How does a wallet use unconfirmed outputs as inputs after unconfirmed transactions?

I have 10 btc on address A.

Using raw transaction, I send 5btc from A to B and set the change address as A itself. Now because the transaction from A to B is not confirmed I can't spend the remaining 5 btc.

But I saw that the QT wallet can do this. Ex:

I have 10 btc on address A. I send 5btc to B. The wallet creates a new address C and sets it as the change address. Then I try using the 5 btc on the wallet and it works. It allows me to send from address C.

1) Is the wallet using unconfirmed outputs as inputs here?

2) If so, how is it doing this and how can I do it using raw transactions?

3) If not, what's going on here?

Emre Kenci

Posted 2013-09-02T16:14:36.353

Reputation: 3 008

Answers

Is the wallet using unconfirmed outputs as inputs here?

Yes.

If so, how is it doing this

Except for coinbase transactions, transactions are independent of blocks. A transaction spending an unconfirmed input looks exactly the same as a transaction spending a confirmed input.

It's safe for Bitcoin-Qt to spend unconfirmed change because it knows that the input is valid and will be confirmed at some point (though probably slowly). It would not be safe for Bitcoin-Qt to spend unconfirmed inputs that it did not itself create because they might never confirm, resulting in permanently tied-up funds. (Very old versions of Bitcoin made this mistake, but it was corrected after widespread issues.)

how can I do it using raw transactions?

You can create the transaction with createrawtransaction normally, but you'll need to give signrawtransaction some extra info about the unconfirmed transaction in its second parameter.

theymos

Posted 2013-09-02T16:14:36.353

Reputation: 8 228

createrawtransaction does support spending unconfirmed inputs; see https://gist.github.com/gavinandresen/3966071#file-twoofthree-sh-L42 for an example.

– gavinandresen – 2013-09-03T02:24:43.800

@gavinandresen Looking into it more, it seems to me that we're both wrong. In your example, createrawtransaction doesn't actually look at the provided redeemScript or scriptPubKey AFAICT. createrawtransaction uses whatever data you give it, and it doesn't even use the block database. signrawtransaction does need redeemScript and scriptPubKey for unconfirmed transactions. – theymos – 2013-09-03T04:33:33.313

It looks like Bitcoin QT is able to reference it's own unconfirmed transactions, which is kind of dangerous. Consider this:

The first transaction (A to B) might arrive in the block chain after the second (C to ...) or it might not arrive at all. In this case, the second transaction will not go through because it won't be valid until the first one happens. Even though the second transaction exists within Bitcoin QT, it probably doesn't get sent out until the first goes through.

If you want to do this with raw transactions, you can create both transactions at the same time, just know that the second one will be invalid (and thus rejected by the block chain) until the first one goes through.

John Henry

Posted 2013-09-02T16:14:36.353

Reputation: 1 153

"The first transaction (A to B) might arrive in the block chain after the second"... I think you need to clarify this... the 2nd transaction would never be included in a block unless the 1st one were in the same or earlier block – RentFree – 2013-09-03T16:25:30.347

1@RentFree Thanks for the clarification. Yes, the 2nd transaction wouldn't actually make it "in" the block chain because it would be invalid without the first. – John Henry – 2013-09-03T18:55:57.283

Bitcoin-QT treating the change as okay to spend depends on the client itself having created it within itself. Creating transaction with createrawtransaction change as unconfirmed. Bu sendfrom not.

Ozan Yurtseven

Posted 2013-09-02T16:14:36.353

Reputation: 174

My understanding is that technically the first confirmation is against your own blockchain copy.

So although the transaction may not be confirmed in a block, the client is aware that this change transaction is unlikely to be rejected.

In fact logically it cannot be rejected if the transaction was created correctly.

T9b

Posted 2013-09-02T16:14:36.353

Reputation: 1 254

1It could get rejected due to not enough transaction fee – RentFree – 2013-09-03T16:26:19.600

It could get rejected if it is double-spended and the double-spending transaction has higher fee – Maciej Mączko – 2014-04-25T18:51:12.107