A Multi-sig tutorial for Electum -- Strong, independent, don't need no market

I couldn't find a good how-to for multi-sig when I was searching before. I decided to make one. I hope you all find it useful.

Multi-sig guide for Electrum
(All parties)

1.) Open up Electrum

2.) Create a new wallet:
File>New/Restore(Ctrl+N)
Give it any name.

3.) Make it a multi-sig:
Select create new wallet, and choose Multi-signature as the wallet type.

4.) Choose (2 of 2) or (2 of 3) or (whatever)
Must be same as what the other trade partners do (I'm pretty sure).

5.) Save your seed words
until you've drained the wallet and are done with it. Choose a safe way to store them.

6.) Save your master public key.
Again, be safe.
Note - At this time, your wallet is saved in a file with your other wallets. You can access it with File> Open...
You could also restore it with the seed words.

7.) Have a conversation with those you may wish to do business with.
Have all parties partially create a multi-sig wallet, as described in the 6 steps above.
All parties in the transaction will then need to exchange master public keys, so have them ready.

8.) Everyone go back to creating your multi-sig wallet.
If you still have the wallet creation wizard open (it should ask for co-signers' master public keys), skip to the next step. If not, you can get here by opening up or restoring the multi-sig wallet file in electrum. View the details of step 6 for ways to do this.

9.) Enter the master public key(s)
Enter the keys of the cosigner(s) into the text box, and proceed. Once you do this, you will have created a wallet.
Coins that are deposited into this wallet by anyone cannot be removed without being signed by the requisite number of parties (e.g. 2 of 2, 2 of 3, x of y, ...).

10.) Get some bitcoin into the wallet
The party offering bitcoin will send their bitcoin to one of the receiving addresses in the multi-signature wallet.
All parties in the transaction which have created a wallet up to this point can see this coin in the wallet once it's been confirmed.

11.) Party who is expecting to receive bitcoin creates a transaction
Send coin from the multi-sig wallet to the receiver's address, sign it by entering your password, and it will create a partial transaction.
Save the transaction (click the button) to a file. This will create a text file with transaction info.
Copy the text from transaction file, and send it (encrypted, of course) to the other party(s). They need this information to sign it as well.
Now the vendor can send their goods along to their eager customer.

12.) Requisite parties sign the transaction to finalize it
From within Electrum: Tools> Load Transaction> From text
Enter the raw transaction text that you received from the initiator of the transaction.

13.) Profit !?
Everyone lives happily ever after.

Notes:
If 2 of 2 are chosen, it should be safe for personal amounts I believe, as there is no incentive for anyone to scam. If the buyer never signs the transaction after receiving their product/services, their coin are forever stuck in that wallet, and therefore are not theirs to spend anymore.
I suppose either party could hold out on the other just to piss them off. I really don't think that this would happen very often.

For large purchases, maybe a trustworthy, neutral party should be used in a 2 of 3 wallet configuration. It could cause people some real grief to see BTCs or 10's of BTC's being locked in an account indefinitely. As for a way of getting anonymous 3rd parties which are also trustworthy and not prone to doing shady side deals, I can't quite give an answer for that.


Comments


[2 Points] TheRealDealMarket:

Who will decide in the case of a dispute?

A market with multisig support is just fine.

You state - If the buyer never signs the transaction after receiving their product/services, their coin are forever stuck in that wallet, and therefore are not theirs to spend anymore.

Have you ever heard of game theory and the prisoner dilemma?

One could say hey, your coins are in this address, you can give me %50 or stay with nothing... therefor 2/2 is problematic.

Nice tutorial though! Our market offers both types of escrow and would like to see more vendors and users being less lazy.


[1 Points] bigbawlzxm:

This is that good shit dude.
Thank you for putting this together.


[1 Points] god_send:

I am currently going through this and following your steps. This is very well written and informative.

Thank you!!!

This is exactly the kind of content we need around here, and you did this just because you wanted to help. I made a post about people needing to be more like, well, you!


[1 Points] KodrieJEDeye:

Was just about to start reading up on this, when I noticed your electrum guide! Cheers mate!


[1 Points] Shibbyoleth:

I encourage everyone to role-play both sides using two multi-sig wallets.

Knawwledge is power!


[1 Points] maddaddam90:

Thanks for this. I hadn't yet delved into multisig because I wasn't sure where to look for a good Electrum explanation. I know one has been posted here before (or, I thought it had), but hadn't gotten around to looking for it, so this is timely.


[1 Points] None:

Thanks for this.


[1 Points] onlinedrugsarebest:

Thanks, dude. Much appreciated.