“Crypto: Why use a Multisig”
Bitcoin has come to shake the established economic system. Cryptocurrency and its blockchain technology have introduced a new financial system and endless features that can integrate the crypto ecosystem. Multi-signature (multisig) is one of them; the first introduced in a Bitcoin addresses in 2012, which later led to the creation of multisig wallets.
What is a multisig?
“…a specific type of digital signature that makes it possible for two or more users to sign documents as a group. Therefore, a multi-signature is produced through the combination of multiple unique signatures. Multisig technology has been extant within the world of cryptocurrencies, but the principle is one that existed long before the creation of Bitcoin.”
Cryptocurrencies were initially made for peer to peer transitions without the interference of a third party. Although having a peer to peer currency has been revolutionary in the financial system there are specific security issues that have appeared throughout the years. One of the main problems is the storage of crypto; the lack of security led to different creations such as cold storage or multisig wallets and exchanges.
In many use cases doing a transaction and the approval of this is far more complicated than a two-person operation. Let’s say your company works with cryptocurrency and all transactions have to be approved from different parties in the company; a multisig could be a solution to this dynamic, providing three keys and the necessary approval of at least two, three or more in some cases.
Nowadays this is similar to what banks do with credit card approved payments. Before a transaction goes through most banks contact the client to authorize payments to prevent online frauds or others.
Anyone who has ever transferred crypto to another person knows how easy and fast it can be, but in terms of security, these funds are protected by only one person. It can be dangerous if this one key is hacked or missed used by someone; in this case, one key being approved for a wrong transaction can mean the loss of thousands without a refund and in a multisig two or more approvals would have to go wrong.
In the future, we would like to incorporate multisig to Pandora´s Wallet and take advantage of this feature that can be included and used by those who feel the need for this type of transaction.
Hope you enjoyed it, feel free to comment!