Here I want to explain how a multi-signature wallet can be used to securely store your coins. The example is valid for all electrum based wallets that exist for many coins.
What is a multi-signature Wallet
In a multi-sig wallet, you have multiple keys that can access your wallet. You can configure how many keys can access the wallet and how many are needed for sending. The notation is commonly used N/M where you need N signatures from M members to send a transaction. Examples for use cases are:
- 1/2 Here you have 2 keys and only one is needed for sending
- this can be used to store a backup of your key
- 2/2 All two keys need to sign the transaction
- This is used to prevent theft. Both keys need to sign the transactions. So if one gets stolen it still cant be used to send funds
- 2/3 this has the best of both worlds. You can store one key fully offline. Have 2 keys on different hardware. You can still lose one key ( pc broken for example ) and still didn't lose your funds.
how to set up a 2/3 Wallet in electrum
The first thing you need is:
- 3 seeds ( which is more or less a private key )
- 3 master public keys
one important note here is DO NOT SEND YOUR SEED OVER THE INTERNET OR STORE IT ON YOUR PC
Ok, now that we got the basics we can generate 3 addresses. Each step is the same.
File => New/Restore
Select "Standard Wallet" and next.
Select Create a New seed:
write it down.
choose a password and click next
Click on "Wallet" => "Information" to display your public master key.
this can be stored online and is not a particular security risk. Although you might want to keep it private because else others can "spy" on your address.
Click on "FIle" and Delete to clear this wallet, we just need the information created by the process not the actual wallet itself.
Now repeat this step 2 times.
At the end, you should have 3 seed values and 3 public keys.
Now we actually create the multi-sig address
Fist you have to select File => New/Restore again but this time you select to create a Multi-signature wallet
Here you change the values to 3 cosigners and 2 required signatures
If you have something else in mind then you can also do so ;)
Next, you have to specify that you already have a seed:
end type one seed from your written down seeds in:
In the following 2 dialogues, it will ask you to enter the cosigner keys. Here you enter the other master public keys that you copied out of the wallet information field:
Congratulations you got yourself your first multi-signature wallet.
Next, repeat this step on another device. Your laptop for example. Or a virtual machine with an encrypted file system.
When you send funds to it it will simultaneously show up in all wallets
How to send transactions?
This is, of course, an important question. So let me explain this to you.
The initial step is to just send a transaction from one of the wallets:
This will then bring up a dialogue with the transaction details.
You have to save the transaction here. You can save this to a file and trasfere it via usb. Send it per mail. Whatever you want its not confidential.
On your second pc you can then load this transaction via Tools => "Load Transaction"
On the bottom of the page, you can see the "Sign" and "Broadcast" buttons. You have to click now on both in order to release the transaction and send the funds.
Congratulations, you now have mastered the art of multi-signature wallets.
If you need something to fill them with check out my other guides about: