What is a multisignature?

Multisignature, also known as multisig, is a technology that allows several private keys to sign transactions in order to increase security and privacy while approving the transaction transfer. How does it work and why do we need it? Is it so useful? Let’s find out!

A multisignature is a type of threshold signature that is created as verification of terms made by a cryptocurrency’s basic scripting language.

When and how did multisignature technology emerge?

Though the multisignature technology gained popularity in the crypto industry, its fundamental principles existed long before bitcoin.

For hundreds of years, the multisignature principle was used to secure monastic crypts where saints’ relics were kept. The abbot of a monastery gave the monks keys to various parts of the tombs. No monk could have access to the saints’ remains alone and steal them.

The multisignature technology was first implemented in bitcoin addresses in 2012. The first wallet with the multisignature function was created in 2013. Today there are more than a dozen of them.

How does the multisignature technology work?

You can only access the tools stored in a multisig wallet if two or more signatures are present at the same time.

It is analogous to a security box or a safe with two locks and two keys. Mary has one key, and Juan has the other. They can only open a box if they give the keys at the same time. They cannot open the box on their own.

Thus, multisig wallets add an extra layer of security. Because of this technology, users can avoid situations in which a wallet has a single private key, a single point of failure, and is vulnerable to cybercriminal attacks.

Because multisig wallets require more than one signature, they are ideal for businesses and corporations that want to store funds in shared wallets.

What are the different types of multisigs?

1-of-2
The combined account of two business partners — the signature of either party is enough to spend funds.

2-of-2
Combined savings account of two business partners — both signatures are required to spend funds, so neither account holder can spend money without the approval of the other.

2-of-2
A wallet with two–factor authentication: one is stored in a computer, the other in a smartphone. Funds cannot be spent without the signature of both devices.

3-of-5
A low-trust donation address — each of the project’s five trusted participants keeps a private key. Money can only be spent by three people, but donations can be made to the project address by anyone. A scheme like this reduces the risk of embezzlement, hacking, virus infection, and money loss if one of the participants loses interest in the project. The blockchain shows which private key was used in the final signature, which improves accounting.

2-of-3
A buyer-seller relationship with an untrustworthy conditional account (escrow) — the buyer transfers funds to the 2-of-3 address, and the seller serves as the third arbitrator.

If the transaction is successful, both the buyer and seller sign the agreement, which returns the funds to the seller. In the event of a failure, they can sign a transaction to return the funds to the buyer.

If they cannot reach an agreement, they turn to a third party, who acts as an arbitrator and provides a second signature to the party it deems worthy. Because he only has one key, the arbiter cannot steal funds.

2-of-3
A board of three managers is in charge of a company’s or organization’s funds; these funds cannot be spent without the approval of two of the three managers. Larger multi-signature transactions — 3-of-5, 5-of-9, etc. — are possible for large organizations.

2-of-3
A hot storage wallet for businesses. The Bitcoin exchange stores one private key online and the other as a paper reserve. A separate cybersecurity protection company stores the third key online and signs transactions only after checking a number of factors (absence/presence in black and white lists, failure to exceed the limit on the number of withdrawals for a specific period, two-factor authentication, compliance with regulatory standards, and so on). Bitcoins cannot be stolen if the exchange’s or company’s hot wallet is compromised. If a cyber defense company fails, the exchange can access funds through a paper reserve.

2-of-3
A decentralized cold storage cell — one key is kept in the user’s home safe, another in a bank safe, and a copy of the third key is kept in the user’s office by a close friend or relative. The home cell is safe from robbers because spending money necessitates a trip to a friend, a bank, or an office.

2-of-2
Smart contracts — TumbleBit, Coinswap, Lightning Network.

1 or 3-of-4
Distributed reserve — the primary user can use the wallet at will, but if this owner loses his private keys, they can be restored with the help of three of the four other trusted friends/organizations. One key is kept in a safe deposit box, while the other three are kept by friends. In the event of the owner’s death, the funds in the cell can be transferred to one of his trusted friends or someone who can use the assistance of trusted friends, according to his will.

What is a ring signature?

A ring signature is a type of cryptographic digital signature that can be used by any member of a group of users, each with their own key.

One of the security parameters of a digital signature is that it is impossible to determine which key of a group member was used to sign using computational means. Ring signatures are similar to group signatures but differ in two ways: an individual signature cannot be deanonymized, and members of any user group can become signatories without any additional configuration.

The term “ring signature” refers to the signature generation algorithm’s ring-like structure.

