Multi-signature. Best security approach to cryptocurrency wallets?

[Raqeebzy 6456]

 

Source: Finextra Research

      Wallets are integral part of cryptocurrency. And what could be more satisfying than having a good, easy-to-use cryptocurrency wallet with maximum security and full user control?. Choosing a perfect wallet has never been a simple decision as there are wide varieties of them with a wide range of properties or features to put into consideration; some of these, mutually exclusive. It is either choosing one with great user interface and ease of use or one that provides almost impossible to break security system.

      However, putting security above (of course, because it should be prioritized first of all features, at least to every sane crypto owner), non-custodial wallets are the best category of crypto wallet. Unlike in custodial, users are allowed to have the private keys of their wallets to themselves with which without, there will be no access to funds present in such wallet. In other words, "If it isn't your private keys, then it is not your crypto".

 

 

All these being said, let's get down to the real deal 😉.

Introduction

 

      Now, entrusting a large amount of cryptocurrency to a non-custodial wallet controlled by a single private key might be too much power and centralization. What if the private key wasn't backed up properly, got lost/stolen, or kept in the wrong hands?. It technical means almost total loss of control of the crypto assets present in such wallet as of course that is shifted to anyone with the keys. 

To solve this setback in the most secured category of wallet to a realistic extent, an unpopular, yet a crucial security approach was introduced in Multi-sig Wallets. 
 

What's a Multi-sig wallet (Multiple Signature Wallet)?.

 

Source: Iconfinder

      Just as having a duo or multiple signatories to a joint bank account or having different multiple keys to a single vault or lock which without each and every corresponding signature or key, funds or valuable items can't be accessed; a multi-signatory approach in a wallet is one that set up an unbreakable rule that ensures at least two private keys is required to have complete access. Literally, it means in a multi-sig wallet, a single private key lost, revealed, or kept in the custody of a third party isn't enough to have access inside the wallet. Isn't this more satisfying?
The first of this kind of idea was dated back to 2013 in BitGo after main cryptocurrency exchanges at that time suffer major security setbacks.

Anatomy of Multi-sig wallets
 

To put it in simplest terms and as simple as possible;
      The anatomy of Multi-sig wallets are represented by M-of-N: the minimum number of private keys required (M) to access a multi-sig wallet of total number of private keys (N). A multi-sig wallet with M-of-N configuration cannot be accessed with available number of keys less than N. From 2-of-2, 2-of-3 (which is the most common), 3-of-3, 3-of-4, 3-of-5 to a number of others are possible with different wallets.

      In a 3-of-4 wallet, minimum number of 3 private keys is required to access the wallet from a total of 4, anything less than that isn't allowed.
Quick Take ❗: It is essential to note that just like it is different sending from multi-sig wallet compared to a single one, it is also the same with recieving. Wallet address is gotten through the multiple public keys accessed by each private keys. For instance, in a 2-of-3 multi-sig, two public address from possible three is required to receive funds. In the most complex way, address (mostly preceded by 3, followed by 32/33 alphanumeric characters)  can be gotten through RPC command lines.
 

Applications

• Personal use or Joint ownership : In case of personal, 2-of-3 is mostly recommend configuration. One can be kept close to reach and the other kept with a multi-sig provider which can be gotten anytime through two factor authentication.
• Exchanges and crypto companies.
• Escrow protocol services

 

Pros

• Massive security boosts for large crypto owners/holders.
• Encourages decentralisation (especially in financial power and decision making process).
   

Cons

• Requires full understanding and technical knowledge thus not for newbies and regulars in crypto sphere
• Multi-sig wallets has been in existence for more than half a decade but it can't be said to be very perfect. Very sensitive, a few mistake can jeopardize transaction and funds.

 

Types of wallet that exhibits multi-sig function

Recommendations:

• Electrum wallet.
• BitPay wallet.
• BitGo wallet.

Other types:

• Armory wallet.
• Coinbase wallet

 

Thank y'all for reading.

Links used in topic: https://en.m.wikipedia.org/wiki/Escrow

 

Update (24/10/2020): A full tutorial was made about multi-sig wallets. Feel free to check it out.

 

Edited October 24, 2020 by Raqeebzy
Additional link

[Babubu609 0]

@Raqeebzyvery excellent updates bot the multi-sig functions. I knew a few about this 😃 but right from your topic I learn something from it. I will like to recommend this to most newbies in to the cryptoworld to take a look and learn from your topic.

 

[kyoukage01 3181]

@Raqeebzy As an added bonus, can you add a short tutorial on how to set up a multi-sig wallet? You can choose one wallet for an example. This is just to give us ignorant ones an idea on how to make one. Since you already had this topic included in the contest (text limit already at maximum), you can add a new post below for that one.

