What is Multi-Signature (Multi-Sig)?
A multi-signature (also known as a multi-sig) transaction is a type of digital signature that requires more than one signature to be valid. This means that multiple parties must sign a transaction in order for it to be processed. The concept of multi-signature transactions is similar to the concept of joint bank accounts, where multiple parties must sign a check before it can be cashed.
In the context of cryptocurrency, a multi-signature transaction is a transaction that requires more than one signature from different parties before it can be executed. This can provide an extra layer of security and can be used to ensure that funds are only spent if all parties agree to the transaction.
Multi-signature transactions can be used in a variety of scenarios, such as corporate accounts, shared wallets, and escrow services. For example, a corporate account may require two signatures from two different executives before a large sum of money can be spent. A shared wallet may require two signatures from two different people before any funds can be withdrawn. An escrow service may require signatures from both a buyer and a seller before a transaction can be completed.
Multi-signature transactions can be implemented in different ways, with different numbers of signatures required, depending on the use case and the level of security required. For example, a two-of-two multi-signature requires two signatures, while a two-of-three multi-signature requires at least two out of three signatures.
Simplified Example
Imagine that you and your friends want to save up some money to buy a big toy together. You decide to keep the money in a piggy bank, but you don't want any one person to be able to take all the money by themselves.
To make this possible, you agree to follow a special rule. You each have a key to the piggy bank, and it takes two keys to open the bank and take out the money. This means that if any one of you wants to take money out, they need to find another friend who also wants to take money out.
This is like multi-signature. It is a way to make sure that important things, like money or information, are not taken or used without the agreement of multiple people. Just like it takes two keys to open the piggy bank, it takes multiple signatures to make a transaction with multi-signature.
Multi-signature helps to keep important things safe, and makes sure that everyone agrees before anything happens. It's like having an extra layer of security to make sure that your toy money is protected.
History of the Term "Multi-Signature"
Envision the early days of cryptography, where digital signatures resembled fragile wax seals, easily broken in the precarious act of sharing secrets like recipes or financial documents. Then came the visionaries—mathematicians and cryptographers—recognizing the potential for a more robust seal, a signature not wielded by one but by many. Academic papers and research labs birthed terms like "joint signatures," "threshold signatures," and "multiple signature schemes," early attempts to capture the essence of shared responsibility in the digital domain. However, the term "multi-signature" itself was not a solo creation; it emerged collaboratively in the resonance of online forums and industry conferences. Developers, security experts, and curious enthusiasts collectively contributed to its evolution, tossing around various iterations, each imbued with its own nuance.
Examples
BitGo: BitGo is a popular digital wallet provider that offers multi-signature technology for secure storage and management of digital assets. BitGo's multi-signature wallets require two signatures to execute a transaction, ensuring that funds cannot be moved without the approval of multiple parties.
Gnosis Safe: Gnosis Safe is a smart contract-based multi-sig wallet that provides users with an extra layer of security for their digital assets. Gnosis Safe requires multiple signatures to execute transactions, making it ideal for holding shared funds or for use as an escrow service.
Coinbase: Coinbase is a popular cryptocurrency exchange that offers multi-signature vault accounts to its users. The multi-signature vault accounts require multiple signatures to execute transactions, making it ideal for businesses and large organizations that need to secure large amounts of cryptocurrency. The multi-signature vault accounts provide an extra layer of security for users' digital assets, helping to protect against theft or unauthorized access.