Crypto Academy Season 3 | Advanced course - Week 5 - Homework for Professor @sapwood: Multisig Wallet(Electrum)-- "m of n" Combinations @rokhani
Dear Steemian..
Hello I am @rokhani from Indonesia.
I am so proud to join this class led by Professor @sapwood. So many new perspectives that I get. For that I must say thank you from the bottom of my heart.
Overview
Human life that is increasingly modern makes practicality a demand in navigating life. As in carrying money, if at the beginning of development people always carried it with a box or pocket, then it shifted to storing it in a wallet. Further development wallets can be filled with credit cards and various facilities that can be stored in the wallet. Modernization with blockchain makes people familiar with cryptocurrency wallets.
A cryptocurrency wallet is the term given to a piece of software that generates a random pair of cryptographic keys. These keys are used to send and receive digital currency from one person to another. So not a wallet as we know it to store money, identity or credit cards and put in a pocket.
Various types of wallets are available ranging from cold wallets, hot wallets, hardware wallets and paper wallets. All can be seen based on the level of security ranging from very safe to easy to hack. This week we are given homework to answer questions about Electrum Wallet and Multi-sig Wallet.
Therefore I will provide answers to the tasks that have been given.
What is a Multi-sig wallet? How is it different from a Single key wallet? What are the different uses of a Multisig wallet?
The term multi-sig stands for multi-signature. Multi-sig wallet is a crypto wallet that can only opened and used to make transactions using two or more digital signatures as keys. This wallet can only give or receive funds when there are two or more signatures of key holders to make transactions. This wallet will not work if only one signature is used.
A multi-sig wallet has a double level of security because it uses more than one signature to make transactions. This wallet is a special type that requires a digital signature that is created through a combination of several collective and cryptographically unique signatures.
With two keys that must be used, hackers will have doubled difficulty because they have to find two keys that are held by different people. So they can't open as long as they only get one key. Because, in multi-sig technology requires two or more users to collectively sign digital documents or crypto currency transactions.
We can analogize a money deposit box that uses two locks and the key is held by two people. Each person holds the key to a lock. A new money box will open if two locks are opened at the same time.
Different from single-sis wallet which only requires one key. Key holders will easily use and decide transactions. The decision to remove assets from the wallet becomes faster and easier without having to ask for approval from others because the keys are held by themselves. However, this wallet will be very vulnerable to hacking.
Using the Single-sig Wallet has its limitations. In the business world, single-sig ownership is mostly owned by individuals.
The use of Multi-sig wallets can be carried out more widely in various sectors of the business world.
In addition, the use of Multisig wallet can also make the owner more secure, because Multisig wallet can also be used like a 2-factor authenticator (in a decentralized way) like OTP, 2 FA on Exchange.
Single-sig wallets are more likely to become easy prey for bad guys with phishing, scamming and other criminal sharing attacks. whereas multi-sig wallets are stronger in protecting the owner from these risks because hackers or criminals have to know two keys to hack funds.
Organizationally/businessly, single key wallets are not profitable and tend to be avoided as they can be a single point of weakness. One example is the manipulation of data by authorities, being hacked or the opportunity to be deceived.
The following is the difference between a multi-sig wallet and a single-sig wallet
| NO | MULTI-SIG | SINGLE SIG |
|---|---|---|
| 1. | Owned by two or more people | Own by one person |
| 2. | Has two or more key | Only has one key |
| 3. | Must be opened with two keys at the same time | Only use one key to open the wallet |
| 4. | The decision to make a transaction must be approved by the other key owners | Decision Own by one person |
| 5. | Safer because the hackers hard to open it. | Vulnerable to hacking |
| 6. | It is more suitable for use as a store of large funds and ownership by many people | Not suitable for use as a large data store and ownership by many people due to the big risk. |
Download, install & set up a 2-of-3 BTC Multisig wallet(Electrum)? What is the difference between Seed key and MPK? Would you share the seed key or MPK with your co-signer and Why? (Screenshots Needed)
Now I will set Electrum as Multi-sig Wallet.
1. Go to https://electrum.org/#download
2. I Click on Window Installer
3. After the download is completed, I open and then install it.
4. I open Electrum and see that the file is exist so I just click ***Berikutnya ***(Bahasa Indonesia) which mean ***Next ***in English .
5. I select the Wallet Type-- Multisignature Wallet. Click on Berikutnya.
6. I specify the combination (m of n-- Signature/Co-signer), I sett up a 2 of 3 Multisig wallet, there will be 3 co-signers and a minimum of 2 signatures needed to spend. So, I adjust the slider to set 3 co-signer and 2 signatures. Then click on Berikutnya.