 

Great article BTW.

 

15 hours ago, Raqeebzy said:

Cons...
 

• Requires full understanding and technical knowledge thus not for newbies and regulars in crypto sphere
• Multi-sig wallets has been in existence for more than half a decade but it can't be said to be very perfect. Very sensitive, a few mistake can jeopardize transaction and funds.

Can multi-sig wallets prove to be a hassle to access whenever transactions should be made, especially for personal use? And will it be even harder to recover if some serious mishap happens compared to normal single-sig wallets?

 

[Raqeebzy 6456]

17 hours ago, Babubu609 said:

@Raqeebzyvery excellent updates bot the multi-sig functions. I knew a few about this 😃 but right from your topic I learn something from it. I will like to recommend this to most newbies in to the cryptoworld to take a look and learn from your topic.

 

Thank you for your feedback. I am happy you learn a few things from the article joined the one you knew. 

2 hours ago, kyoukage01 said:

As an added bonus, can you add a short tutorial on how to set up a multi-sig wallet? You can choose one wallet for an example. This is just to give us ignorant ones an idea on how to make one. Since you already had this topic included in the contest (text limit already at maximum), you can add a new post below for that one.

As you expected, it is more complex setting up a multi-sig wallet for transactions than compared to single key wallets. I will take your suggestion into consideration and make a full tutorial on how to set-up one. If you don't mind, it won't be done under this thread but in a new topic in tutorial sections. Maybe in few days.

2 hours ago, kyoukage01 said:

Can multi-sig wallets prove to be a hassle to access whenever transactions should be made, especially for personal use?

A few think multi-sig wallet isn't needed for personal use, they feel just an hardware wallet is okay and safe enough. Apart from setting up, I see not much complexity in using multi-sig wallet once a wallet address is already gotten and private keys available at reach. The only problem is where to keep the two or more private keys separately in safe place.

2 hours ago, kyoukage01 said:

And will it be even harder to recover if some serious mishap happens compared to normal single-sig wallets?

 

Multi-sig wallets are collective of two or more keys. Mostly, the only time things go wrong in a non-custodial wallet is loosing the private keys. Even if you lose one PK in a multi-sig wallet, it is possible to access the wallet with other PKs or not depending on the configuration. If there is a case where many private keys are misplaced, that way it becomes more complex because the private keys need to be recovered (not one). No recovery of them, no access. 

[Yomose 3704]

The most secured wallet is the multisig, and if BIP340, taproot tapscript has been implemented, it will be good, it will help increase privacy. I have seen multisig wallet to be the most secure and safest of all types of wallets. 

It makes use of cosigners and number of signatures needed to make a transaction.possible. 

[Calvinpriva 17296]

Very well explained @Raqeebzy it's true, choosing a wallet it's not easy because there are many wallets with many features, but there are important features that we need to check to find the best wallet. Multi-sig wallets are very good, as long as i work in business field and i pay some services using crypto, i use BitPay and BitGo because they all have multi-sig security.

[Whited35 15285]

@Raqeebzy The similar technology was already in practice before the birth of Bitcoin but in case of cryptocurrency sphere, it was first applied to Bitcoin address in 2012. Wallets like Electrum with this features overrated because security does matter 😊

2 hours ago, Calvinpriva said:

i use BitPay and BitGo because they all have multi-sig security.

@Calvinpriva I have no idea about BitGo, maybe we will be discussing in PM

[CARLOS15071 85]

Very good information friend, wallets have become part of our life, that is why it is so important to choose the safest wallet to store our cryptocurrencies, in addition to this we must investigate the advantages and disadvantages of each of them since they are different.

[Raqeebzy 6456]

9 hours ago, Whited35 said:

 I have no idea about BitGo, maybe we will be discussing in PM

BitGo was the first multi-sig wallet launched back in 2013 although I intended to add Bitpay instead because it is what I have used more and maybe electrum. All in all, it doesn't matter, BitGo is also a trustable and recommendable wallet. 

I assume you are very much aware of this technology but a few of forum members haven't. 

11 hours ago, Calvinpriva said:

Very well explained @Raqeebzy it's true, choosing a wallet it's not easy because there are many wallets with many features, but there are important features that we need to check to find the best wallet. Multi-sig wallets are very good, as long as i work in business field and i pay some services using crypto, i use BitPay and BitGo because they all have multi-sig security.

