the beauty of multi sig wallet [help needed]

[Zoomic]

Sometimes, it is better not to be informed than to have a half baked information. I have known of multi sig wallet, but I never knew about its core usefulness. Today, I searched the internet on how to have a joint Bitcoin account. I thought it won't be possible or something like that doesn't exist. Since there is no harm in trying, I still searched, and I was surprised to see the real concept of multi sig wallet.

1. What I do on Binance P2P when buying a coin can be done by three or more people who don't even know one another with a multi sig wallet.

2. Instead of spending money for hardware wallets, I can actually use three or more devices to save and secure my coins, especially if one is air gapped or I use a paper wallet.

3. In the case of a joint project, this system can be used to secure the project funds.

There are some drawbacks, like one losing  two of the three devices simultaneously or one of the signatories conniving with the other to cheat the other. Every system has its drawback, but I believe the advantages overweight the disadvantages for this multi sig.

The essence of this post is not to explain how multi sig works because I know there are experts with years of experience who are into it.

THE PURPOSE of this post is to have two people who would help me practice this. Please, I want to practice this, and I don't have a bitcoin enthusiast around me. This could help me to avoid a bank joint account when I marry by next year.
Please, I don't know how much it will require to test it, but I'll provide the coins.
Also, it is said that one device will first initiate the transaction before others will join.
I will download electrum, because it was recommended. How does the signing and signatories work?

[1714255766]

1714255766

[1714255766]

1714255766

[1714255766]

1714255766

[1714255766]

1714255766

[1714255766]

1714255766

[Little Mouse]

I will download electrum, because it was recommended. How does the signing and signatories work?

Download the electrum wallet and launch the wallet.

1. Select multisig wallet in the first step.
2. In the next step, select how many total cosigners will be there and out of the total cosigners, to execute a transaction, how many will have to sign the transaction. Say, a total of 2 cosigners will be there and from the 2 cosigners, 2 cosigners will have to agree to send funds from the wallet. It's 2 of 2.
3. Create a new seed
4. You will be given a master public key. Send it somewhere.
5. Ask your cosigner to do the same.
6. In the next step, you will be asked to add cosigners. Ask for the master public key from your cosigner and add it by selecting "Enter cosigner key", ask your cosigner to do the same.
7. You have created the multisig wallet. Check addresses in your wallet and in your cosigner's wallet. Make sure they are the same.

I used multisig wallet long ago and totally forgot how to spend lol. The basic is, out of the 2 consigners, anyone will create a transaction that will be partially signed and save the partially signed transaction data and send the file to your other cosigner. He will have the option to sign the transaction by accessing the transaction through the file you sent. That's it.

In case, you need help, feel free to reach out to me. Don't trust anyone with a big sum of money, not even with a small sum unless they are reputed. Be sure that I will not PM you first.

[o_e_l_e_o]

1. What I do on Binance P2P when buying a coin can be done by three or more people who don't even know one another with a multi sig wallet.

I think you are confusing concepts here.

Binance is an exchange for trading bitcoin and fiat. A multi-sig set up is a type of wallet for holding bitcoins. A multi-sig wallet can not replicate an exchange, nor vice versa.

THE PURPOSE of this post is to have two people who would help me practice this. Please, I want to practice this, and I don't have a bitcoin enthusiast around me.

You don't need anyone to help you practice this. You can set up a multi-sig wallet on your own with three different Electrum wallets on the same device. Doing so removes much of the benefit of the multi-sig wallet (since all three wallets are on the same device, so the additional security gained over a single sig wallet is very minimal), but it is sufficient for testing purposes so you can learn how it works.

[Little Mouse]

1. What I do on Binance P2P when buying a coin can be done by three or more people who don't even know one another with a multi sig wallet.

I think you are confusing concepts here.

Binance is an exchange for trading bitcoin and fiat. A multi-sig set up is a type of wallet for holding bitcoins. A multi-sig wallet can not replicate an exchange, nor vice versa.

