How to do Escrow Transactions in YodaPlus Multisig Wallet?
Multi-sig as a concept has been around for quite a while now. Just ask your parents to give you an example of multi-signature or multi-key safes; they’ll direct you to your bank locker. They know the concept, too, but it is often disguised under different names.
Digital wallets are online safes used to secure your cryptocurrency. Multi-signature wallets, multi-sig for short, are the ones that require two or more keys to access the wallets. This sounds familiar because we have encountered many use-cases of this concept in our life.
There are various types of multisig wallets available based on the number of keys required to access the wallet. Today, as we’re diving deep into using multisig wallets for Escrow transactions, we’re going to learn a bit more about the 2-of-3 type of Multisig Wallet Account.
The Concept: 2-of-3 type of Multisig Wallet Account
M>.5*n Consensus Account.
M = Signatures required to access your wallet.
N = Total number of signatures.
This type is often called the Classic Multi-sig Wallet, which is a 2-of-3 wallet. Often referred to as the sweet spot of multisig wallets. This type of wallet consists of the best characteristics for creating a cryptocurrency wallet. If one of your keys is lost or one of your devices is compromised, it’s nothing to sweat about. Your funds won’t be accessible anyway. You need 2 out of the 3 total keys to access this wallet. Having understood that, we can explore escrow transactions.
Escrow Transactions.
Escrow is a financial concept in which a third party holds access to funds in a two-way transaction. This third party is often referred to as the mediator, and this party doesn’t release the funds until both parties complete their contractual agreements.
Escrow is something that allows you to carry out transactions between two parties extra securely. We know there are different numbers of keys a multisig wallet can have. Escrow typically uses a 2-of-3 multisig wallet.
Let me explain in detail with an example. Imagine there’s a stellar 1960s Jaguar E-Type car you want to buy secondhand from a person you’ve never met. You contact the person and say, “Hey! This is a big transaction we’re doing. Let’s do it escrow style”. The person agrees, and you both set up an escrow account and the buyer, aka you, transfers funds in it, adding the condition that you will only release it after you have received the car.
In this case, a 2-of-2 wallet isn’t the ideal option, despite only two parties involved in the trade. What happens if the seller has some issue with your delivery conditions? What if the car is in a worse state than promised?
That’s where the basic functionality of escrow transactions utilizing 2-of-3 multisig wallets enters the picture. There’s a separate independent 3rd party involved in this type of transaction acting as a mediator. There are two possible scenarios:
- Both parties agree upon the trade, and with the agreement from the mediator, they use their own two private keys to access the wallet and carry out the transaction.
- Both parties disagree, and then the mediator needs to step in with their private key and carry out the transaction based on the decision they deem right.
Let me explain the way the mediator works in these situations. The mediator is already familiar with the contractual agreements. They are additionally also provided with the facts of the dispute from both parties. The mediator will then weigh the facts and terms amongst each other. Then the mediator will favor whichever party comes out to be the most right and use their key to carry out the transaction in that direction.
In both these cases, the funds will never be stuck in the wallet, helping guarantee that all transactions are successful. The only scenario when the funds might get stuck is if the mediator is inaccessible or more than one key is lost or misplaced.
Conclusion
With cryptocurrency gaining a lot of traction across the globe, there have been concerns regarding secure crypto transactions. Well, Escrow Chains have gained a reputation of being secure and trustworthy. Therefore, they have been widely used while transacting with
Multisig wallets.
For more information on Yodaplus Multisig Vault, please visit https://help.yplusvault.com/
If you want to create your own vault, check this link — https://apothem.yplusvault.com/#/welcome
In case you want to use test XDC, check out this one — https://faucet.apothem.network/
