How twofactor authentication uses in multisig wallet development services?
What is Multi-sig wallet development?
Multisig otherwise denoted as multi-signature, which is a specific type of digital signature that makes it possible for two or more users to sign documents as a group. Therefore, a multi-signature is produced through the combination of multiple unique signatures. Multisig technology has been extant within the world of cryptocurrencies, but the principle is one that existed long before the creation of Bitcoin.
Increasing security
By using a multisig wallet, users are able to prevent the problems caused by the loss or theft of a private key. So even if one of the keys are compromised, the funds are still safe.
Imagine that Alice creates a 2-of-3 multisig address and then stores each private key into a different place or device (e.g. mobile phone, laptop, and tablet). Even if her mobile device is stolen, the thief won’t be able to access her funds using only 1 of the 3 keys.
Malicious attacks aside, if anyone loses one of her private keys, she can still access her funds using the other 2 keys.
Two-factor authentication
By creating a multisig wallet that requires two keys, Alice is able to create a two-factor authentication mechanism to access her funds. For instance, she could have one private key stored in her laptop and the other one in her mobile device (or even on a piece of paper). This would ensure that only someone who has access to both keys is able to make a transaction.
Keep in mind, however, that using multisig technology as a two-factor authentication can be dangerous — especially if it is set as a 2-of-2 multisig address. If one of the keys are lost, you won’t be able to access your funds. Therefore, using a 2-of-3 setup or a third party 2FA service that counts with backup codes would be safer. When it comes to exchange trading accounts, using Google Authenticator is highly recommended.
Escrow transactions
Creating a 2-of-3 multisig wallet can allow for an escrow transaction between two parties (Alice and Bob) that includes a third party (Charlie) as a mutually trusted arbiter in case anything goes wrong.
In such a scenario, Alice would first deposit the funds, which would be locked up (neither user being able to access them on their own). Then, if Bob provides the goods or services as agreed, they can both use their keys to sign and complete the transaction.
Charlie, the arbiter, would only need to step in if there was a dispute, at which point he could use his key to create a signature that would be provided to either Alice or Bob, according to Charlie’s judgment.
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