He didn't mean what you meant I think. He is talking about Binance false P2P. Binance acts as an escrow when we use P2P on their platform but according to his post (If I got him correctly), you can do the exact trade with the help of a multisig wallet where identity is even unnecessary. That's true in the technical sense but we need a platform to find buyer/seller. It's not something possible lol.

[Zoomic]

Thank you Little Mouse for the step by step explanation you gave to me. I will try it out and as o_e_l_e_o has said that I can actually do it all myself in the same device but it is not advisable security wise. Since it is for testing purpose there is not problems. If I understand it very well I can do it the right way.

1. What I do on Binance P2P when buying a coin can be done by three or more people who don't even know one another with a multi sig wallet.

I think you are confusing concepts here.

Binance is an exchange for trading bitcoin and fiat. A multi-sig set up is a type of wallet for holding bitcoins. A multi-sig wallet can not replicate an exchange, nor vice versa.

He didn't mean what you meant I think. He is talking about Binance false P2P. Binance acts as an escrow when we use P2P on their platform but according to his post (If I got him correctly), you can do the exact trade with the help of a multisig wallet where identity is even unnecessary. That's true in the technical sense but we need a platform to find buyer/seller. It's not something possible lol.

Thank you very much for understanding me correctly. All what you explained here is what I meant. The escrow system used in the p2p such as Binance pzp.
Please, why did you call the Binance p2p a false p2p?

[Little Mouse]

Please, why did you call the Binance p2p a false p2p?

When you say P2P, it should be a direct transaction between you and the other party but in Binance, they are acting as an escrow. It's a centralized service but promoting them as P2P. If I transact Bitcoin with you without the help of any third party. In Binance P2P, third-party or centralized exchange Binance play a role. So, it's no anymore the true P2P where we even shouldn't share personal information. It's far better to trade here than on Binance. Because Binance will ask for all of your personal information.

[khaled0111]

The escrow system used in the p2p such as Binance pzp.
Please, why did you call the Binance p2p a false p2p?

Most truly decentralized exchanges use multisig wallets (usually 2 of 3) to escrow the funds. You send the coins to the escrow wallet (lock them) and if the deal of successful, both parties (buyer and seller) can sign a transaction to release the coins. Otherwise, in case of a dispute, the platform will step in and decide whether to send the coins to the buyer or send it back to the seller, thus canceling the order.

This is not how binance and other centralized exchanges operate. They don't need such a setup since the coins are on their custodial wallets and there are actually no onchain transactions. There is no need for anyone to sign anything.

[Zoomic]

Please, why did you call the Binance p2p a false p2p?

When you say P2P, it should be a direct transaction between you and the other party but in Binance, they are acting as an escrow. It's a centralized service but promoting them as P2P. If I transact Bitcoin with you without the help of any third party. In Binance P2P, third-party or centralized exchange Binance play a role. So, it's no anymore the true P2P where we even shouldn't share personal information. It's far better to trade here than on Binance. Because Binance will ask for all of your personal information.

I understand you. The concept of the third party has defeated the idea of decentralization.  But humans are difficult to be trusted, even with Binance centralized and monitored system, there is still substantial amount of scam going on. It works have been worse if they became 100% decentralized.

The escrow system used in the p2p such as Binance pzp.
Please, why did you call the Binance p2p a false p2p?

Most truly decentralized exchanges use multisig wallets (usually 2 of 3) to escrow the funds. You send the coins to the escrow wallet (lock them) and if the deal of successful, both parties (buyer and seller) can sign a transaction to release the coins. Otherwise, in case of a dispute, the platform will step in and decide whether to send the coins to the buyer or send it back to the seller, thus canceling the order.

This is exactly what I meant in my number one point in the starting post. Is there such truly decentralized and functioning exchanges. Please point me to it.

[o_e_l_e_o]

Is there such truly decentralized and functioning exchanges. Please point me to it.

Bisq is a great example of a decentralized exchange which utilizes multi-sigs like this.

Their old system used a 2-of-3 multi-sig, where one key was held by each of the buyer, the seller, and Bisq themselves. All coins being traded, plus a security deposit from both parties, were deposited to this multi-sig escrow. Once the fiat trade was complete, buyer and seller would sign to release the coins to the appropriate party and return the security deposits to both parties. If there was a dispute, Bisq could step in and sign with one of the trading parties to release the funds.

