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Author Topic: Do 2-of-2 multisig addresses make escrows irrelevant?  (Read 766 times)
pandalion98 (OP)
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August 23, 2016, 10:25:40 PM
 #1

As far as I understand, a multisig address is derived from two other addresses. Now, if the buyer and seller agrees to make a multisig address and deposit the buyer's funds there, it should be safe since both parties must agree before the funds can move, right?

Or do we still need 3rd party escrows? I've seen some very reputable escrows on this forum that suddenly turned into scams.
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August 23, 2016, 10:31:22 PM
 #2

If there's a dispute, a 3rd party might help solving it: hence why escrows still survive. Also, multisig technology doesn't need to replace escrows. Both can co-exist.
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August 23, 2016, 10:40:53 PM
 #3

If there's a dispute, a 3rd party might help solving it: hence why escrows still survive. Also, multisig technology doesn't need to replace escrows. Both can co-exist.
Oh yeah. Good point.
I think 2-of-3 multisig can enhance escrows by making it trustless but still have the possibility of arbitration. Just have another person (the escrow) hold a key.

But the problem here is that there's a possibility of an escrow being biased or the seller can give them a cut to release the funds to them. I know that for an escrow to be trustworthy, they should not do what I just mentioned, among other things.

How do you think can we have trustless escrows?
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August 23, 2016, 10:49:01 PM
 #4

If there's a dispute, a 3rd party might help solving it: hence why escrows still survive. Also, multisig technology doesn't need to replace escrows. Both can co-exist.
Oh yeah. Good point.
I think 2-of-3 multisig can enhance escrows by making it trustless but still have the possibility of arbitration. Just have another person (the escrow) hold a key.

But the problem here is that there's a possibility of an escrow being biased or the seller can give them a cut to release the funds to them. I know that for an escrow to be trustworthy, they should not do what I just mentioned, among other things.

How do you think can we have trustless escrows?

You simply can't because it's not possible to represent "every" transaction in decentralized manor. Certain things can through the use of smart contracts and as these become more powerful and able to interact cross chain we may see new potential, but the two must always co-exist. There will never be a point where mediation of a 3rd party isn't a good thing to have.
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August 23, 2016, 11:59:48 PM
 #5

As far as I understand, a multisig address is derived from two other addresses. Now, if the buyer and seller agrees to make a multisig address and deposit the buyer's funds there, it should be safe since both parties must agree before the funds can move, right?

Or do we still need 3rd party escrows? I've seen some very reputable escrows on this forum that suddenly turned into scams.

Ethereum and smart contracts might tend to make escrows irrelevant.   Smiley
Of course, getting them to work as you desire might not be easy.
As demonstrated by the DAO hack.

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August 24, 2016, 10:27:24 AM
 #6

Deals can be very complex and require human moderation. Multisig is without question a great invention, but it won't make escrow irrelevant. Smart contracts will neither, because these contracts are not able to automatically set in motion a transfer of real world objects.

Imagine a buyer and seller agreeing on a multisig address. Now the seller transfers his goods to the buyer, but the buyer refuses to agree on a transfer of funds, until the seller gives him something extra. Only an independent third party would be able to properly resolve this case.

In fact, a 2-of-3 multisig setup could improve the usage of human escrow, because it would reduce the risk of getting scammed by the escrow provider himself, who alone can't control the funds.

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August 24, 2016, 11:20:09 AM
 #7

for me to be escrow service, we must use ledger wallet or other secure bitcoin wallet
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August 24, 2016, 11:31:55 AM
 #8

Escrow is always necessary due to the fact that 2nd party might not deliver the coins after receiving the product. That's when a 3rd party enters in game. No automatic system is 100% effective, there must be always a human system to solve these kind of problems.
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August 24, 2016, 11:43:05 AM
 #9

As far as I understand, a multisig address is derived from two other addresses. Now, if the buyer and seller agrees to make a multisig address and deposit the buyer's funds there, it should be safe since both parties must agree before the funds can move, right?

Or do we still need 3rd party escrows? I've seen some very reputable escrows on this forum that suddenly turned into scams.

