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Multi-Signature Address

A multi-signature (multi-sig) address is a Bitcoin address that requires two or more private keys to authorize Bitcoin transactions. The general purpose of using multi-sig addresses is to increase security.

Multi-signature addresses can have various arrangements depending on the desired level of security. The general formula M-of-N describes how secure a wallet is, where M is the number of keys required to create a transaction and N is the total number of keys associated with the wallet.

For example, if a husband and wife want to have a joint Bitcoin wallet that can only be spent by themselves, they need a wallet where N = 2. If they want to be able to spend from the wallet without the other’s permission, then M =1. If they want to have it so both parties must be present to spend from the wallet, then M = 2.

Smart contracts are a type of multi-signature wallet type 2 of 2 that are required to make the bidirectional payment channels required for the Lightning Network.