Multisig Support Set to Become a New Standard
The immense security benefits of multisig transactions have become especially relevant as bitcoins – like all valuable things – are prominent targets of theft. Where users choosing the convenience of web wallets once had to worry about being ‘Goxxed,’ multisig has stepped in to save the day.
To be Goxxed (as you may know all too well) is to lose your bitcoins because you stored your private keys with a third party who turned out not to be trustworthy. Vitalik Buterin has explained that in Bitcoin’s first four years, all web wallets and exchanges worked that way: each Bitcoin address had only one set of private keys, and using the convenience of web-based services meant having to trust a company to keep your keys safe.
This single-point-of-failure model birthed several widely-publicized disasters, and multisignature addresses presented the solution as Bitcoin Improvement Propsal #10, or BIP 10.
BitGo is recognized as the first wallet to offer multisig services, in which a Bitcoin address possesses not one, but three individual sets of private keys. Two sets of keys go to the user – one is stored on her computer, and the other is stored somewhere offline (on paper in a safe, for example). The service provider then holds the third key. A signature by two of the three keys is required to execute a transaction (called a ‘two of three’), and this simple process provides several benefits.
This post was published at Coin Telegraph on 2014-11-04.