What is Multisig Technology?
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What is Multisig Technology?


We can think of Bitcoin like cash. If I have 100 Bitcoin, they’re all in a Bitcoin
address, and that Bitcoin address has a corresponding private key. If I have that private key, I can spend that
$100. But that is a lot of power to put in just
one little string of letters and numbers. That if I lose, that if I have stolen from
me, hacked, all the money associated with it is gone. How do we increase security there? Let’s say I have a balance of $10,000. Instead of having one single key that controls
that $10,000, what I do is that I create a Multisig address. And that’s an address that say, has three
keys. And I set a rule that says, “You need at least
two of those keys to turn, in order to move any of that $10,000.” Now, I don’t keep these three keys together,
because if I did I might as well just have one key. So what do I do? I keep one key for myself in my wallet in
my cell phone, and I have it with me at all times. The second key I put in a safety deposit box,
or somewhere else that’s safe, that I use as sort of a backup recovery key. In case I lose something, I can use that key. And the third key I give to a Multisig provider. Let’s say I go to the store now, and I want
to buy a cup of coffee. I go to the cash register, and I turn my one
key that I have on my mobile phone. So, that’s one out of three keys. At that point then, a message is sent to the
service provider, that looks at the transaction and verifies that my phone has not been stolen. It looks like I put in my password. It’s happening near my home. It’s … comports a lot of the same sort of
fraud prevention rules that a credit card provider might do. They look at a transaction, and if it looks
legit, and if I had signed it, they will sign as well. So that’s two out of three signatures, the
transaction goes through, and I have my coffee. Now notice what’s interesting about this,
is that if I was to lose my phone, I could always recover my money. Because I’ve got a key saved somewhere safe,
like a safety deposit box. And I’ve got the key that my service provider
has, that’s two out of three. I don’t lose the money. With this system that we have set up, you
get all the benefits of the fraud protection and all the services that you would get from
a credit card company that monitors your transactions, but they never hold your funds. They have one out of three keys. They cannot move your money, or prevent you
from moving your money, which sometimes is even more important, with just one key. With multisig, there is simply an amount of money to which folks have divided control over the amount. And really, no one of them has custody, not even joint custody, over the account.

12 Comments

  • Gabriel Martins

    I'm interested in making Brazillian Portuguese subtitles for this video.
    Would you approve them, if I did translate it?

  • Samuele Agostinelli

    So, if I stop trusting the multisig service provider or if the company goes out of business , can I use my personal key and me safe key to move the money into another account? Do I just need 2 keys out of 3 no matter which key it is?

  • Mr.MaximusPrime

    Mulit-sig tech is only compelling if you actually achieve equitable, distributed trust. But here, it looks like you'll still have to rely on the service provider to ultimately confirm every transaction. So which key has most control during the transaction? How is this different from your credit union?

  • Jerry Davis

    I still don't get it 100%. One key on lost or stolen phone, and the other with your service provider. It makes two out of three keys needed. Isn't that right? Further more, couldn't service provider get hold of your private key during transaction?

  • Broadsword

    What if the criminal uses my phone before I register it as stolen?

    I can understand multisig addresses where you keep 2 at friends houses and then 1 at your house. It would be useful for long term savings with infrequent access.

  • Mary Naomi

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