV parameter. Essentially, this restricts spending the UTXO until a certain number of blocks or seconds have elapsed relative to the time the UTXO was mined.
 As with CLTV, the value in CSV must match the format in the corresponding nSequence value. If CSV is specified in terms of blocks, then so must nSequence. If CSV is specified in terms of seconds, then so must nSequence.
 Relative timelocks with CSV are especially useful when several (chained) transactions are created and signed, but not propagated, when they're kept "off-chain". A child transaction cannot be used until the parent transaction has been propagated, mined, and aged by the time specified in the relative timelock. One application of this use case can be seen in <<state_channels>> and <<lightning_network>>.
 CSV is defined in detail in BIP-112:
 BIP-112 CHECKSEQUENCEVERIFY:: https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0112.mediawiki]
 ==== Median-Time-Past
 As part of the activation of relative timelocks, there was also a change in the way "time" is calculated for timelocks (both absolute and relative). In bitcoin there is a subtle, but very significant difference, between wall time and consensus time. Bitcoin is a decentralized network, which means that each participant has their own perspective of time. Events on the network do not occur instantaneously everywhere. Network latency must be factored into the perspective of each node. Eventually everything is synchronized to create a common ledger. Bitcoin reaches consensus every 10 minutes about the state of the ledger as it existed in the _past_.
 The timestamps set in block headers are set by the miners. There is a certain degree of latitude allowed by the consensus rules to account for differences in clock accuracy between decentralized nodes. However, this creates an unfortunate incentive for miners to lie about the time in a block so as to earn extra fees by including time-locked transactions that are not yet mature. See <<fee_sniping>>.
 To remove the incentive to lie and strengthen the security of timelocks, a Bitcoin Improvement Proposal was proposed and activated at the same time as the BIPs for relative timelocks. This is BIP-113 which defines a new consensus measurement of time called _Median Time Past_.
 Median-Time-Past is calculated by taking the timestamps of the last 11 blocks and finding the median. That median time then becomes consensus time and it is used for all timelock calculations. By taking the midpoint from approximately two hours in the past, the influence of any one block's timestamp is reduced. By incorporating 11 blocks, no single miner can influence the timestamps in such a way as to gain fees from transactions with a time lock that hasn't yet matured.
 Median-Time-Past changes the implementation of time calculations for nLocktime, CLTV, nSequence and CSV. The consensus time calculated by Median-Time-Past is always approximately one hour behind wall clock time. If you create timelock transactions, you should account for it when estimating the desired value to encode in nLocktime, nSequence, CLTV, and CSV.
 Median-Time-Past is specified in BIP-113:
 BIP-113 Median time-past as endpoint for lock-time calculations:: https://github.com/bitcoin/bips/blob/master/bip-0113.mediawiki[https://github.com/bitcoin/bips/blob/master/bip-0113.mediawiki]
 [[fee_sniping]]
 ==== Timelock defense against fee-sniping
 Fee-sniping is a theoretical attack scenario, where miners attempting to rewrite past blocks, "snipe" higher-fee transactions from future blocks to maximize their profitability.
 For example, let's say the highest block in existence is block  #100,000. If instead of attempting to mine block #100,001 to extend the chain, some miners are attempting to re-mine  #100,000. These miners can choose to include any valid transaction (that hasn't been mined yet) in their candidate block  #100,000. They don't have to re-mine the block with the same transactions. In fact, they have the incentive to select the most profitable (highest fee per kB) transactions to include in their block. They can include any transactions that were in the "old" block  #100,000, as well as any transactions from the current mempool. Eseentially they have the option to pull transactions from the "present", into the rewritten "past" when they re-create block  #100,000.
 Today, this attack is not very lucrative, because block reward is much higher than total fees per block. But at some point in the future, transaction fees will be the majority of the reward (or even the entirety of the reward). At that time, this scenario becomes inevitable.
 To prevent "fee sniping", when Bitcoin Core creates transactions, it uses nLocktime to limit them to the "next block", by default. In our scenario above, Bitcoin Core would set nLocktime to 100,001 on any transaction it created. Under normal circumstances, this nLocktime has no effect - the transactions could only be included in block #100,001 anyway, it's the next block.
 But under a blockchain fork attack, the miners would not be able to pull high-fee transactions from the mempool, because all those transactions would be timelocked to block #100,001. They can only re-mine  #100,000 with whatever transactions were valid at that time, essentially gaining no new fees.
