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 P2SH script and address, making it possible for any wallet to make payments that are segwit compatible.

As we saw in Pay-to-Witness-Script-Hash (P2WSH), Mohammed's company is using Segregated Witness payments with multisignature 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 hashes the redeem script with SHA256 (just once). Let's use bx to do that on the command-line:

Mohammed's wallet creates a P2WSH witness program:

echo \
2 \ [04C16B8698A9ABF84250A7C3EA7EEDEF9897D1C8C6ADF47F06CF73370D74DCCA01CDCA79DCC5C395D7EEC6984D83F1F50C900A24DD47F569FD4193AF5DE762C587] \
[04A2192968D8655D6A935BEAF2CA23E3FB87A3495E7AF308EDF08DAC3C1FCBFC2C75B4B0F4D0B1B70CD2423657738C0C2B1D5CE65C97D78D0E34224858008E8B49] \
[047E63248B75DB7379BE9CDA8CE5751D16485F431E46117B9D0C1837C9D5737812F393DA7D4420D7E1A9162F0279CFC10F1E8E8F3020DECDBC3C0DD389D9977965] \
[0421D65CBD7149B255382ED7F78E946580657EE6FDA162A187543A9D85BAAA93A4AB3A8F044DADA618D087227440645ABE8A35DA8C5B73997AD343BE5C2AFD94A5] \
[043752580AFA1ECED3C68D446BCAB69AC0BA7DF50D56231BE0AABF1FDEEC78A6A45E394BA29A1EDF518C022DD618DA774D207D137AAB59E0B000EB7ED238F4D800] \
5 CHECKMULTISIG \
| bx script-encode | bx sha256
9592d601848d04b172905e0ddb0adde59f1590f1e553ffc81ddc4b0ed927dd73

 

Next, the hashed redeem script is turned into 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. Let's use bx on the command-line to do that:

The HASH160 of the P2WSH witness program:

echo \
'0 [9592d601848d04b172905e0ddb0adde59f1590f1e553ffc81ddc4b0ed927dd73]'\
 | bx script-encode | bx sha256 | bx ripemd160
86762607e8fe87c0c37740cddee880988b9455b2

 

Next, the wallet constructs a P2SH bitcoin address from this hash. Again, we use bx to calculate on the command-line:

P2SH bitcoin address

echo \
'86762607e8fe87c0c37740cddee880988b9455b2'\
 | bx address-encode -v 5
3Dwz1MXhM6EfFoJChHCxh1jWHb8GQqRenG

 

Now, Mohammed's clients can make payments to this address without any need to support segwit. To send a payment to Mohammed, a wallet would lock the output with the following P2SH script: 

P2SH script used to lock payments to Mohammed's multisig

HASH160 86762607e8fe87c0c37740cddee880988b9455b2 EQUAL

 

Mohammed's company can then construct segwit transactions to spend these payments, taking advantage of segwit features including lower transaction fees.