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Working with bitcoind in regtest

In this tutorial, we will guide you through setting up a Bitcoin Core bitcoind node in regtest mode. We'll cover basic operations like creating wallets, generating blocks, checking balances, and sending Bitcoin between two wallets.

1. Installing bitcoind

To start working with Bitcoin, it's necessary for us to install the Bitcoin Core software, which includes the bitcoind daemon.

Steps:

  1. Get Bitcoin Core:

    • We will visit the official Bitcoin Core website and download the appropriate version for our operating system.
    • After downloading, we’ll follow the instructions on the site to verify the downloaded files by checking the signatures to ensure authenticity.

  2. Verify Installation:

    • After installation, we can run the following command to confirm that bitcoind is properly installed: 
      bitcoind --version
    • This will output the version of bitcoind if it's installed correctly.

2. Setting up a bitcoin.conf File

While bitcoind can be run on various Bitcoin networks, we will focus on the regtest network in this tutorial, which is a local blockchain environment ideal for development and testing. Before running bitcoind, we need to configure the node with a bitcoin.conf file to set up the regtest network.

Sample bitcoin.conf File for regtest

First, we’ll create a directory for Bitcoin data and configuration files if it doesn’t already exist:

mkdir -p ~/.bitcoin

Then, we’ll create a bitcoin.conf file in ~/.bitcoin/ and add the following lines:

regtest=1 # change this to change Bitcoin Network
server=1
fallbackfee=0.0001 # for regtest only
rpcuser=user
rpcpassword=password
rpcallowip=0.0.0.0/0
txindex=1

Explanation of Configurations:

  • regtest=1: Runs the node in regtest mode.
  • server=1: Enables bitcoind to run as a server and accept RPC (Remote Procedure Call) commands.
  • rpcuser and rpcpassword: Set the username and password for bitcoin-cli RPC access. We can customize these values or leave them as provided.
  • rpcallowip=0.0.0.0/0: Allows RPC connections from any IP address. We should be cautious when using this in a non-development environment.
  • txindex=1: Enables a full transaction index for our node, which is useful for querying historical transactions.

After setting up the configuration file, our node will be ready to run in regtest mode.

NOTE: Regtest is a toy network that allows for creating custom blocks and generating coins, making it ideal for easy integration testing of applications.
For actual swap markets, use testnet4. Switch to testnet4 by setting testnet4=1 in the configuration.

3. Basic Operations

Once the bitcoin.conf file is configured, we can start bitcoind and perform basic operations using bitcoin-cli.

3.1 Start the bitcoind daemon:

We run the following command to start the Bitcoin node:

$ bitcoind
  • Note: We don’t need to specify the network explicitly since the bitcoin.conf file already defines the network.

To check the status of the node and confirm that it's running, we can use:

$ bitcoin-cli getblockchaininfo

This will output the current state of the blockchain, including the number of blocks and synchronization status, as shown:

{
  "chain": "regtest",
  "blocks": 0,
  "headers": 0,
  "bestblockhash": "0f9188f13cb7b2c71f2a335e3a4fc328bf5beb436012afca590b1a11466e2206",
  "difficulty": 4.656542373906925e-10,
  "time": 1296688602,
  "mediantime": 1296688602,
  "verificationprogress": 1,
  "initialblockdownload": true,
  "chainwork": "0000000000000000000000000000000000000000000000000000000000000002",
  "size_on_disk": 293,
  "pruned": false,
  "warnings": ""
}

3.2 Create a Wallet for Alice

We create a wallet called alice to perform wallet-related operations in the regtest environment:

$ bitcoin-cli createwallet "alice"

The response will confirm that the wallet alice has been created:

{
  "name": "alice"
}

3.3 Create a Wallet for Bob

Similarly, we create another wallet called bob:

$ bitcoin-cli createwallet "bob"

The response will confirm that the wallet bob has been created:

{
  "name": "bob"
}

3.4 Get a New Bitcoin Address for Alice

We generate a new Bitcoin address for alice to receive funds:

$ bitcoin-cli -rpcwallet=alice getnewaddress

This returns a new address for alice:

bcrt1qfvgecwpwtn77f7vv6wfc78zdcxseq4pjpyn9jv

3.5 Generate Some Blocks for Alice

Since we’re using regtest, we can generate new blocks to the generated address for alice and receive Bitcoin as block rewards:

$ bitcoin-cli -rpcwallet=alice generatetoaddress 101 <alice_address>

This will return a list of block hashes in hex format, corresponding to the 101 newly generated blocks as shown:

[
  "00b968e6627d8f160369a06a3169719487cf246a5d43afa113c42a236305b7d3",
  "3ac6820a58627c9e69dcd349d9d152909b018a2afe923bed73dae0c7b7134104",
  "0d4b1870a18216450e5da68c7349e7cb26beb144c671524c23798728ca222cd8",
  "41c1c331c93e75f2048a285c925e15eca423b0a93f1f7354261adef8f29186c3",

  ... till 101 block hashes
]

3.6 Check Alice's Wallet Balance

We can now check the balance in alice's wallet:

$ bitcoin-cli -rpcwallet=alice getbalance

This will show a balance corresponding to the block rewards for the generated blocks:

{
  "mine": {
    "trusted": 50.00000000,
    "untrusted_pending": 0.00000000,
    "immature": 0.00000000
  }
}

4. Sending Bitcoin from Alice to Bob

Now, let’s send 1 BTC from alice to bob using the sendtoaddress RPC command.

4.1 Get Bob's Bitcoin Address

We generate a new Bitcoin address for bob:

$ bitcoin-cli -rpcwallet=bob getnewaddress

This returns a new address for bob:

bcrt1q2nys4aedf448ngt5gpw5gmun6gdjqgy04qj6cq

4.2 Send 1 BTC from Alice to Bob

Next, we send 1 BTC from alice to bob using the sendtoaddress command:

$ bitcoin-cli -rpcwallet=alice sendtoaddress <bob_address> 1

This will create and broadcast a signed transaction, returning the transaction hash:

0b0c6a25e16f987e5a68fe59c301e06615376837b11a3ed678b0f0bd8a69a18a

4.3 Generate a Block to Confirm the Transaction

We generate a block to confirm the transaction to bob:

$ bitcoin-cli -rpcwallet=bob generatetoaddress 1 <bob_address>

This will return the block hash in hex format:

"43e5d06abcf026e3faec392626545fb4880592682fd61645dc99d51e277bd761"

4.4 Check the Final Balance of Each Wallet

Finally, we check the balance of both wallets to confirm that the transaction was successful.

For Bob's Wallet:
$ bitcoin-cli -rpcwallet=bob getbalances

The response should show that bob has received the 1 BTC:

{
  "mine": {
    "trusted": 1.00000000,
    "untrusted_pending": 0.00000000,
    "immature": 0.00000000
  }
}
For Alice's Wallet:
$ bitcoin-cli -rpcwallet=alice getbalances

The response will show that alice's balance has been reduced by a little more than 1 BTC, where 1 BTC has been sent to bob, and the remaining amount goes toward mining fees for confirming the transaction:

{
  "mine": {
    "trusted": 48.99998590,
    "untrusted_pending": 0.00000000,
    "immature": 0.00000000
  }
}

We’ve set up bitcoind, created two wallets (alice and bob), generated blocks, and sent Bitcoin between the wallets. This provides everything we need to start with bitcoind on regtest. Now, we’re ready to explore Bitcoin transactions and experiment with coinswap CLI apps.