The Current State of Bitcoin Multi-Signature

In this article, I will review the history of multi-signature, introduce its use in the Bitcoin network, and look at how multi-signature will change the future.

What is multi-signature?

Multi-signature is a technology that allows multiple public keys to co-sign a Bitcoin transaction. For example, using multi-signature technology, Alice, Bob and Charlie can jointly supervise a Bitcoin, so that at least two of them need to agree to use the Bitcoin.

When Bitcoin was first released, the coin could only be stored with a public key, which means that anyone who knows the private key that matches the public key can control the Bitcoin under the public key.

For a reliable and secure system, immunity to single point failure is a basic principle (single point failure means that if a failure occurs here, the entire system stops functioning). However, this principle is not respected here, because as long as the private key is lost or leaked, it means losing the identity of the legal owner of Bitcoin.

The earliest solution to this problem was a cryptographic method called secret fragments. It breaks a private key into several independent parts (called fragments), and a certain number of fragments (less than the total number) can be combined to reconstruct the original private key. In this way, the loss or disclosure of a private key fragment will not endanger the security of Bitcoin.

However, this approach is not well compatible with the Bitcoin software: you have to use additional tools to create or merge private key fragments. Moreover, in order to use Bitcoin, you have to put a lot of fragments together, which means that the original purpose of immunity to single points of failure is still not well achieved.

In fact, the solution has always been included in the Bitcoin core code and has existed since the beginning, but it has not been standardized: there are two script operations that allow multi-signatures for ordinary Bitcoin public keys. In this way, the different private keys that need to be verified in multi-signature transactions do not need to be in the same space, which can greatly improve the security of the system compared to the method of using a single private key or encrypted fragments.

A Bitcoin Improvement Protocol ( BIP11 ) standardized this type of transaction and limited the maximum number of keys to 3. On December 20, 2011, BIP11 was incorporated into the Bitcoin Core code, and in late January 2012, the first BIP11-type transaction appeared on the blockchain.

Multi-Signature and Pay to Script Hash ( P2SH )

Although multi-signature has been possible since early 2012 thanks to BIP11, its mass adoption is thanks to another type of transaction: Pay to Script Hash, or P2SH . This new transaction type allows any script to be used to validate the transaction. Prior to this, transactions could only be validated using strictly specific scripts.

Since arbitrary scripts can be used, the maximum number of keys that can be used in a multi-signature script is increased from the 3 accepted by BIP11 type multi-signatures to the 15 compressed keys and corresponding signatures allowed by P2SH scripts.

Most importantly, P2SH adds a new Bitcoin address model. Under BIP11, to simply provide someone with a multi-signature address and transact with him, you must tell him exactly how to set up your multi-signature to send coins: what the secret keys are, how many are needed to verify the transaction, how to initiate a multi-signature...

P2SH reduces the difficulty of using multiple signatures to the same level as using a single public key. Using this new technology, a large number of online wallets and software have emerged, while improving the security of the Bitcoin network.

The current state of multi-signature

Today, more than 65 million Bitcoin transactions have used multi-signature technology, with the vast majority using P2SH, which shows that P2SH has played a vital role in the acceptance of multi-signature technology.

Today, more than 10% of all Bitcoin uses P2SH addresses (most of which use multi-sig), and it is no exaggeration to say that multi-sig has occupied a very important position in the Bitcoin ecosystem in the past two years.

Among the use cases for multi-signature, two most popular usages emerge:

1. ·2-3 multi-signature, about 46.9 million Bitcoin transactions from about 1.1 million addresses use this method.

2. 2-2 multi-signature, used by about 261,000 addresses for 13.3 million Bitcoin transactions.

Interestingly, of the top 10 busiest P2SH addresses (i.e., the addresses that receive and send the most Bitcoin), the top 4 use 2-2 multi-signatures, accounting for 80% of all transactions using 2-2 multi-signatures. This also means that 2-3 multi-signatures are the most commonly used multi-signature settings.

A common usage of 2-3 multi-signature is that a user generates two keys: one is saved as a backup, and the other is stored in the wallet; the remaining key is generated and saved by the wallet service provider. When paying Bitcoin, the user and the wallet service provider jointly sign the transaction. If the user or the wallet service provider loses the secret key, the backup key can be used to transfer funds. However, the wallet service provider cannot use the user's funds privately.

What’s new?

The newly released Bitcoin Core 0.11.2 introduces a new script operation: OP_CHECKLOCKTIMEVERIFY. CLTV for short

The new payment method allows transaction outputs to be unavailable until a certain point in the future. Although similar functions can be achieved using simple transaction settings and transaction lock times, CLTV can be combined with other script instructions, such as multi-signature and algorithmic operations, to create complex transaction contracts.

For example, you can create a 2-of-3 multi-signature output that gets a signature after a certain date. The CLTV command is a step towards more complex applications of Bitcoin.

Another important development taking shape is payment channels. Payment channels allow one party to make repeated micropayments to another, but only publish the first and last transactions, thus avoiding overloading the blockchain. Some variations of this idea, such as the Lightning Network, extend this idea to allow users to make secure bitcoin transactions over a network of payment channels without publishing every transaction on the blockchain.

in conclusion

All of these innovations make multi-signatures increasingly important in the more complex and fascinating applications of the Bitcoin network.

Some people think that Bitcoin is dead, but in the past two years, I have seen an explosion of new usage and new concepts brought about by multi-signature, which undoubtedly proves that Bitcoin is alive and well.

Original link: https://medium.com/@alcio/the-state-of-bitcoin-multisig-82b3bf09b1ca#.5rkhrix00
By Antoine Le Calvez
Translator: Mian Shen Hu Fa
Translator's BTC address: 1AgQhZScPTYeZdz5zQ86Nr4dwhX1RPXkXC
Source (translation): Babbitt Information (http://www.8btc.com/the-state-of-bitcoin-multisig)