Redeem Script

A redeem script is the full spending script behind a pay-to-script-hash (P2SH) bitcoin address. Instead of publishing conditions up front, the sender pays to a 20-byte hash of the script, and the owner reveals the actual script and satisfies it only when spending. The mechanism was introduced by BIP 16 and activated in April 2012.

Why it matters

Redeem scripts made complex bitcoin contracts practical. Before P2SH, sending to a multisignature arrangement required the payer to construct a long, unusual output and pay higher fees for it. With P2SH, any spending policy compresses to a standard-length address beginning with 3, so the burden of complexity falls on the recipient who designed the policy, not the sender. Multisig custody, escrow arrangements, and early payment channels were all built on this foundation.

How it works

The address encodes the hash of the redeem script. To spend, the owner provides the script itself plus whatever data it demands, such as two of three required signatures. Nodes verify in two stages: first that the revealed script hashes to the committed value, then that the script executes successfully with the supplied signatures. Until the spend, observers see only a hash and learn nothing about the conditions. SegWit later applied the same idea with stronger hashing, and Taproot went further by letting unexecuted script branches remain hidden forever.