Now they've transitioned to a 2-of-2 multi-sig between buyer and seller only, without Bisq having a private key at all. The system is otherwise the same as above, but now additionally both parties also sign a timelocked transaction which empties the multi-sig in to the Bisq DAO, which can be broadcast after the timelock expires in the event of a dispute.

[Zoomic]

Is there such truly decentralized and functioning exchanges. Please point me to it.

Now they've transitioned to a 2-of-2 multi-sig between buyer and seller only, without Bisq having a private key at all. The system is otherwise the same as above, but now additionally both parties also sign a timelocked transaction which empties the multi-sig in to the Bisq DAO, which can be broadcast after the timelock expires in the event of a dispute.

Great! Thanks for this.

I have downloaded the Bisq exchange and did my initial set up. I am so much relaxed and comfortable on reading that Bisq is an Open source and decentralized.
I also read what you said above on the Bisq website( should I call it a website? Because Bisq said it's not a company but a code)

Each trader must lock bitcoin in a multisignature escrow until the trade is complete—this is part of what makes trading on Bisq highly secure.

Bisq does not hold any bitcoin. All bitcoin used for trading is held in 2-of-2 multisignature addresses controlled solely by the trading peers themselves.

Is Bisq running on Bitcoin network? Because as Bisq was launching I saw these;
Connecting to Bitcoin network...
Synchronising with Bitcoin Mainnet (via Tor)...

I also want to ask.
Since I now have my backup and seed phrase saved, am  I free to use Bisq as a personal wallet?

Since there is no KYC, if illegal activities are carried out on Bisq, is there a way government will trace it since Bisq doesn't have a CEO and not centralized ?

Finally, 
Why do most people not use this type of system that guarantees privacy, rather many people troop into centralized exchanges like Binance and even use it as wallets.
I mean, without this forum, I wouldn't have known  an exchange called Bisq.

[o_e_l_e_o]

Is Bisq running on Bitcoin network? Because as Bisq was launching I saw these;
Connecting to Bitcoin network...
Synchronising with Bitcoin Mainnet (via Tor)...

It doesn't run on the bitcoin network, but it syncs with it via Tor to fetch blockchain data and therefore improve privacy.

Since I now have my backup and seed phrase saved, am  I free to use Bisq as a personal wallet?

You could, but even although it is non-custodial it is still a hot wallet, which are one of the least secure types of wallet. I would use it as a trading wallet, and move any funds you are not planning to trade to somewhere more secure such as a hardware wallet.

Since there is no KYC, if illegal activities are carried out on Bisq, is there a way government will trace it since Bisq doesn't have a CEO and not centralized ?

Since Bisq is ran peer to peer, a government cannot shut it down just like they cannot shut down bitcoin itself. Even if they take down the Bisq websites, then individual users can still run the Bisq client. And since there is no KYC or personal data collected, and everything is done via Tor, then Bisq don't have any information to hand over beyond what is already visible on the blockchain.

Why do most people not use this type of system that guarantees privacy, rather many people troop into centralized exchanges like Binance and even use it as wallets.

Greed and laziness are the main ones. People are too lazy to use the slightly more complex Bisq over somewhere like Binance, even although using Binance gives them absolutely zero security, zero privacy, zero ownership of their coins, and zero protection against scams. And of course people are greedy to put their coins in to high yield accounts or staking or some other nonsense which promises obviously unsustainable returns, despite dozens of such platforms going bankrupt or scamming over the past few months and millions of users losing everything.

[Zoomic]

Why do most people not use this type of system that guarantees privacy, rather many people troop into centralized exchanges like Binance and even use it as wallets.

Greed and laziness are the main ones. People are too lazy to use the slightly more complex Bisq over somewhere like Binance, even although using Binance gives them absolutely zero security, zero privacy, zero ownership of their coins, and zero protection against scams. And of course people are greedy to put their coins in to high yield accounts or staking or some other nonsense which promises obviously unsustainable returns, despite dozens of such platforms going bankrupt or scamming over the past few months and millions of users losing everything.

