One of the great things about bitcoin is the use of multisignature technology, or otherwise known as multisig.
Traditionally speaking, with bitcoin you are your own bank, guarding your own safe with your money inside the safe. With a regular bitcoin wallet address (starts with a 1), there is one public key and one private key. The private key is used to unlock your safe sort of speak. Withmultisig, it allows users to have one bitcoin address with multiple key holders, so funds from the address cannot be spent until all key holders sign off on it. In this tutorial, we will walk you through creating a multisig address and show you how to spend from it using the service Coinbin.
Coinbin (Coinb.in) is a third-party service that is robust in the sense that it gives users full control of all actions on their site; from creating wallets, creating addresses, creating raw transactions, signing, broadcasting, etc. Coinbin is more for the advanced bitcoin user, but with a little patience, it can be used by anyone. It’s also open source and can be saved offline for better security.
Creating a multisig address
In order to create a multisig address, you will need two or more public public keys to generate it. Multisig addresses start with the number 3. The more key holders or signers you want, the more public keys you will need. For example, if you want 3-of-5 people to be required to sign a transaction in order to send, you will need 5 public keys and 3 will be required to send funds from it.
Using Coinbin, under the New tab click on Multisig Address. Enter in the public keys in each row, adding or removing rows based on the number of signers you want. Once that is complete, submit it and you will now have generated a new multisig address with a redeemable script. It will look like the below.
Now that you have a multisig address, you really won’t be doing much of anything unless there are funds in it. For the sake of new users attempting multisig for the first time, it’s a good idea to test this entire process first with just a little bit of bitcoin that you are willing to lose in case it doesn’t work. It will work, but everyone makes mistakes, so start small until you are confident in the process. Once you have funded your multisig address, you can now spend from it.
Spending from a multisig address
Continuing with Coinbin, under the New tab click on Transaction. Here you will want to create a transaction to spend from your new multisig address. Enter in the redeem script and click Load. You will see the Outputs and Inputs. As long as you have confirmed transactions in the new multisig address, click on Inputs and you will see the funds there. Click back to Outputs to spend. Enter in the address you want to send bitcoin to and the amount. The Transaction Fee field will display the remaining balance; this is important to note, so either you spend it all or create a change address to send the change to. Click Submit and you will get an encoded transaction ready to be verified and signed.
Take the encoded transaction and click on the Verify tab on the top of Coinbin. Verify the transaction. Then click on the Sign tab on the top of Coinbin; this is where the multisig part comes into play.
The signers will need to enter in their private keys and join the transactions together to create the multisig transaction. The first signer will enter in the private key and encoded transaction and generate a Signed Transaction. The second signer will enter in their private key and take the Signed Transaction and apply it to the encoded transaction. This gets a little tricky here, but once it’s complete click Submit. Then go to the Broadcast tab and take the entire encoded transaction to submit the transaction to the bitcoin network. Once this is completed, you are done.
As mentioned above, for new users the most complex part is getting both signers to join the transactions together which is where I’ve seen users slip up in the past. Someone made a YouTubevideo on this entire process, which sometimes videos are easier to help demonstrate how to do this, which I have embedded below. The video does a great job as well on showing how to use Coinbin to do exactly what we outlined above. If you have questions, please post them in the comments below!