What is multi-signature
The term is “multisig” or multi-signature, that is, a multiple signature. It is not difficult to guess what it is and why it is necessary, but nevertheless we will understand in more detail.
We already spoke with you earlier that there are two types of keys in the blockchain:
- Public – address of the currency holder;
- And personal – with the help of which transaction confirmation takes place.
It is a private key or private key that acts as a virtual signature. It is absolutely secret and in no case can it be transferred to another person, since it, in fact, blocks access to financial assets.
If we talk about multi-signature – this is the collection of several private keys that are needed in order to complete a currency transaction.
What is multisig created for
The point of the technology is to share responsibility and further protect assets. This method is often used for corporate accounts, which have several owners – so that one of the leaders of the company could not single-handedly dispose of a common financial pillow. For any outgoing operation, the signature of two, three or more persons is required.
Each key (signature) is stored separately: on paper, in cold storage (disconnected from the Internet), on various gadgets. The physical presence of signature holders is not required – they can be located geographically anywhere. And, since the keys are probably with them, it’s impossible to crack the account by collecting all the signatures together.
Multiple signatures are also used on the exchange. This usually happens when the seller and the buyer do not trust each other and they need someone else to conduct the transaction. In this case, a deposit account is created, funds from which can be transferred only with the participation of two of the three parties: the original sender or the initial recipient and a third party who monitors the transparency of the operation.
A security deposit is also sometimes used, which guarantees honest intentions. That is, before the transaction is completed, a common account is created on which each party transfers a security deposit exceeding the size of the transaction.
If either of the parties violates the conditions, it will lose its security deposit. If everything goes well, the money will be returned to the owners, with the consent of all parties involved.
How to apply multi-signature
The most convenient and common use case is a crypto wallet with several signatures (multi-valued) – this is the type of wallet that requires more than one key to authorize. It is used mainly for two purposes:
- To provide greater security and prevent human error;
- To create a more decentralized storage that can be used by several people.
The wallet has one indisputable plus – if one of the signature holders loses its key – the wallet has backup copies that can be used in such a situation.
The multi-signature feature is available in most wallets on the market, but they may differ in how they implement this technology.
- Only users have a private key.
- A copy of the personal key, but without the ability to confirm transactions, is stored in the program (used only for recovery).
- The encrypted private key is stored on the server of the manufacturer of the storage, and access to it is provided by a password that only the wallet owner knows.
Among the most popular wallets that provide the multi-signature function can be distinguished.
- Armory – the user independently controls his keys and you can create up to 7 multisig.
- Electrum is one of the oldest and most reliable storage facilities on the market. Up to fifteen signatures can be used to authorize transactions.
- Copay – to complete a transaction, two out of three signatures are required.
- BitGo is a popular Bitcoin wallet that supports multi-signature functionality and has been taking care of Bitcoin funds since 2013. Three signatures of three are used to transfer funds.
- Coinbase – controls the keys for the username. It uses three levels of security – wallet key, public and personal user keys.
None of these options are ideal, so digital developers are constantly looking for new ideas for asset security.
When it comes to money, it means a comprehensive and professional approach to cybersecurity. This is why wallets with several signatures are becoming the most popular option, which allows you to regain access to money in an unforeseen situation or to share responsibility if giving all power over assets to one person is not advisable.