Secure Bitcoin transactions and the use of multi-signature wallets in various fi
⭐ Merited by Mia Chloe (2)
From the day I joined this forum and from the day I wanted to invest in Bitcoin, I was thinking about what kind of steps I can take to provide maximum protection to my funds? Then I remembered the joint account in my regular bank where there are more than one account partner at the same time and funds can be withdrawn from the account only after getting the approval of at least two or three of them. Basically, I was looking for if there is any such method to store Bitcoin? And while searching, I came to know about Multi-Signature Wallet. I don't know if anyone has posted about this on the forum before. Here I am sharing my experience about Multi-signature Wallet. So that those who are new can benefit from it.
What is Multi-Signature?
Since Bitcoin is a part of the digital economy and its main strength is Bitcoin Script (stack-based, non-Turing complete programming language). The script determines the conditions under which bitcoins will be spent.
In normal transactions, we use a signature to approve the transaction. But Multi-Signature is a process where more than one signature is required to approve a transaction.
For example_
2 of 3 Multi-Signature: Where any two of the three partners approve, they can use the funds/bitcoins stored in the wallet.
It is like_ a vault has three keys, to open the vault, you have to use two keys together.
Which wallets can set up Multi-Signature?
Desktop Wallet _
▫️Electrum
▫️Sparrow Wallet
▫️Armory
Mobile Wallet_
▫️BlueWallet
▫️Electrum
▫️Samorai Wallet
Rules for setting up a Multi-Sig wallet using Electrum mobile wallet:
1. First open the Electrum wallet. An interface like the image below will appear, from there click OPEN/CREATE WALLET.
2. After clicking OPEN/CREATE WALLET, a page will open where you have to give a name for the wallet. After giving the name, click “Next”.
2. After clicking Next, an interface like the image below will appear. Since we are preparing a Multi-Sig wallet, we have to select “Multi-Signature wallet” from there. And enter the next step.
3. In the next step, we have to determine how many partners the wallet will have and how many people's approvals the funds can be used.
We have three partners and two transaction approvers here.
4. After determining the partners and approvers, an interface like the image below will appear when you enter the next step. If you already have a wallet there, you can add the wallet here using its seed or master key or if you want, you can create a new wallet by creating a new seed.
5. Once the new wallet is created, a new page will appear where you have to input the xpub of the other two partners and click Next. Here, xpub can be input in two ways - by scanning the QR Code and manually copying/pasting it.
[I am not showing the image here for security reasons]
6. If the tasks are completed correctly, a Multi-Sig address will be generated through which Bitcoin transactions can be made.
[Warning: ⚠️ If set up incorrectly, funds may be locked, so do a small transaction to test first]
How is a transaction completed in a multi-signature wallet?
First, one of the three partners we added to the wallet will create a transaction. The wallet will save it as a Partially Signed Bitcoin Transaction (PSBT) and send a message to another partner, and when that partner opens the message and signs it, the transaction will be completed.
What are the most popular uses for it?
▫️ Business partners.
▫️ Maximum security of personal funds.
▫️ In the case of Escrow services.
▫️ In the case of Inheritance Planning.
Are any of you using it? How did you like the experience of using it?
What is Multi-Signature?
Since Bitcoin is a part of the digital economy and its main strength is Bitcoin Script (stack-based, non-Turing complete programming language). The script determines the conditions under which bitcoins will be spent.
In normal transactions, we use a signature to approve the transaction. But Multi-Signature is a process where more than one signature is required to approve a transaction.
For example_
2 of 3 Multi-Signature: Where any two of the three partners approve, they can use the funds/bitcoins stored in the wallet.
It is like_ a vault has three keys, to open the vault, you have to use two keys together.
Which wallets can set up Multi-Signature?
Desktop Wallet _
▫️Electrum
▫️Sparrow Wallet
▫️Armory
Mobile Wallet_
▫️BlueWallet
▫️Electrum
▫️Samorai Wallet
Rules for setting up a Multi-Sig wallet using Electrum mobile wallet:
1. First open the Electrum wallet. An interface like the image below will appear, from there click OPEN/CREATE WALLET.
2. After clicking OPEN/CREATE WALLET, a page will open where you have to give a name for the wallet. After giving the name, click “Next”.
2. After clicking Next, an interface like the image below will appear. Since we are preparing a Multi-Sig wallet, we have to select “Multi-Signature wallet” from there. And enter the next step.
3. In the next step, we have to determine how many partners the wallet will have and how many people's approvals the funds can be used.
We have three partners and two transaction approvers here.
4. After determining the partners and approvers, an interface like the image below will appear when you enter the next step. If you already have a wallet there, you can add the wallet here using its seed or master key or if you want, you can create a new wallet by creating a new seed.
5. Once the new wallet is created, a new page will appear where you have to input the xpub of the other two partners and click Next. Here, xpub can be input in two ways - by scanning the QR Code and manually copying/pasting it.
[I am not showing the image here for security reasons]
6. If the tasks are completed correctly, a Multi-Sig address will be generated through which Bitcoin transactions can be made.
Quote
Open Electrum wallet ➡️ Give a name to the wallet and click Next ➡️ Next, you will be asked to select the Wallet Type, select Multi-Signature wallet from there ➡️An option will appear, add the number of partners and the number of approvers from there ➡️ If there is an old wallet, please seed the wallet here or create a new wallet ➡️ An xpub (extended public key) will be created ➡️ Add partners to the xpub list with your xpub ➡️ A multi-signature address will be generated ➡️Multi-signature wallet is ready, you can now make transactions.
[Warning: ⚠️ If set up incorrectly, funds may be locked, so do a small transaction to test first]
How is a transaction completed in a multi-signature wallet?
First, one of the three partners we added to the wallet will create a transaction. The wallet will save it as a Partially Signed Bitcoin Transaction (PSBT) and send a message to another partner, and when that partner opens the message and signs it, the transaction will be completed.
What are the most popular uses for it?
▫️ Business partners.
▫️ Maximum security of personal funds.
▫️ In the case of Escrow services.
▫️ In the case of Inheritance Planning.
Are any of you using it? How did you like the experience of using it?