Bitcoin 101: Multisig
Part of our mission at Casa is to help teach people about bitcoin and why it’s important. We hope these bitcoin 101 posts will be a good resource for those who want short explainers on tough topics.
Our first post is on multi-signature (“multisig”) wallets. Multisig is an important concept for bitcoin security, and it's core to the Casa product. Here is my attempt at explaining multisig in a way that’s short and to the point, but still gives a good picture for the bitcoin-uninitiated.
The one sentence intro
“Multisig” is short for multi-signature, and it means that spending money requires more than one approval or “sign-off”.
A real world example
Think about when a married couple sells their house (let’s just pick two random names, first ones that come to my mind for whatever reason…Bob and Alice). Assume they legally co-own the house. In order for ownership of the house to transfer to the new buyer, both Bob and Alice have to give their approval by writing their signature on separate lines of the contract. Bob couldn’t just go and sell the house without telling Alice because he needs Alice’s signature to complete the transaction.
Multisig in bitcoin
Imagine Bob and Alice share a credit card with their daughter, Mary. If Mary goes out and spends a bunch of money on the credit card, Bob and Alice don’t find out about it until after the fact. Mary gets grounded for life, but the money is spent.
With bitcoin, Bob and Alice have the ability to program restrictions into their money. They could utilize a multisig wallet (think wallet = spending account) to rein in Mary’s out-of-control spending. With a 2-of-3 multisig wallet, the family would require any 2 out of the 3 people to approve a transaction before the money can be spent. So the next time Mary wants to buy expensive concert tickets, either Bob or Alice have to sign off too.
How Casa uses multisig
When many people think of multisig, they think of it like the scenario above, where different people manage each signature. With Casa, we’ve taken a slightly different approach, using multisig to add security to the bitcoin wallet of a single person or a team. Our setup options include a 2-of-3 multisig wallet (at least 2 signatures are required to spend any bitcoin), and a 3-of-5 multisig wallet (at least 3 signatures are required to spend any bitcoin). The signatures come from different devices (hardware wallets such as Trezor), which are in different locations, but owned by one person or team. This provides significant security against hackers and in-person attackers who want to steal a user’s cryptocurrency because a transaction must be physically approved from multiple different locations before it can be completed.
Try it for yourself!
Casa's 2-of-3 multisig is currently free to try. Take the first big step in bitcoin security and graduate to multisig today.