Topic: the beauty of multi sig wallet [help needed] (Read 457 times)

Am not sure there's any complementary relationship between a binance p2p and a multi sign wallet, as binance is a centralized exchange platform unlike a multi sign wallet like electrum that's a non-custodial wallet for asset storage and doesn't function as exchange.
Someone should correct me if am wrong.
Be careful about it, so no one take advantage of your enthusiasm in the process.

That's correct. Lightning support was initially experimentally implemented in Version 4.0.1, which was released back in July 2020, before being formally implemented in 4.1.0 in March 2021. Either way, it's been around in Electrum for a while now.

This is a unique feature. It therefore means that one may not have needs for other wallets for multi purposes. Electrum can serve well as one wallet with multiple wallets where each of the wallets are independently unique.
Meanwhile, in the updated electrum wallet, I saw Lightening network and when I generated address there was column for Lightening, address and Url. While the address and url were active, the former was inactive. When, I'm OK with this, I'll move to here, seems electrum can open LN channels now.

I do not have any need for legacy wallets for now, I'm sticking with segwit

Thanks, I don't intend using the 2FA wallets. I just included it above to clarify my question and you rightly understood my question. Thanks for the help and follow up. You are a guardian arc angel.

Yes, each wallet will need its own seed phrase. Electrum seed phrases have a built in versioning system, which means each seed phrase will only generate one type of wallet.

However, Electrum will no longer generate legacy (standard) wallets by default, only segwit ones. If you desperately want a legacy wallet then it can be done via console commands, but I'd recommend just sticking to segwit.

Secondly, be aware that 2FA wallets have nothing to do with the multi-sig set up you were discussing earlier. 2FA wallets use a third party to cosign your transactions, and they charge a fee to do so. If you really want one you can of course generate one, but for your multi-sig set up between computer and phone you shouldn't be using them.

I was stocked here for days and I was shy coming here again to ask how to delete a wallet when you already described for me. I went on YouTube there was not available option.
I checked my mobile again and was convinced there is no option for deleting wallet anywhere.
It just occurred to be to check for an update on the wallet, and there was, after updating there was an option to delete a wallet.

Edit:
Question:
I downloaded an Electrum wallet and have my seed phrase saved. Inside the Electrum wallet app, if I want to create 3 different wallets like (Standard, Segwit and 2fa wallet), do I need 3 different seed phrase for the 3 different wallets?
An answer here will enable me proceed. Thanks!

If you have not funded it and haven't copied any of the addresses out of it (so there is no risk that you or someone else send coins to it in the future), then you can delete it. On Electrum for mobile, open the wallet, tap the wallet name at the top left, tap "Wallet details", and then "Delete Wallet" at the bottom. On desktop just open the wallets folder and delete the specific wallet file.

I would do exactly as you said. Then, I was trying to delete the wallet I created, I named it 'SegWit wallet". Since I made a mistake by linking the seed phrase of the intended segregated witness wallet, will it not be fine to have the option of permanently removing a wallet from the electrum wallet. I am pretty sure I will not be needing that very wallet again in both devices (phone and laptop).

That's OK. It's not the most straightforward process.

So yeah, the only thing which you should share between your wallets is your master public keys. These will be long strings of characters which begin with "Zpub". You can either transfer these via QR code, via a file, or typing them by hand (but make sure to triple check you didn't make a mistake).

Once you've successfully set it up the wallet, you should fund it with a very small amount of bitcoin. Ensure you can spend it using your phone and laptop together, and also ensure you cannot spend it using just one device.

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.

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.   

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.

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.).

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.

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.

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

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

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.

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.

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.

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

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 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.

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.

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)

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.

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.

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?