Mulitsig, also called multisignature, is the requirement for a transaction to have two or more signatures before it can be executed. Multisig provides more security than single-signature transactions. Although the use of multiple signatures from authorized parties to execute on transactions is a long-established practice, the term multisignature or multisig today often refers to its application within the cybercurrency Bitcoin and similar electronic transactions. Multisig transactions are also referred to as M-of-N transactions, with M being the required number of signatures or keys and N being the total number of signatures or keys involved in the transaction. The concept can be applied in cybercurrencies used by financial institutions as well as in the execution of contracts and private sales of digital resources.Content Continues Below
In a multisig transaction, at least two signatures are required to approve the transaction between three addresses; for example, in a Bitcoin transaction, the two signatures would be the sender (in other words, the person spending his or her bitcoin) and a second private key. The additional signature or signatures can ensure that the transaction is only fully executed when both parties are satisfied that the terms of the transaction have been met; so if party A is buying a product from party B, then party C can hold the bitcoin payment in an escrow-like arrangement, executing payment after the product has been exchanged. It is also useful for when more than one party has ownership and all parties are needed to execute on the transaction; this way, no one party can execute a transaction without the other parties agreeing to it.
In many ways, multisig is no different than paper-based financial transactions and contractual agreements that require more than one signature, such as corporate checks that need two or more signatures, which have existed for generations. Other past technologies, such as those that enable the electronic transfer of cash (wire transfers) also typically have multisignature requirements. However, multisig in Bitcoin works with the underlying blockchain technology and it’s that coupling of the blockchain technology with the multisignature requirements that represents an evolution in how electronic transactions will happen. Multisignature transactions on the blockchain are more transparent because there’s a non-centralized record of those involved, which ostensibly bolsters the security of the transaction and discourages illicit activity.