Signing Bitcoin Transactions with bitcoind and bitcoin-cli

As you can see, creating and signing Bitcoin transactions with bitcoind and bitcoin-cli can be a bit complicated. In this article, we will cover the differences between the two tools and provide step-by-step instructions on how to sign Bitcoin transactions using only these APIs.

Why doesn’t it work?

Before we dive into the solution, let’s briefly discuss why signing transactions with signrawtransaction might fail. The main reasons are:

• Private key format: The private key used to sign transactions with bitcoin-cli must have a specific format that is different from the format expected by the createRawTransaction API.

• Key format: bitcoind expects your private keys in PEM format, while the createRawTransaction API requires them in PGP format.

Signing transactions using bitcoin-cli

To sign Bitcoin transactions using only bitcoin-cli, you need to:

• Create a new wallet: Use bitcoin-cli to create a new wallet.

• Import the private key: Convert the private key from PEM format to PGP format using the “-w ” option, e.g.:

”bash

bitcoin-cli -w /path/to/your/key.pem

Create a transaction: Use "createRawTransaction" to create a new transaction with the newly created wallet.
Sign the transaction: Use "signRawTransaction" to sign the transaction.
Here is an example code snippet showing how to sign a transaction using only bitcoin-cli:
''bash









Create a new wallet
bitcoin-cli -w /path/to/your/key.pem create address

Import your private key
bitcoin-cli -w /path/to/your/key.pem -c privatekey.pgp

Create a transaction using the wallet you just created
transaction = bitcoin-cli -w /path/to/your/key.pem createRawTransaction 0x1234567890abcdef

Sign the transaction
TransactionSig = bitcoin-cli -w /path/to/your/key.pem signRawTransaction "your_transaction_hash_here"

Signing transactions using bitcoind

To sign Bitcoin transactions using only bitcoind, you need to:

• Create a new wallet: Use bitcoind to create a new wallet.

• Import the private key: Convert the private key from PEM format to PGP format using the “-w ” option, e.g.:

”bash

bitcoind -q -w /path/to/your/key.pem importprivatekey

Create a transaction: Use "createRawTransaction" to create a new transaction with the newly created wallet.
Sign the transaction: Use "signTransaction" to sign the transaction.
Here is an example code snippet showing how to sign a transaction using only bitcoind:
''bash

Create a new wallet
bitcoind -q -w /path/to/your/key.pem importprivatekey

Create a transaction using the newly created wallet
transaction = bitcoind -q createRawTransaction 0x1234567890abcdef

Sign the transaction
TransactionSig = bitcoind -q signTransaction "your_transaction_hash_here"

Conclusion

Signing Bitcoin transactions using bitcoind and bitcoin-cli is only possible using these APIs, but it requires a specific private key format and key format. After following the steps in this article, you should now have the necessary knowledge to create and sign Bitcoin transactions using any of these tools.

Remember to always use your private keys securely and follow best practices for managing them.