It is indeed worrisome and theses centralized exchanges become more popular as the day goes and they become more dominant.
But then there could be a change  in the future. There are people cross carpeting.
For instance, I have been a centralized guy since I know about cryptocurrency but now I am trying to join the decentralized people. But it is so difficult for people who already knows and enjoy decentralization and privacy to cross over to centralization. That is a big plus.

I feel regret now because the few people I introduced to cryptocurrency, the first place I took them to is Binance and they made account and KYC, they buy coins and sell and make profits and they are happy at me and with themselves. But I now feel like I lead them through the wrong part. It is not totally my fault, but I acted according to the information available to me as at then.

[Cricktor]

It's worth pointing out that multi-sig setups not only have their beauty but also their dangers if you don't fully understand multi-sig. While e.g. in a 2-of-3 multi-sig setup you only need the private keys of any two different co-signers, you still need _all_ three xpubs (or similar extended public keys) from every co-signer to generate and validate public addresses of the multi-sig wallet. You can't afford to loose _all_ details from a single co-signer's wallet completely.

Every co-signer needs the other two co-signer's extended public key details and not a single co-signer's extended public key should be lost completely, otherwise you're screwed.

[Z-tight]

I feel regret now because the few people I introduced to cryptocurrency, the first place I took them to is Binance and they made account and KYC, they buy coins and sell and make profits and they are happy at me and with themselves. But I now feel like I lead them through the wrong part. It is not totally my fault, but I acted according to the information available to me as at then.

You don't have to regret what you did, it happens to most newbies, but you must not force them to immediately switch to decentralized exchanges like Bisq, you can just slowly integrate them with decentralized exchanges and let them know what the advantages are, after sometime they will probably see the benefits and make the switch themselves when they have enough knowledge about things.

What you must do for them is to debunk misleading information that: 'Binance is too big to fail', 'funds are SAFU', '99% of people will lose funds in self custody', 'lock your funds in Binance to earn high APY', etc, these are the wrong information you must debunk, and even if they decide to still use Binance, they should move their funds into their self custody wallets after trading there, they would have no privacy or security using the exchange, but they would own their coins because it is in their self custody wallet, and binance cannot lose it through trading or gambling with it, or when they finally bite the dust.

[larry_vw_1955]

I feel regret now because the few people I introduced to cryptocurrency, the first place I took them to is Binance and they made account and KYC, they buy coins and sell and make profits and they are happy at me and with themselves.

so all of them made profit? did they just get lucky or what exactly?  

[Zoomic]

I will download electrum, because it was recommended. How does the signing and signatories work?

Download the electrum wallet and launch the wallet.

1. Select multisig wallet in the first step.
2. In the next step, select how many total cosigners will be there and out of the total cosigners, to execute a transaction, how many will have to sign the transaction. Say, a total of 2 cosigners will be there and from the 2 cosigners, 2 cosigners will have to agree to send funds from the wallet. It's 2 of 2.
3. Create a new seed
4. You will be given a master public key. Send it somewhere.
5. Ask your cosigner to do the same.
6. In the next step, you will be asked to add cosigners. Ask for the master public key from your cosigner and add it by selecting "Enter cosigner key", ask your cosigner to do the same.
7. You have created the multisig wallet. Check addresses in your wallet and in your cosigner's wallet. Make sure they are the same.

I used multisig wallet long ago and totally forgot how to spend lol. The basic is, out of the 2 consigners, anyone will create a transaction that will be partially signed and save the partially signed transaction data and send the file to your other cosigner. He will have the option to sign the transaction by accessing the transaction through the file you sent. That's it.

In case, you need help, feel free to reach out to me. Don't trust anyone with a big sum of money, not even with a small sum unless they are reputed. Be sure that I will not PM you first.

