[Discussion] Multisignature wallets M-of-N wallet

[hugeblack]

In short, if you don't know what to do avoid downloading any multi-sig wallet or at least make sure you have enough signatures (2-of-3/3-of-5,...etc.)

In the past, when I downloaded a wallet I didn't care about the phrase "multi-sig," just being an open-source or reliable wallet + (I could access the private key "wallet seed") was enough to try out any wallet.

So I used a greenaddress wallet for a long time, recently I discovered some problems with it which made me exchange all the coins into a new wallet.
then I decided to extract the private key to claim some hard forks.
Hence, I discovered one of the disadvantages of multi-sig wallets, which is that you need the second signature to have full control over your currencies. I can use tricks like time-locked (greenaddress,) but it will be difficult with central wallets^{[1] [2]}.

[1] lost BTC on block.io
[2] how to claim Bitcoin gold from Block.io ?

[pooya87]

i can't help but see this as a problem with "custodial wallets" not with "multi-signature wallets". and the arguments are the same too: if you aren't the only one controlling your private key you don't own bitcoin. or in this case "control all the private keys".

the solution is to stop using custodial wallets, and if you wanted to use multi-signature you still should be in control of either all the keys or majority of the keys. meaning if it is m of n keys either one of these two:
1. control n keys
2. control m keys yourself but only have x number of them in the hot wallet where x is smaller than m and have a third party control y keys where y is smaller than m

the second option is how Electrum 2FA works: you generate 2 keys and only have 1 key in your wallet while the second is backed up by your seed phrase on a piece of paper, the third party generates 1 key. your hot wallet can't spend coins without using the third party but you can always go to your backup and get 2 keys and spend all. and third party can't do anything since they only have 1 key (the scheme is 2 of 3).