Who created a ring signature and when?

Ring signatures were invented by cryptographers Ron Rivest, Ron Rivestand Yael Tauman Kalai and presented this technology at the ASIACRYPT International conference in 2001.

The original idea was that ring signatures would be used to prevent the leakage of classified information, particularly from government offices. The original model was then optimized.

In 2006, Ichiro Fujisaki and Kotaro Suzuki proposed a solution called Traceable Ring Signatures to fix the vulnerability of ring signature technology (the risk of manipulation by malicious or irresponsible signatories). An optimized version of this type of ring signature is currently used in CryptoNote coins and ensures that the sender is untraceable in a P2P transaction, hiding the source of the inputs in the transaction.

In 2015, Monero Research Labs put forward the concept of Ring Confidential Transactions, which was introduced and implemented by Bitcoin Core developer Gregory Maxwell. Expanding the anonymization capabilities inherent in the original ring signature, ring confidential transactions hide not only the identity of the sender, but also the transaction amounts between the sender and the recipient.

How does a ring signature work?

Ring signatures take group signature technology to a new level, providing the user with increased privacy. Ring signatures protect the sender in the P2P transaction format of cryptocurrencies such as CryptoNote by hiding the receiving side of the transaction in such a way that it is impossible to determine who the signatory of the transaction is computationally.

Ring signatures are a more advanced scheme than traditional digital signatures such as ECDSA or Schnorr signatures.

Ring signatures may necessitate the use of multiple public keys for verification. The “ring” signature gets its name from the fact that it is made up of a number of partial digital signatures from different users. These signatures combine to form a single signature. A ring is a collection of signatures that can be chosen at random from the outputs of other users on the blockchain.

Ring signatures are similar to a scheme in which several parties sign a check from a joint bank account, but the signatory from among the group members is hidden using cryptography.

The structure of the ring signature (using the example of the Monero cryptocurrency):

• Alice wants to send Bob 10 Monero tokens, and initiates the transaction via her Monaro wallet.
• The digital signature for this transaction is a one-time key that starts with the output spent from her wallet.
• Unsigned ring signatures are past transactional outputs that are randomly selected from the blockchain and act as “deceptions” in the transaction.
• All members of the chain are possible signatories of the transaction — a third party cannot, by computational means, establish a real signatory.
• All outputs of the ring signature together form the transaction input.
• Alice, the transaction’s creator, has the right to spend the transaction amount in such a way that her identity cannot be distinguished from the identities of the other ring participants.
• Although Alice’s public key is used in her own transaction, it can optionally be used in other transactions on the Monero network as a masking factor.

Automatic creation of unique one–time keys prevents the connectability of transactions and is possible thanks to the optimization of key exchange using the Diffie-Hellman method.

What is a key image?

Double spending is a problem for private currencies such as Monero. Because these networks are useless as a digital currency due to the lack of a solution, a solution was found in the form of using key images in conjunction with a ring signature scheme.

Every ring signature transaction includes a key image, which is a cryptographic key derived from the spent output. On the blockchain, each output has only one unique key image. The blockchain stores a list of all key images that have been used.

It is impossible to correlate the output on the blockchain and its key image due to the cryptographic features of key images. Any new ring signatures using a duplicate of the key image are automatically rejected as an attempt at double spending.

What are Ring CTs?

Ring CTs is an enhanced version of ring signature technology. If the primary purpose of ring signatures is to ensure the confidentiality of the transaction’s sender, then ring confidential transactions were created to increase confidentiality for both the sender and the recipient by concealing the transaction amount.

Because ring signatures could only contain equivalent outputs, the outputs were “split” into separate rings in the original ring signature format. As a result, third parties could see the actual transaction amounts. Because of the use of Ring CTs, transactions are stored in a “turbid” blockchain rather than a transparent one like the bitcoin blockchain.

Ring CTs transactions no longer need to be broken down into parts and included in rings of equivalent outputs — a wallet in a cryptocurrency using Ring CTs can arbitrarily select members of the ring from any amount of output.

Ring CTs also employ a commitment scheme based on a range proof, which confirms that the amount used in the transaction is greater than 0 and less than a certain number while not disclosing transaction amounts. External observers cannot see the transaction, but they can be confident that it is valid due to cryptographic verification.

If you have anything to add to the multisig topic, welcome to our comments!
In terms of tracking the updates, subscribe to our Medium feed.

Stay tuned!

New to trading? Try crypto trading bots or copy trading