21 BTCMultisig
In plain words
Multisig means a payment needs several keys out of a set, for example any 2 of 3. Losing one key, or having one stolen, does not lose the coins.
Short definition
A wallet that needs several keys to spend, e.g. 2-of-3.
How it works
The coins are locked by a script that lists n public keys and requires m signatures. Since Taproot the keys can also be aggregated so a multisig spend looks like a single-signature one on-chain.
Every key holder must keep not only their seed but also the wallet configuration (all xpubs, or an output descriptor); without it the remaining keys cannot find the coins.
See also
- Seed phraseA seed phrase is a list of 12 or 24 ordinary words that can recreate all the keys of a wallet. Whoever has the words has the bitcoin, so write them on paper or metal and never type them into a website.
- Hardware walletA hardware wallet is a small device that keeps your private keys offline and signs transactions inside itself. Even if your computer is infected, the keys never leave the device.
- DescriptorA text that fully describes how a wallet derives its addresses; essential backup for multisig.
- PSBTPartially Signed Bitcoin Transaction: a standard file format to pass a transaction between wallets for signing.
- TaprootTaproot is a 2021 upgrade that added Schnorr signatures and a way to hide unused spending conditions. Complex wallets, such as multisig, can look like ordinary single-key payments.
References
- BIP 16 (github.com/bitcoin/bips) github.com
- BIP 141 (github.com/bitcoin/bips) github.com
- BIP 341 (github.com/bitcoin/bips) github.com
- Bitcoin Wiki: Multi-signature en.bitcoin.it