 To achieve this, Bitcoin Core sets the nLocktime on all new transactions to <current block # + 1> and sets the nSequence on all the inputs to 0xFFFFFFFE, to enable nLocktime.
 === Scripts with Flow Control (Conditional Clauses)
 One of the more powerful features of Bitcoin Script is flow control also known as conditional clauses. You are probably familiar with flow control in various programming languages that use the construct IF...THEN...ELSE. Bitcoin conditional clauses look a bit different, but are essentially the same construct.
 At a basic level, bitcoin conditional opcodes allow us to construct a redeem script that has two ways of being unlocked, depending on a TRUE/FALSE outcome of evaluating a logical condition. For example, if x is TRUE, redeem script is A, ELSE redeem script is B.
 Additionally, bitcoin conditional expressions can be "nested" indefinitely, meaning that a conditional clause can contain another within it, which contains another, etc. Bitcoin Script flow control can be used to construct very complex scripts with hundreds or even thousands of possible execution paths. There is no limit to nesting, but consensus rules impose a limit on the maximum size, in bytes, of a script.
 Bitcoin implements flow control using the IF, ELSE, ENDIF, and NOTIF opcodes. Additionally, conditional expressions can contain boolean operators such as BOOLAND, BOOLOR, and NOT.
 At first glance, you may find the bitcoin's flow control scripts confusing. That is because Bitcoin Script is a stack language. The same way that +1 {plus} 1+ looks "backwards" when expressed as +1 1 ADD+, flow control clauses in bitcoin also look "backwards".
 In most traditional (procedural) programming languages, flow control looks like this:
 .Pseudocode of flow control in most programming languages
 ----
 if (condition):
  code to run when condition is true
 else:
  code to run when condition is false
 code to run in either case
 ----
 In a stack-based language like Bitcoin Script, the logical condition comes before the +IF+, which makes it look "backwards", like this:
 .Bitcoin Script flow control
 ----
 condition
 IF
  code to run when condition is true
 ELSE
  code to run when condition is false
 ENDIF
 code to run in either case
 ----
 When reading Bitcoin Script, remember that the condition being evaluated comes *before* the +IF+ opcode.
 ==== Flow Control with VERIFY opcodes
 Another form of flow control in Bitcoin Script is any opcode that ends in +VERIFY+. The +VERIFY+ suffix means that if the condition evaluated is not TRUE, execution of the script terminates immediately and the transaction is deemed invalid.
 Unlike an +IF+ clause which offers alternative execution paths, the +VERIFY+ suffix acts as a _guard clause_, continuing only if a precondition is met.
 For example, the following script requires Bob's signature and a pre-image (secret) that produces a specific hash. Both conditions must be satisfied to unlock:
 .A redeem script with an +EQUALVERIFY+  guard clause.
 ----
 HASH160 <expected hash> EQUALVERIFY <Bob's Pubkey> CHECKSIG
 ----
 To redeem this, Bob must construct an unlocking script that presents a valid pre-image and a signature:
 .An unlocking script to satisfy the above redeem script
 ----
 <Bob's Sig> <hash pre-image>
 ----
 Without presenting the pre-image, Bob can't get to the part of the script that checks for his signature.
 This script can be written with an +IF+ instead:
 .A redeem script with an +IF+ guard clause
 ----
 HASH160 <expected hash> EQUAL
 IF
   <Bob's Pubkey> CHECKSIG
 ENDIF
 ----
 Bob's unlocking script is identical:
 .An unlocking script to satisfy the above redeem script
 ----
 <Bob's Sig> <hash pre-image>
 ----
 The script with +IF+ does the same thing as using an opcode with a +VERIFY+ suffix, they both operate as guard clauses. However, the +VERIFY+ construction is more efficient, using one fewer opcode.
 So, when do we use +VERIFY+ and when do we use +IF+? If all we are trying to do is to attach a pre-condition (guard clause), then +VERIFY+ is better. If however, we want to have more than one execution path, then we need an +IF...ELSE+ flow control clause.
 ==== Using Flow Control in Scripts
 A very common use for flow control in Bitcoin Script, is to construct a redeem script that offers multiple execution paths, each a different way of redeeming the UTXO.
 Let's look at a simple example, where we have two signers, Alice and Bob and either one is able to redeem. With multi-sig, this would be expressed as a 1-of-2 multisig script. For the sake of demonstration, we will do the same thing with an +IF+ clause:
 ----
 IF
 <Alice's Pubkey> CHECKSIG
 ELSE
 <Bob's Pubkey> CHECKSIG
 ENDIF
 ----
 Looking at this redeem script, you may be wondering: "Where is the condition? There is nothing preceeding the +IF+ clause!"
