Glossary

Script Type Heuristic

1 min read

The Script Type Heuristic is utilized in chain analysis in order to determine which outputs of a transaction are sending to another party and which are returning bitcoin to the sender as change. This heuristic is based on the assumption that all wallets and users will use the same script type to receive payments and change outputs.

For example, if a user receives a payment to a P2PKH address and then spends this output to create two outputs, one to a P2SH address and one to a P2PKH address, it can be assumed that the P2SH output now belongs to another party while the P2PKH output is a change output and still belongs to the sender.

Like all chain analysis heuristics, this is an assumption, and does not carry any certitude. Additionally, the Taproot upgrade and future upgrades to the Bitcoin protocol may render this heuristic useless as transaction types become less discernible.

Related Terms
Chain Analysis
Chain analysis uses heuristics to analyse the blockchain and trace ownership of bitcoin across transactions. Chain analysis is performed by companies who contract with governments and regulated institutions to provide insight into how individuals send and receive bitcoin.
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Bitcoin Script
Script is the language Bitcoin uses to determine who can spend a given piece of bitcoin (a UTXO). Script is intentionally limited in order to maintain Bitcoin's simplicity and ensure that any individual can run a node and validate the blockchain.
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Common Input Ownership Heuristic
The Common Input Ownership Heuristic is used by chain analysis companies to determine the owner of specific UTXOs. This heuristic currently assumes that all inputs of a given transaction are owned by the same owner.
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Change Output
When bitcoin is sent, a piece of bitcoin is broken up into the amount to be sent to the receiver, and the amount to be returned to the sender, like the change you receive from a store when paying with cash. This change is called a change output, and is identical to other bitcoin you may receive.
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