Crypto Academy Season 3 | Advanced course - Task 5: Multisignature Wallet(Electrum)-- "m of n" Combination
INTRODUCTION
Hello fellow steemians it's another week of the steemit crypto academy season 3. We are now in the 5th week of the season. We have covered different topics so far and i have learnt a lot from the assignment given. This week course by @sapwood is on Multisignature wallet.
LET GET STARTED
What is a Multi-sig wallet? How is it different from a Single key wallet? What are the different uses of a Multisig wallet?
A multisig wallet also know as a multisignature wallet is a wallet that need two or more private key to sign and make a transaction. This account is not an account for personal use. As the name implies multi that means two or more people are involved. The multisig wallet always comes in m and n combination. Where m means number of signature and n means numbers of fellow cosigners. m and n combination can be (2 of 3, 3 of 4, 4 of 5 and so on). The wallet has to do with a group of people controlling activities on it.
- The first different between a single wallet and a multisig wallet is that a single wallet is operated by a single person while a multisignature wallet is operated based on agreement of the group on how the funds are bein handled.
- A multisig wallet is highly secured hackes have to hacks all the m signature before they can access the funds but a single wallet I not as secure as multisig wallet
- A single wallet has only one private keys to sign and make transaction but a multisig wallet have more private keys depending on the number of combination handling it.
- A multisig wallet can be used for a business with group of cosigners but a single wallet is an individual wallet.
Below are some of the use-cases of the multisig wallet.
High level of security:
A multisig walletbis highly secured and can't be easily compromised. When a 2 of 3 wallet is created each user has one private key. The funds in this wallet cannot be stolen. Except the hacker has the two keys he won't be able to access the fund sin the wallet with a single private key because in a 2 of 3 wallet each users need two private keys to access the funds in the wallet.
Escrow service
This is a trusted third party know as the arbiter to settle disputes between members. Sometimes disputes can happen when a transaction is going on and for sure it will be in favour of a user. It is the work of the arbiter to manage the dispute and solve every complications. The arbiter is just like the escrow service in the P2P market in a single wallet.
For example if a transaction take place between a buyer and a seller and something happens and the seller already have the funds and don't want to release my goods at this point I can call on the arbiter. The arbiter will then look into the case the they will offer me the third private key so I will have access to my funds back.
Business/family account
A group of business men can decide to open a multisig wallet of 4 of 6 combination and each of them have the access to a private key and for any transaction to be made the other 3 member must also sign before a transaction can take place. So it is based on mutual agreement before a signature/ transaction can be valid. There is transparency among the the business men
Two factor authentication
This is an additional level of security just like in a single wallet we can add phone number / Google authentication to our wallet for a safety purpose. So before do any transaction we will have to put a code after we must have put our private key that the additional level of security we are adding.
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?
To set up a multisig wallet on electrum it's just a few steps and i will be showing reference with screenshot on how I set up my account on electrum.
First we have to download the app from playstore to our phone so we can sign up an account.
The sign up process
After I have downloaded the app I launched the app and begin the process. Click on next.
Then I clicked on the type of wallet I want to create which is the multisig wallet. The I clicked on next
Then I set my combination remember we are using the 2 of 3 combination. I set it to 2 of 3 as you can see In the screenshot below. After that I clicked on next
Since we don't have an existing wallet we have to create a new seed. Then I clicked on create a new seed. Then I clicked on next again
After I have created a new seed I wrote my seed In a sheet of paper then I inserted it back as requested by the app. We are almost done after this I was asked to add a cosigner. My cosigners already did the same process that I took.
I clicked on enter cosigner key
Then I entered my both cosigners keys 2 and 3 and I also paste them my key also
After adding both keys I then created a personal password to my wallet. I create that password and confirmed it. Then I login to the wallet
The sign up process is now complete
After I have successfully logged in I edited the expiry date to never then I request for my address and I also told my cosigners to do the same and the address are the same.
The differences between the seed key and the MPK is that the key is for restoring our wallet public keys while the MPK is for signing and sending a transaction. We can share our MPK with the cosigners but we should not send our seed to them.
We can share the MPK because they will need it whenever the want to make a transaction but the seed should not be sent because it can be used to change the MPK and we the seed it's self then we won't have access to our funds again.
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?
There are 5 combination of the m and n combinations on the electrum multisig wallet on the android app. There is maximum of 5 signature and 5 cosigners in the electrum multisig wallet and a minimum of 2 cosigners and one signature
While on a PC there are maximum of 15 cosigners and signature and the minimum is the same .
To export your seed and private key. I tap the default wallet above my wallet then I was directed to a new page here there are three public key and my seed I then export the keys for backup.
Then I exported my key for a proper backup. I also review my seed by tapping the space provided them my seed was revealed
I also exported my and backup my keys and seed .
That's the simple process of exporting my seed and MPK.
Perform a real transaction(Send BTC) to another Address using a 2 of 3 Multisig wallet?
I have created a multisig wallet and my cosigners are my friend @eloksjoseph and @mykhell007 we created an electrum wallet yesterday as we are asked to do so we want to perform a transaction I and @eloksjoseph combined trx then we convert the trx using changenow app to BTC the we make deposit to our multisig wallet. After the deposit he copied his BTC wallet so we can send the BTC to another wallet
What is the difference between Receiving Address & Change Address? Demonstrate your experience with a Change Address?
A receiving address is an address given to us by the wallet. It is used to receive crypto to our wallet. The three cosigners have the same wallet so the wallet is the same for the both cosigners. The only difference between the electrum multisig wallet is that the wallet expires. If we don't change the setting to never we will have to create a new one everytime we want to receive crypto.
A change address is like an additional wallet created automatically by the wallet for saving remains after we have finished a transaction. For example we have 0.112btc then we send 0.11 to another wallet. The electrum multisig wallet will create an address for the remaining 0.02btc. we can't do anything to this address we will just leave it. It an address for saving the unspent funds (UTXO) after a transaction is conducted. We can't spent the UTXO partially because the BTC protocol doesn't support it. They why the electrum wallet created another address known as the change address.
CONCLUSION
A multisig wallet is a wallet that requires two or more cosigners to sign and to send a transaction. It is a multi wallet. A single wallet controlled by two or more members. A multisig wallet is a highly secured wallet that can't not be compromised because of the level of security. The multisig wallet always comes in m and n combination. Where m means number of signature and n means numbers of fellow cosigners. m and n combination can be (2 of 3, 3 of 4, 4 of 5 and so on). The wallet has to do with a group of people controlling activities on it. This wallet can serve the purpose of maintaining funds ment for business for group of businessman provided that they all agreed to the terms and they have their public keys and ready to sign when needed.