 The condition is not part of the redeem script. Instead, the condition will be offered in the unlocking script, allowing Alice and Bob to "choose" which execution path they want.
 Alice redeems this with the unlocking script:
 ----
 <Alice's Sig> 1
 ----
 The +1+ at the end serves as the condition (TRUE), that will make the +IF+ clause execute the first redemption path, for which Alice has a signature.
 For Bob to redeem this, he would have to choose the second execution path, by giving a +FALSE+ value to the +IF+ clause:
 ----
 <Bob's Sig> 0
 ----
 Bob's unlocking script puts a +0+ on the stack, causing the +IF+ clause to execute the second (+ELSE+) script, which requires Bob's signature.
 Since +IF+ clauses can be nested, we can create a "maze" of execution paths. The unlocking script can provide a "map" selecting which execution path is actually executed:
 ----
 IF
  script A
 ELSE
  IF
    script B
  ELSE
    script C
  ENDIF
 ENDIF
 ----
 In this scenario, there are three execution paths (+script A+, +script B+ and +script C+). The unlocking script provides a path in the form of a sequence of +TRUE+ or +FALSE+ values. To select path +script B+ for example, the unlocking script must end in +1 0+ (+TRUE+, +FALSE+). These values will be pushed onto the stack, so that the second value (+FALSE+) ends up at the top of the stack. The outer +IF+ clause pops the +FALSE+ value and executes the first +ELSE+ clause. Then the +TRUE+ value moves to the top of the stack and is evaluated by the inner (nested) +IF+, selecting the +B+ execution path.
 Using this construct, we can build redeem scripts with tens or hundreds of execution paths, each offering a different way to redeem the UTXO. To spend, we construct an unlocking script that navigates the execution path by putting the appropriate +TRUE+ and +FALSE+ values on the stack at each flow control point.
 === Complex Script Example
 In this section we combine many of the concepts from this chapter into a single example.
 Our example uses the story of Mohammed, the company owner in Dubai who is operating an import/export business.
 In this example, Mohammed wishes to construct a company capital account with flexible rules. The scheme he creates requires different levels of authorization depending on timelocks. The participants in the multisig scheme are Mohammed, his two partners Saeed and Zaira and their company lawyer Abdul. The three partners make decisions based on a majority rule, so two of three must agree. However, in the case of a problem with their keys, they want their lawyer to be able to recover the funds with one of the three partner signatures. Finally, if all partners are unavailable or incapacitated for a while, they want the lawyer to be able to manage the account directly.
 Here's the script that Mohammed designs to achieve this:
 .Variable Multi-Signature with Timelock
 [source,linenums]
 ----
 IF
  IF
    2
  ELSE
    <30 days> CHECKSEQUENCEVERIFY DROP
    <Abdul the Lawyer's Pubkey> CHECKSIGVERIFY
    1
  ENDIF
  <Mohammed's Pubkey> <Saeed's Pubkey> <Zaira's Pubkey> 3 CHECKMULTISIG
 ELSE
  <90 days> CHECKSEQUENCEVERIFY DROP
  <Abdul the Lawyer's Pubkey> CHECKSIG
 ENDIF
 ----
 Mohammed's script implements three execution paths, using nested +IF...ELSE+ flow control clauses.
 In the first execution path, this script operates as a simple 2-of-3 multisig with the three partners. This execution path consists of lines 3 and 9. Line 3 sets the quorum of the multisig to +2+ (2-of-3). This execution path can be selected by putting +TRUE TRUE+ at the end of the unlocking script:
 .Unlocking script for the first execution path (2-of-3 multisig)
 ----
 0 <Mohammed's Sig> <Zaira's Sig> TRUE TRUE
 ----
 [TIP]
 ====
 The +0+ at the beginning of this unlocking script is because of a bug in CHECKMULTISIG which pops an extra value from the stack. The extra value is disregarded by the CHECKMULTISIG, but it must be present or the script fails. Pushing +0+ (customarily) is a workaround to the bug, as described in <<multisig_bug>>
 ====
 The second execution path can only be used after 30 days have elapsed from the creation of the UTXO. At that time, it requires the signature of Abdul the lawyer and one of the three partners (a 1-of-3 multisig). This is achieved by line 7 which sets the quorum for the multisig to +1+. To select this execution path, the unlocking script would end in +FALSE TRUE+:
 .Unlocking script for the second execution path (Lawyer + 1-of-3)
 ----
 0 <Saeed's Sig> <Abdul's Sig> FALSE TRUE
 ----
 [TIP]
 ====
 Why +FALSE TRUE+? Isn't that backwards? Because the two values are pushed on to the stack, with +FALSE+ pushed first, then +TRUE+ pushed second. +TRUE+ is therefore popped *first* by the first +IF+ opcode.
