Bitcoin Observable Wallet Proof of Concept

This project is a proof of concept (PoC) implementation of a simple Bitcoin wallet, built using TypeScript and leveraging:

• BitcoinJS for address/key derivation and transaction building/signing.
• Blockstream & Blockcypher API to interact with the Bitcoin network (Testnet or Mainnet) for transaction history, UTXO retrieval, and broadcasting transactions.
• RxJS for reactive programming to observe wallet state, transaction history, and UTXO updates.

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Features

This PoC showcases the following core wallet functionalities:

1. Address and Key Derivation:

   • Supports BIP32 and Electrum-compatible derivation paths.
   • Generates:
     • Legacy (P2PKH)
     • SegWit (P2SH-P2WPKH)
     • Native SegWit (P2WPKH)
     • Taproot (P2TR) addresses.

2. Transaction History and UTXOs:

   • Fetches transaction history for specified addresses.
   • Retrieves UTXOs (Unspent Transaction Outputs) for address spending.

3. Balance Tracking:

   • Continuously tracks and updates wallet balance based on UTXOs.

4. Transaction Building and Signing:

   • Constructs a raw transaction from available UTXOs.
   • Signs the transaction using the derived private key.
   • Submits the transaction to the Bitcoin network.

5. Transaction Tracking:

   • Tracks the status of a transaction (e.g., Pending, Confirmed, or Dropped) until it is included in a block.

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Dependencies

• BitcoinJS: Library for Bitcoin transaction building, key derivation, and signing.
• Blockstream API: Blockchain backend to fetch transaction data and submit transactions.
• Blockcypher API: Alternative blockchain backend for fetching transaction data and submitting transactions.
• RxJS: Reactive library for handling real-time updates (transaction history, balance, and UTXOs).

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How It Works

1. Derive Keys and Addresses

The wallet generates Bitcoin addresses and keys for the following address types:

• Legacy
• SegWit
• Native SegWit
• Taproot
• Electrum Native SegWit

Example:

const mnemonic = 'your 12-word mnemonic here';
const seed = bip39.mnemonicToSeedSync(mnemonic);
const publicKey = derivePublicKey(seed, AddressType.NativeSegWit, ChainType.External, 0);
const address = deriveAddressByType(publicKey, AddressType.NativeSegWit, bitcoin.networks.testnet);

console.log(`Generated Address: ${address}`);

2. Track Balance, Transactions, and UTXOs

The wallet uses RxJS Observables to continuously fetch and track the following data:

• Transaction History
• UTXO Set
• Wallet Balance

wallet.transactionHistory$.subscribe((txHistory) => {
  console.log('Transaction History:', txHistory);
});

wallet.utxos$.subscribe((utxos) => {
  console.log('UTXOs:', utxos);
});

wallet.balance$.subscribe((balance) => {
  console.log(`Balance: ${balance} satoshis`);
});

3. Build, Sign and Submit Transactions

The wallet constructs a raw transaction, signs it, and submits it to the Bitcoin network.

wallet
  .send(recipientAddress, amountToSend)
  .then((hash) => {
     console.log(`Transaction successfully sent! Sent ${amountToSend} satoshis to ${recipientAddress}, Tx Hash: ${hash}`);
  })
  .catch((err) => {
     console.error('Failed to send transaction:', err.message);
  });

4. Track Transaction Status

The wallet tracks the status of a transaction until it is included in a block.

provider.getTransactionStatus('your-tx-hash').subscribe((status) => {
  console.log(`Transaction Status: ${status}`);
});

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Getting Started

1. Clone the Repository:

git clone https://github.com/Biglup/bitcoin-observable-wallet.git
cd bitcoin-observable-wallet

2. Install Dependencies:

yarn install

Demo

The PoC includes a simple demo that showcases the wallet functionalities. You can run the demo by executing the following command:

ts-node ./src/index.ts

Starting to track wallet...

Transaction History Updated:
Tx 1: Hash: b0b4db..., Confirmations: 0, Status: Pending, Delta: +10000
Tx 2: Hash: f0c4ab..., Confirmations: 2, Status: Confirmed, Delta: -500

UTxOs Updated:
UTxO 1: TxId: b0b4db..., Index: 0, Amount: 10000, Address: tb1...

Wallet Balance Updated: 9500 satoshis

Transaction submitted! Hash: c5f8e4...

Conclusion

This PoC demonstrates a fully functional Bitcoin wallet capable of:

• Deriving addresses and keys.
• Fetching transaction history and UTXOs.
• Tracking balances in real-time.
• Building, signing, and submitting transactions.
• Polling transaction status for confirmations.

You can extend this PoC further to include more advanced features, such as:

• Multi-address discovery
• Fee estimation
• Improved UTXO selection strategies to avoid dust outputs