An escrow would still be useful.
Imagine buyer and seller agree to a 2 of 2 multisig wallet and seller sends the goods to the buyer and he had sent the funds to the multisig adress. However after he received the goods he denies to sign the multisig addy.Now the seller can not get the funds.The funds would be burned.
With a 2 of 3 multigsig adress such a scenario could be avoided as escrow holds the third key and could free the funds which would  automatically being send to the seller.
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August 24, 2016, 12:44:18 PM
 #10

2-of-3 multisig escrow system MAY work if the escrow is trustable. The escrow can easily act as the seller and if the transaction value is high enough, the escrow can run with the funds since he will control 2 of the 3 keys. Even though multisig does help to reduce the risk of the escrow scamming, it is still very possible. 2-of-2 escrow system wouldn't work since either party and refuse to sign.

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August 24, 2016, 12:52:29 PM
 #11

2-of-3 multisig escrow system MAY work if the escrow is trustable. The escrow can easily act as the seller and if the transaction value is high enough, the escrow can run with the funds since he will control 2 of the 3 keys. Even though multisig does help to reduce the risk of the escrow scamming, it is still very possible. 2-of-2 escrow system wouldn't work since either party and refuse to sign.

the whole point of using a multisignature address is to not give all the keys to one person. so if you want the escrow to have both keys then use a regular address of a regular escrow.

2 out of 3 means escrow has only one and each party has one key so nobody can spend the funds alone and it will need 2 person to sign with their keys.

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August 24, 2016, 12:57:39 PM
 #12

Escrow is not needed at all, but a reputable third person is still needed for arbitrage.
So a 2 of 3 multisig, where the third key owner can mediate the issues if they occur is the way to go.

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August 24, 2016, 01:32:24 PM
 #13

2-of-3 multisig escrow system MAY work if the escrow is trustable. The escrow can easily act as the seller and if the transaction value is high enough, the escrow can run with the funds since he will control 2 of the 3 keys. Even though multisig does help to reduce the risk of the escrow scamming, it is still very possible. 2-of-2 escrow system wouldn't work since either party and refuse to sign.

the whole point of using a multisignature address is to not give all the keys to one person. so if you want the escrow to have both keys then use a regular address of a regular escrow.

2 out of 3 means escrow has only one and each party has one key so nobody can spend the funds alone and it will need 2 person to sign with their keys.
I was talking about self-escrowing here. Where the escrow uses an alt to pose as the seller. The control of 2 of the keys would effectively be with the escrow only. Read the post again.

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August 24, 2016, 02:52:28 PM
 #14

2-of-2 multisigs don't really help solve a dispute since there's no way the parties involved would be able to solve it(unless they could come up with an agreement in which case they would just release the bitcoins and product to each other). Escrow is a third-party trader that help prevent disputes and solves them if one crops up.
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August 24, 2016, 02:55:43 PM
 #15

As far as I understand, a multisig address is derived from two other addresses. Now, if the buyer and seller agrees to make a multisig address and deposit the buyer's funds there, it should be safe since both parties must agree before the funds can move, right?

Or do we still need 3rd party escrows? I've seen some very reputable escrows on this forum that suddenly turned into scams.

I think that the most important way of escrow in giving some advantages and also the security for all the people who make transactions on the internet. Indeed it does, but here too there are still many escrow that remain on their establishment and want to help the people who need the services of their arty escrows? I've seen some very reputable escrows on this forum that suddenly turned into scams.
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August 24, 2016, 02:59:28 PM
 #16

Escrow is always better choice because escrow is honest and neutral in case there's conflict.
Also, funds can't be spend if one of them don't want to sign address to move funds Sad
This may only come true if the escrow remain trustworthy throughout the process and don't become biased in middle which is quite rare and OP is also having fear about escrow turning into scam. However there is no other choice in most of the cases so even it is risky use of 2 of 3 multisig addresses with escrow in middle is the only thing that can help in deal between two parties. In future smart contract may solve this problem but it still needs much more time.

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August 24, 2016, 04:08:16 PM
 #17

If there's a dispute, a 3rd party might help solving it: hence why escrows still survive. Also, multisig technology doesn't need to replace escrows. Both can co-exist.
Oh yeah. Good point.
I think 2-of-3 multisig can enhance escrows by making it trustless but still have the possibility of arbitration. Just have another person (the escrow) hold a key.

But the problem here is that there's a possibility of an escrow being biased or the seller can give them a cut to release the funds to them. I know that for an escrow to be trustworthy, they should not do what I just mentioned, among other things.

How do you think can we have trustless escrows?

We can have trustless escrows when everyone starts being honest Wink Speaking more seriously, I don't think there currently is a way to make escrows 100% trustless, there are simply ways to reduce the possibility of scamming to a minimum.
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