Hodl Hodl introduces 2 out of 3 multisig escrow
Today Hodl Hodl, a P2P cryptocurrency exchange, introduces a new type of multisig escrow account available for contracts at the exchange. From now on, during offer creation, every user will choose what type of contract will be created by the offer: 2-out-of-2 or 2-out-of-3.
We have recently added a new type of escrow, and it’s already available for trades, it requires 2 out of 3 keys for making a release. This means, that from now on, in 2 out of 3 contracts, buyers have some control over the funds locked in escrow, since one of the keys belongs to himself, and the other two belong to the seller and Hodl Hodl. Also, 2 out of 2 contracts are still available for trading.
How does it work?
In every trade, Hodl Hodl exchange generates a unique multisig escrow cryptocurrency address, where the seller locks the funds, and then buyer sends the payment. Only after seller has received the payment, he releases funds from escrow directly to the buyers wallet.
In a regular 2 out of 3 contract, where everything goes well, buyer’s key is not needed — it only comes into play if the contract was disputed, and Hodl Hodl administrator resolved it in favor of buyer. In this case, buyer is able to sign a release transaction with his key and receive the funds without seller’s participation. This is how the 2 out of 3 contract type works.
Differences between these types of contracts
Now, you may have a question: what does the term “contract type” mean? Contract type indicates how many keys are needed to make a release from escrow:
- Contract type “2 out of 2”: this means, that in contracts of this type, 2 keys are needed for a release, and in total there are 2 keys to escrow: one belongs to the seller, and one to Hodl Hodl.
- Contract type “2 out of 3”: this means, that in contracts of this type, 2 keys are needed for a release, and in total there are 3 keys to escrow: one belongs to the seller, one to the buyer, and one to Hodl Hodl.
During the offer creation process, every user specifies what type of contract will be created with this specific offer. Once the offer is created, the contract type will be shown in the offer list for other users.
In case you already had offer(-s) before today, these contract types will remain 2 out of 2, so if you want, you can now edit your offer(-s).
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