Topic: the beauty of multi sig wallet [help needed] - page 2. (Read 423 times)

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.

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.

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.

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.

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.

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?

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.

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.

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.

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.

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?