(1) 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 traditional wallet is used for storing tokens and sending and receiving tokens and it just needed one individual which is the wallet owner to validate transactions using a single private key
This type of wallet has lots of monotony and you can’t expect a company wallet to be left in the hands of one person what if he died or something happened to him and this led to the creation of another type of wallet that required more than one person to verify a transaction and this is the multi-sig Wallet.
This type of Wallet is created by a group of people known as co-signers(n)with different private keys and a certain number of these groups of people(m) is enough to verify or validate a transaction.
We can say a multi-sig wallet is an m of n-type of wallet where m is the number of signatures needed to validate transaction and n is the number of people that came together to create the wallet
M of n combinations varies a lot in wallets eg: 2 of 3,7 of 7,15 of 15,2 of 2, etc. So when the amount of signatures needed from the co-signers is gotten a transaction can go through
Example: using a bit pay wallet, three friends A, B, C open a multi-sig Wallet with a 2 of 3 combinations and let us say they deposited 1bf and then something happens between them maybe A duped B and C and they want to pull out investment, B and C can authorize the transactions but had it been only B he can’t do anything and if all three want to pull out they can sign it but the third person is not necessary
Examples or multi-dog wallets and the maximum combinations they can allow
1.Armory(desktop wallet)-7 of 7
2.Electrum(desktop and mobile )-15 of 15
3.bitpay- 2 of 3
4.Bitgo-3 of 3
5.btc.com wallet (mobile and web wallet )-2 of 3
How is it different from a single key wallet
DIFFERENCE BETWEEN MULTI SIG AND SINGLE SIG WALLET
| MULTI-SIG | SINGLE SIG |
|---|---|
| There is no monopoly of asset | There is a monopoly of asset |
| .It is the best for company accounts | it is best for individual usage |
| More than one private key is needed | Only one private key is needed |
| .less risk of being scammed cause one would need more than one key to access an account and before that the accounts must have been pulled out already | Risk to hack is high since only one key is needed to perform transactions on the wallet |
Uses of multi sig wallet
1.it helps in running of company funds: setting up a multiethnic wallet for company funds is a very good thing cause it serves as the traditional joint account in banks and like the join account where more than one person is needed to send money out of the account a multi-sig wallet always requires more than one signatures for a transaction to go through
2.increasing layer of security for assets: not only do companies use multi-sig wallets even individuals do and the main purpose is for security reasons. One can create a multi-sig wallet having two private keys which he or she keeps far apart from each other to prevent robbery
3.Escrow transactions: An escrow is someone who acts as an intermediary during transactions. So let’s say two individuals wish to do a transaction but don’t really know each other then they involved a well-known escrow and create a 2 of 3 multi-sig wallets together and then in a situation where one party tries to dupe the other the escrow can always come in and settle the difference by authorizing a return of the asset to the victim
(2) 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)
1.For the download of the app, I went to source to download the app
2.I ran the installation and it was successful as you can see below. now let's create a wallet
3.I opened the app, I am creating a default wallet so I clicked next
4.clicked on the multi-sig wallet
5.As I said I am opening a 2 of 3 multi-sig wallets so I identified that too
6.Then I clicked on create a new seed
7.A seed came up which I copied out and kept somewhere, please note that you should never share this key with anybody
8.I now verified the seed and was given a master key
'
9.The next process was adding the cosigners 1 and cosigner 2 which required them to send me their MPKs which I added up and then I had to create a strong password for the account afterward
What is the difference between Seed key and MPK?
The seed key is the most important key in a wallet that can be used to generate the master keys and can be used to recover wallets. it is also important to know that for a transaction to through, it is the seed key that is used
Master public key- like the name implies, it can be shared with others who will form part of the wallet's cosigners, it cant be used to validate transactions and cannot be used to generate other keys. its main function is to be used to add up cosigners
I will not share my seed key with anyone cause it's just like me offering my wallet account to the person to do whatever he or she wills
(3) How many different "m of n combinations" Multisig wallets you can construct in Electrum? How do you Export your Seed & Private Key(Electrum) in a Multi-sig wallet? (Screenshots needed)
in setting up my wallet I decided to check the maximum amount of cosigners and signatures that the wallet allowed and I discovered it had a maximum of 15 of 15 combination
How do you Export your Seed & Private Key(Electrum) in a Multi-sig wallet? (Screenshots needed)
We are going to start
1.I opened my wallet and then clicked on the wallet
2.Dropdown box appears and we click on private keys and then export
3.You are expected to put in your password and the keys will be exported to your internal storage
How to export seed keys
1.I opened my wallet and then clicked on the wallet
2.A dropdown box appeared and I clicked on seed
3.You are expected to put in your password and you will see the seed note that the seed is only visible for you copy it out and store anyplace of your choice unlike the private keys that are exported to internal storage
(4) Perform a real transaction(Send BTC) to another Address using 2 of 3 Multisig wallets? (You can perform a micro-transaction for this Task, also send a partial amount to demonstrate your experience with Change Address, screenshots needed).
In this example, I would first need to get BTC but I have trx so I will be converting my trx to mbtc using changenow.io to perform this task.
1.I went to the site and then type in the amount of trx I wish to convert
2.I was asked to transfer and then went through a confirmation stage
3.After I converted my trx to BTC and transferred it to my standard wallet cause changenow.io doesn't work with a multi-sig-wallet
New balance :
4.Now we send the BTC from standard wallet to multi-sig wallet
5.We are now asked for our password which we put
6.The transaction was confirmed and my multi-sig wallet balance changed
TRANSFER PROCESS FROM MULTISIG WALLET
1.I would open my multi-sig wallet and then click on send section. I am moving my BTC from the multi-sig wallet to my standard wallet so when we click send option, we fill in details by pasting the address of my standard wallet
2.Next we can see the transaction details, I am sending out which include0.21mBTC which is the amount I am sending out, in the transaction box below we see the RECIEVER'S ADDRESS which is green in color getting the total mBTC in my account but look below we see a yellow address below known as CHANGE ADDRESS which we see a value 0.1676mBTC. This is the difference between the amount I am actually transferring and the amount I have in my account and change address is where the amount difference is transferred to.
3.We now have to export transactions and get our second signature from one of the other cosigners. Firstly we export transactions first
4.Unfortunately I lost my keys to my other cosigners and could not complete the transaction
(5) What is the difference between Receiving Address & Change Address? Demonstrate your experience with a Change Address?
The change address: This is an address created automatically by the wallet to store the remaining fund from a transaction, the fund got when we subtract the initial amount from the amount we are sending. The address is often represented with a yellow color in the transaction details. The UTXO from a transaction is sent here
RECIEVING ADDRESS: This is the address that receives the funds you are sending and is often depicted with a green color on the transaction area
The multi-sig wallet is actually a new thing to me and something very good for maintaining transparency in business while allowing more than one person to co-own assets and it offers higher security too. It was also important to know that what is shared to cosigners was the master public key and not one's seed key I am really disappointed I couldn't finish the transaction honestly but I did my best and I actually learned a lot from the class
ALL SCREENSHOTS WERE TAKEN FROM THE ELECTRUM APP ON MY LAPTOP USING SNIP AND SKETCH APP