Bitcoin QT private key

You may have heard about bitcoin 2.0 features in recent weeks, one of which being multisignature wallets. To reiterate, multisignature bitcoin wallets have more than one private key associated with them, requiring a certain amount in order to access their funds.

A 2-of-3 bitcoin wallet, for example, requires 2 out of the 3 available private keys in order to access its funds. This sounds good in theory for conducting transactions with others, but how would this actually pan out? To answer this question, Im usinge the example of a service called Cosign Coin, a multisignature escrow service.

How does Cosign Coin work?

Cosign Coin is not yet another cryptocurrency, but a multisignature escrow that allows you to conduct transactions without the need to trust the escrow service.

Let’s say you would like to sell a used graphics card for about 0.5 BTC. Normally, as the seller, you would send that 0.5 BTC directly to the escrow and hope they are trustworthy. Your bitcoins are entirely out of your hands, and there is that potentially corruptible human element when using this type of escrow.

With a multisignature escrow, you would simply generate a multisignature bitcoin address with 3 private keys associated with it, with one belonging to you, one belonging to the buyer, and one belonging to Cosign Coin.

Proceeding with the example, the buyer sends their 0.5 BTC to the new multisignature address while you ship your graphics card to them. Once the buyer receives the graphics card, they send their private key over to you, giving you control over the 0.5 BTC in the multisignature address.

But let’s say something goes wrong; the buyer claims they did not receive the graphics card when you clearly sent it. This is where the escrow service acts as an arbitrator, holding their own private key for this reason; they give their private key to the person they deem correct in the dispute, giving them control of the funds.