A Multisignature Wallet, or simply referred to as a MultiSig wallet, is a type of electronic wallet that requires more than just one signature, or private key, in order to be accessed. Ordinarily, electronic wallets only require one private key to grant access, i.e. the private key belonging to the owner of the wallet. But a MultiSig wallet has, usually, three private keys divided among three separate parties. This way it is ensured that the assets inside the wallet cannot be accessed with just one private key and by just one person. Therefore, requiring more than one private key to open up, a MultiSig wallet offers a variety of applications, mostly related to security.
The services offered by Counos implement the MultiSig wallet technology in numerous occasions. But mainly this technology is used in the Counos Escrow System and in Counos Decentralized Exchange (otherwise known as Counos DEX). As was mentioned above, the MultiSig wallet technology ensures a higher level of safety and security for the content of a wallet, guaranteeing that it cannot be accessed by just one party. For this reason, MultiSig wallet is used in Counos Escrow and Counos DEX, where crypto-based trades and deals take place. In the following parts, we will discuss exactly how a MultiSig wallet works and how it is operated in specific occasions in Counos Escrow and Counos DEX.
To simply explain how a MultiSig wallet works we can imagine a box. This secure box is locked using two locks and therefore has two different keys. These two different keys are given to two different people. So the box cannot be opened with one key. Both keys from the both people are required for the box to be opened. This is basically how a MultiSig wallet works. The assets stored inside a MultiSig wallet can only be accessed when two or more signatures, or private keys, are available. So the use of MultiSig wallet guarantees an extra security level when crypto assets are involved. But when should MultiSig wallets be used over single key wallets?
Ordinarily, cryptocurrencies are stored in single-key addresses. Therefore whoever holds the signature, or private key, to that address can access the cryptocurrencies stored in it. So this way only one key is enough to access the wallet without authorization needed from any other party. Therefore, it is much faster and more efficient for people to store their cryptocurrencies. But with respect to the nature of the single-key wallets, there can be a number of issues. One of the main issues with regard to such wallets is that hackers can gain access to the key and thus gain access to the assets inside the wallet. But it can be seen that using a MultiSig wallet can make it so much more harder for hackers to gain access to all the keys.
Plus, when organizations, companies, firms, and basically a number of parties involved in a financial endeavor together work with cryptocurrencies, using a single-key wallet to store the cryptocurrencies of the enterprise is obviously not a great idea and it would definitely not fly easily by all the members involved. Again, MultiSig wallet to the rescue. In such situations MultiSig wallets can be used to store cryptocurrencies in a way that accessing to them would require multiple keys held by multiple parties.
While MultiSig wallets can have multiple private keys, most have three. The MultiSig wallets that have three private keys usually open when two out of three keys are available. This is the type of MultiSig wallets used in Counos DEX and Counos Escrow. In both of these services, the three private keys of the MultiSig wallet are divided as follows: one private key is given to the buyer, one private key is given to the seller, and the third private key is given to the Counos agent, represented by an official legal entity. With this combination, it is guaranteed that in Counos DEX, both buyer and seller will definitely get their cryptocurrency, and that there are no fake deals or scams. And also in Counos Escrow, it is guaranteed that when a buyer is acquiring some sort of goods or services from a seller, the buyer definitely gets their goods or services as they wanted, and the seller gets paid exactly how much they should have been paid. Thus the use of MultiSig wallet provides an unprecedented level of security in crypto-based trades and deals that take place in Counos services.