<p>There are two basic templates for using multisig for "escrow", 2-of-2 and 2-of-3. In both cases, you can currently use bitcoin-qt's raw transaction API to create the addresses and transactions.</p>

<hr>

<p>In 2-of-2 you do the following:</p>

<ol>
<li>Create a multisig address which requires signatures from both the buyer and seller.</li>
<li>The buyer sends funds to this address.</li>
<li>Seller ships the product.</li>
<li>When the product arrives, the buyer and the seller sign a transaction sending the funds from the multisig address to the seller.</li>
<li>If the order is cancelled amicably, the buyer and seller sign a transaction sending the funds from the multisig address to the buyer.</li>
</ol>

<p>This doesn't require any 3rd party, but it does have several failure modes, e.g. extortion, negligence and so on.</p>

<hr>

<p>In 2-of-3 you do the following:</p>

<ol>
<li>Find a relatively trustworthy escrow/mediator.</li>
<li>Create a multisig address requiring 2 signatures out of the buyer, seller and mediator.</li>
<li>Buyer sends funds to this address.</li>
<li>Seller ships the product.</li>
<li>When the product arrives, buyer and seller sign a tx sending funds to seller.</li>
<li>If the product doesn't arrive, mediator verifies this fact, and buyer and mediator sign a tx sending funds to buyer.</li>
<li>If the product arrives but buyer refuses to pay, mediator verifies this fact, and seller and mediator sign a tx sending funds to seller.</li>
</ol>

<p>This requires a 3rd party, but the trust requirement is limited. As long as buyer and seller cooperate the mediator doesn't do anything. A problem requires 2 out of 3 parties to defect, unlike traditional escrow where the escrow can ruin it himself.</p>

CC BY-SA 3.0
2014-01-02T13:49:31.843Z
Thank you for a detailed reply but this "the product arrives, buyer and seller sign a tx sending funds to seller.".. what does this look like?  As in, on the command line what would need to be typed here?  Does it require their private keys?
sradforth
CC BY-SA 3.0
2014-01-05T11:09:14.583Z
@sradforth - That's implementation dependent, but yes, signing the transaction will require each party to use his private key.
Meni Rosenfeld
CC BY-SA 3.0
2013-10-18T06:53:19.940Z
2013-10-18T08:22:40.783Z
2013-10-18T08:22:40.783Z
Meni Rosenfeld
<p>I want to do a private escrow between me and someone else for a Bitcoin miner, and it will take weeks or months for that miner to arrive.</p>

<ul>
<li><p>I think multisig is an easy trust-free way to accommodate this.  What is the correct sequence of actions that I can use to handle this?</p></li>
<li><p>Is there a way to also have arbitration in case either party refuses to release the funds?</p></li>
</ul>

<bitcoin-core><multi-signature><escrow>
How do I use Multisig transactions to handle escrow needs?
makerofthings7
# How do I use Multisig transactions to handle escrow needs?

(Asked by: username_0 on 2013-10-17)

I want to do a private escrow between me and someone else for a Bitcoin miner, and it will take weeks or months for that miner to arrive.

* I think multisig is an easy trust-free way to accommodate this. What is the correct sequence of actions that I can use to handle this?
* Is there a way to also have arbitration in case either party refuses to release the funds?

**Tags:** bitcoin-core, multi-signature, escrow


---

## 1 answers

### Answer by username_1 on 2013-10-18. Score: 10

There are two basic templates for using multisig for "escrow", 2-of-2 and 2-of-3. In both cases, you can currently use bitcoin-qt's raw transaction API to create the addresses and transactions.

---

In 2-of-2 you do the following:

1. Create a multisig address which requires signatures from both the buyer and seller.
2. The buyer sends funds to this address.
3. Seller ships the product.
4. When the product arrives, the buyer and the seller sign a transaction sending the funds from the multisig address to the seller.
5. If the order is cancelled amicably, the buyer and seller sign a transaction sending the funds from the multisig address to the buyer.

This doesn't require any 3rd party, but it does have several failure modes, e.g. extortion, negligence and so on.

---

In 2-of-3 you do the following:

1. Find a relatively trustworthy escrow/mediator.
2. Create a multisig address requiring 2 signatures out of the buyer, seller and mediator.
3. Buyer sends funds to this address.
4. Seller ships the product.
5. When the product arrives, buyer and seller sign a tx sending funds to seller.
6. If the product doesn't arrive, mediator verifies this fact, and buyer and mediator sign a tx sending funds to buyer.
7. If the product arrives but buyer refuses to pay, mediator verifies this fact, and seller and mediator sign a tx sending funds to seller.

This requires a 3rd party, but the trust requirement is limited. As long as buyer and seller cooperate the mediator doesn't do anything. A problem requires 2 out of 3 parties to defect, unlike traditional escrow where the escrow can ruin it himself.

> **Comments:**
> **username_2**: Thank you for a detailed reply but this "the product arrives, buyer and seller sign a tx sending funds to seller.".. what does this look like?  As in, on the command line what would need to be typed here?  Does it require their private keys?  
> **username_1**: @username_2 - That's implementation dependent, but yes, signing the transaction will require each party to use his private key.  

---