I am able to setup SegWit wallet for 2 cosigner today with my laptop and mobile phone.
I installed electrum on both devices and follow the steps above. It wasn't complicated but easy going.
Where I would have stocked was where to share master key among the two wallets. It was easy to use my phone to scan the QR Code in my laptop, but it wasn't easy for me to transfer the master key from my laptop to phone. I was given one file to share, but at a time I couldn't see the file to share. I had to alternatively type in the seed phrase from my mobile to the laptop and that served as the master key.

At the end of the process, the address in my phone was same as the one on the laptop. Honestly, I felt happy.
Next I'll send btc to the address and try to spend it.

Thank you o_e_l_e_o for letting me know only me can do it without second person and thank you Little Mouse for providing the steps to achieve this.
Thanks@all

[o_e_l_e_o]

I was given one file to share, but at a time I couldn't see the file to share. I had to alternatively type in the seed phrase from my mobile to the laptop and that served as the master key.

So by doing this, you have lost all the security of the multi-sig.

By typing the seed phrase from your phone in to your laptop, the wallet on your laptop now contains two seed phrases - the one the laptop generated, and the one you entered from your phone. This means it has all the information needed to spend your coins on its own, without requiring any input from the wallet on your phone. Although you still have a multi-sig wallet, the compromise of a single wallet (the one on your laptop) will let an attacker steal your coins.

You'll need to start again from scratch and make sure the seeds phrases stay completely isolated to the devices which generated them. The only thing you should be transferring between devices are your master public keys.

[Zoomic]

I was given one file to share, but at a time I couldn't see the file to share. I had to alternatively type in the seed phrase from my mobile to the laptop and that served as the master key.

So by doing this, you have lost all the security of the multi-sig.

By typing the seed phrase from your phone in to your laptop, the wallet on your laptop now contains two seed phrases - the one the laptop generated, and the one you entered from your phone. This means it has all the information needed to spend your coins on its own, without requiring any input from the wallet on your phone. Although you still have a multi-sig wallet, the compromise of a single wallet (the one on your laptop) will let an attacker steal your coins.

You'll need to start again from scratch and make sure the seeds phrases stay completely isolated to the devices which generated them. The only thing you should be transferring between devices are your master public keys.

Oops! Even when I thought I got it right. Thanks for the follow up, I will do it again the right way. It is better I didn't do it than do it wrongly.

[BlackHatCoiner]

[...]

This is indeed a problem, and I'm not quite sure what percentage of multi-sig users know about it. Hopefully most, but I doubt the overwhelming majority backs up master public keys in paper.

Greed and laziness are the main ones.

I get the latter, but why greed? It comes more expensive to use Binance, unless we take into account the time that a complete newbie has to spend to learn how to use a free software like that.
Edit: Okay, I get what you mean.

I think the main reason newbies begin with Binance is reputation. You will not prefer to begin your journey with a peer-to-peer network, if you don't understand how that works; instead, you will pick the first exchange Google will return you, according to reviews. Binance is more time consuming for a competent user, but I'm not so sure for a complete newbie. Especially in an Internet market where everything is done in custodial manner (i.e., Amazon, Ebay etc.).

[Pmalek]

You don't have to regret what you did, it happens to most newbies, but you must not force them to immediately switch to decentralized exchanges like Bisq, you can just slowly integrate them with decentralized exchanges and let them know what the advantages are, after sometime they will probably see the benefits and make the switch themselves when they have enough knowledge about things.

Someone's willingness to switch from a CEX to a DEX will greatly depend on the success they had with the former. Usually when something works all right, people will keep using it expecting the same or better results. OP's friends made profit on Binance. There is a great chance they will now view Binance as something positive that is worth using because of the returns. On the other hand, it's easier to change the mindset of someone who had a negative experience. OP can always try though.

I think the main reason newbies begin with Binance is reputation. You will not prefer to begin your journey with a peer-to-peer network, if you don't understand how that works; instead, you will pick the first exchange Google will return you, according to reviews.

Exactly. With marketing and advertising, you will come to learn about Binance and similar big names sooner or later. That's not going to happen with Bisq, Peach Bitcoin, AtomicDEX, etc. Keywords like "crypto exchange" are much more popular than "decentralized crypto exchange", so CEXs always have a head start.