7. I select Create a new seed. Click on Berikutnya.
8.Then it displays the seed key, I write down the 12 words phrase(seed key) on my laptop and print it then I save it. I click on Berikutnya.
9. I confirm the seed key by entering the 12 words phrase in the correct order. Click on Berikutnya.
10. Then it displays the MPK(Master Public Key). As you explained, It always starts with the letter Z. I b Copy the MPK, and share it with your co-signers. Click on Berikutnya.
Prof, from your explanation and other information I can explain about difference between Seed Key dan MPK?
The seed lock consists of a series of words in this case with 12 words forming a phrase. This is the main key for wallet owners. This is very important because it allows us to access our funds. The use of a seed key is similar to that of a private key. The seed key is needed to recover the wallet when a computer or device is updated or damaged so that it is easy to find again, also to update a portfolio or import a portfolio. Seed Keys should not be shared with others because we are giving them our money. Or it's the same as giving us the keys to the house so that we will be evicted and unable to enter the house by ourselves.
The Master Public Key (MPK) is a key that can or may be known by the parties involved in the transaction. As the name indicates is the public key, in the case of Multi-sig wallet, the owner can use it and share it with other owners or recipients so that it can be connected to the multi-sig wallet. The master public key is generated after getting the seed phrase in Electrum.
11. The steps must be continued by follow up with your co-signers to receive the MPKs.
Because I am setting up a [2 of 3] Multisig wallet, I need the other two MPKs from your cosigners to construct this Multisig wallet.
From your explanation, basically your Co-signer will repeat the process as we did until now and they will also ask me for the MPK to construct 2 of 3 Multisig wallet.
So I only need to share the MPK with your co-singers.I never share the seed key.
Why?
Because to open wallet cosigners need MPK. Without it wallet can't be used.
I also note down your MPK as well as the MPKs of my co-signers on a piece of paper, or you can also print it.
Then it will ask to add the co-signers( 2 of 3). I add them by entering their MPKs. For that select Enter Cosigner Key. I click on Berikutnya.
12. I paste the MPK of my Cosigner in the designated box. Click on Berikutnya.
13.It ask me to enter the MPK of the Cosigner(3 of 3). I paste the MPK of the third Co-signer in the designated box. Click on Berikutnya.
14. Then I set a password to encrypt the Wallet keys. Click on Berikutnya
The construct Electrum Wallet is finished
How many different "m of n combinations" Multisig wallet you can construct in Electrum? How do you Export your Seed & Private Key(Electrum) in a Multi-sig wallet? (Screenshots needed)
Number of Combinations
The number of combinations of m and n on each device will differ between laptop, PC and Android devices. Electrum wallet on a computer the maximum number of n (cosigners) is 15 and the minimum is 1.
For m (signature required) the maximum number is 15 and the minimum is 1.
Combinations of cosigners using the formula m of n i.e., 1 of 5, 2 of 5, 3 of 5, 4 of 5 and 5 of 5 can be combined. According to the maximum number of n (signers) which is 12 and always the minimum of m (signatures required) is 1.
Example: A combination with a maximum of 10 recipients will be 1 in 10, 2 out of 10 , 3 out of 10, 4 out of 10, 5 out of 10, 6 out of 10, 7 out of 10 , 8 out of 10, 9 out of 10, and 10 out of 10 Likewise, if there are fewer recipients, the combination will be less.
Export Private Keys
Click on Wallet, then Private Keys, then Export, enter Password, Click on OK.
Fill the password click OK
The privat Key apppear and click Export
The privat Key has Exported click OK
Perform a real transaction(Send BTC) to another Address using a 2 of 3 Multisig wallet? (You can perform a micro-transaction for this Task, also send a partial amount to demonstrate your experience with Change Address, screenshots needed).
I go to File. Click on Open. I select Wallet_tm.
Enter the Password, Click on Next.
Enter the amount, address then click Pay.
Enter the Password then click Send.
What is the difference between Receiving Address & Change Address? Demonstrate your experience with a Change Address?
Difference between Receiving address and Chang Address
Receiving Address is used to receive funds from outside, while Chang Address is used to complete if the payment we make is still lacking. For example, My wallet contains 1 mBTC whereas I make a payment of 1.2 mBTC. So on this payment I lost 0.2mBTC. This will be repaid by another cosigner.
Unfortunately, I don't have a Change Address screen shot.
Conclusion
A multi-sig wallet is a wallet that provides security for users with a layer of locks that makes businesses more secure. With the development of multi-sig wallet business it will be much better in decision-making and payment methods
Thus all my task this week. I hope you enjoy it.
Best regard from Indonesia
@rokhani