Thank you mate. @Calvinpriva

Edited October 19, 2020 by Raqeebzy

[Calvinpriva 17296]

1 hour ago, Whited35 said:

I have no idea about BitGo, maybe we will be discussing in PM

My brother @Whited35 BitGo is the best software for business owners who uses crypto as payments, a lot of large companies are using BitGo API and leave a good review. Check this link about their API, am trying to understand something but it's really hard to understand alone 😃 

 

https://api.bitgo.com/docs/#operation/v1.trade.getAccountSettings

[Whited35 15285]

7 hours ago, Raqeebzy said:

I assume you are very much aware of this technology but a few of forum members haven't. I am trying to make a tutorial on how to set it up in Electrum but I do not have my PC available, so I might use Bitpay instead. 

@Raqeebzy I am waiting for it and I encourage you to create such topics with the detail explanations. You have more concerns about PC, are you supposed to make a review for Electrum desktop wallet ? 

6 hours ago, Calvinpriva said:

Check this link about their API, am trying to understand something but it's really hard to understand alone 😃

Thanks for the link brother @Calvinpriva did you mean, you are trying to understand more about wallet API and its usage? 

[Raqeebzy 6456]

39 minutes ago, Whited35 said:

am waiting for it and I encourage you to create such topics with the detail explanations. You have more concerns about PC, are you supposed to make a review for Electrum desktop wallet?

Not really that. Just for a proper screenshots and picture edit to make it go well. I don't plan on making a full review of Electrum desktop wallet; that's not the subject of my topic. Anyhow it comes, please accept it.

[Calvinpriva 17296]

7 hours ago, Whited35 said:

did you mean, you are trying to understand more about wallet API and its usage? 

Yes brother @Whited35 you remember i asked you about API in PM? I'm trying to understand more about API, and am trying to find the best API. That link has a lot of things but it's kinda difficult to understand!

[Whited35 15285]

15 minutes ago, Calvinpriva said:

Yes brother @Whited35 you remember i asked you about API in PM? I'm trying to understand more about API, and am trying to find the best API. That link has a lot of things but it's kinda difficult to understand!

@Calvinpriva Get started with Uphold or Coinbase  API . They are pretty cool and working perfectly. I do not think it will be harder to get started. Give a try. This course may help you to get started      😉 https://www.udemy.com/course/toufiqelahy5/ 

[Calvinpriva 17296]

1 hour ago, Whited35 said:

@Calvinpriva Get started with Uphold or Coinbase  API . They are pretty cool and working perfectly. I do not think it will be harder to get started. Give a try. This course may help you to get started      😉 https://www.udemy.com/course/toufiqelahy5/ 

Thank you SO MUCH my brother 🙏 @Whited35 i really need to learn this course because there is something am working on (I'll tell you in PM) i will give you feedback after i check this course. Thanks again!

[misuomeso 46]

Thank you, my friend, for this useful information for choosing the best cryptocurrency wallet that is safe, easy to use and multitasking.

[Whited35 15285]

2 hours ago, Calvinpriva said:

Thank you SO MUCH my brother 🙏 @Whited35 i really need to learn this course because there is something am working on (I'll tell you in PM) i will give you feedback after i check this course. Thanks again!

@Calvinpriva I will be waiting for you to hear back what you learnt after taking this course. If this course can not fulfill your demands what you are searching for, you know I will be always there to support you 😊

[Calvinpriva 17296]

28 minutes ago, Whited35 said:

I will be waiting for you to hear back what you learnt after taking this course. If this course can not fulfill your demands what you are searching for, you know I will be always there to support you 😊

Thank you brother @Whited35 you always support me and I'm really thankful for that. Let me learn it slowly and maybe by tomorrow I'll give you feedback.

[Raqeebzy 6456]

On 10/22/2020 at 6:22 PM, rachid19 said:

What is meant by encryption? Are they private keys? The topic is very excellent and useful. Thank you very much

An encrypted data is one that is encoded and can be accessed be accessed by a secret key or password (decryption key). The decrypting key to a non-custodial wallet is they private keys or seed phrase. 

[Liliz 529]

We see each and every wallet from angle and with different area of perspective. The choice of every individual in terms of protecting our wallet is different from one another. Some people seek to have an extra guidance and protection over their wallet in order to worry less about the case of theft and any other fraudulent practices by a third party. One of the uses of multi-signature is to ensure that more than one or two people to sign documents and transactions as a group for the security of their wallet. It is provided as a result of combining multiple unique signatures. This is indeed one of the improvised approach to ensuring that our cryptocurrency wallet is highly protected.

[Dhanito12 2]

Best idea for the world we live in. Scammers are everywhere so let's be smart and make sure we don't fall victim...owever an account with two signature will be of great advantage.