 ====
 Finally, the third execution path allows Abdul the lawyer to spend the funds alone, but only after 90 days. To select this execution path, the unlocking script has to end in +FALSE+:
 .Unlocking script for the third execution path (Lawyer only)
 ----
 <Abdul's Sig> FALSE
 ----
 Try running the script on paper to see how it behaves on the stack.
 A few more things to consider when reading this example. See if you can find the answers:
 * Why can't the lawyer redeem the third execution path at any time, by selecting it with +FALSE+ on the unlocking script?
 * How many execution paths can be used 5, 35 and 105 days respectively after the UTXO is mined?
 * Are the funds lost if the lawyer loses their key? Does your answer change if 91 days have elapsed?
 * How do the partners "reset" the clock every 29 or 89 days to prevent the lawyer from accessing the funds?
--- a/ch09-orig.asciidoc
+++ b/ch09-orig.asciidoc
@ -60,7 +60,7 @@ To demonstrate the use of colored coins, we have created a set of 20 colored coi
 ==== Mastercoin
-((("meta-coin platforms","mastercoin protocol")))Mastercoin is a protocol layer on top of bitcoin that supports a platform for various applications extending the bitcoin system. Mastercoin uses the currency MST as a token for conducting Mastercoin transactions but it is not primarily a currency. Rather, it is a platform for building other things, such as user currencies, smart property tokens, de-centralized asset exchanges, and contracts. Think of Mastercoin as an application-layer protocol on top of bitcoin's financial transaction transport layer, just like HTTP runs on top of TCP. 
+((("meta-coin platforms","mastercoin protocol")))Mastercoin is a protocol layer on top of bitcoin that supports a platform for various applications extending the bitcoin system. Mastercoin uses the currency MST as a token for conducting Mastercoin transactions but it is not primarily a currency. Rather, it is a platform for building other things, such as user currencies, smart property tokens, decentralized asset exchanges, and contracts. Think of Mastercoin as an application-layer protocol on top of bitcoin's financial transaction transport layer, just like HTTP runs on top of TCP. 
 Mastercoin operates primarily through transactions sent to and from a special bitcoin address called the((("exodus addresses"))) "exodus" address (+1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P+), just like HTTP uses a specific TCP port (port 80) to differentiate its traffic from the rest of the TCP traffic. The Mastercoin protocol is gradually transitioning from using the specialized exodus address and multi-signatures to using the OP_RETURN bitcoin operator to encode transaction metadata.
--- a/code/select-utxo.py
+++ b/code/select-utxo.py
@ -26,9 +26,9 @@ def select_outputs_greedy(unspent, min_value):
    key_func = lambda utxo: utxo.value
    if greaters:
        # Not-empty. Find the smallest greater.
-        min_greater = min(greaters)
+        min_greater = min(greaters, key=key_func)
        change = min_greater.value - min_value
-        return [min_greater], change
+        return [min_greater], "Change: %d Satoshis" % change
    # Not found in greaters. Try several lessers instead.
    # Rearrange them from biggest to smallest. We want to use the least
    # amount of inputs as possible.
--- a/images/nSequence_encoding.png
+++ b/images/nSequence_encoding.png
--- a/preface.asciidoc
+++ b/preface.asciidoc
@ -66,7 +66,7 @@ This book is here to help you get your job done. In general, if example code is
 We appreciate, but do not require, attribution. An attribution usually includes the title, author, publisher, and ISBN. For example: “_Mastering Bitcoin_ by Andreas M. Antonopoulos (O’Reilly). Copyright 2015 Andreas M. Antonopoulos, 978-1-449-37404-4.”
-Some editions of this book are offered under an open source license, such as CC-BY-NC (creativecommons.org), in which case the terms of that license apply.
+Some editions of this book are offered under an open source license, such as [CC-BY-NC](https://creativecommons.org/licenses/by-nc/4.0/), in which case the terms of that license apply.
 If you feel your use of code examples falls outside fair use or the permission given above, feel free to contact us at pass:[<a href="mailto:permissions@oreilly.com">permissions@oreilly.com</a>].