The Bitcoin network experiences a high level of security largely because of its decentralized nature. Nevertheless, the network users do face security threats especially at touch points, where they interact with it.
It is common for people to lose bitcoins from their wallets through hacks as well as fraud schemes.
One security feature that has sprung up to protect users from this and other potential risks is the Multisignature. It fits into a variety of use cases, including mass market applications for both businesses and individuals.
Today, it is commonly used by exchange, vault, escrow and wallet service providers.
So what is multisignature?
It is simply the use of more than one signatory to unlock an account, which, in this case, is a Bitcoin wallet. It is comparable to a couple who share a joint account at a bank. Both partners will have to co-sign to make any withdrawals.
Aside from Bitcoin wallets, the multisignature feature is applicable in any case where more than one authority is required to approve an action. This could be in land title registration or trust fund liquidations.
A Bitcoin wallet is paired public key and private key. The public key is the address that you share with anyone who wants to send you money. A private key, however, should be held safely because, without it, you will not access the funds. If it falls into the hands of others, you are likely to lose ownership of your money.
In the Multisignature scenario, a public address is generated with more than one corresponding private keys. That means, to authorize the movement of any amount from the wallet, all the corresponding private keys are required to unlock it.
More security and check on joint ownership
The different private keys can optionally be owned by separate individuals and thus stored in different locations. This arrangement drastically diminishes the probability of a successful attack on the wallet in question. Anyone attempting to get an unauthorized access will need to obtain all the keys.
Besides working as a safeguard for potential theft, it also serves as a check and balance. No one can spend funds jointly owned without the permission of the other stakeholders.
In order to avoid the risk of losing funds through the loss of one of the private keys, there is the option of having one master key that can override each of the other keys. This super key should be kept separate from the other keys.
It is important to note that the minimum number of keys needed for unlocking access is set in advance by the person generating this type of address. Afterward, altering this threshold is impossible.
All in all, care should be observed when handling multiple private keys, especially in how they are stored. Still, they are one of the best ways to guard against malware and criminal attacks. Open source applications such Copay wallet, are making it easier for mainstream users to tap into this feature.