Partially Signed Bitcoin Transactions as a Standard

Nothing Partial about BitGo’s commitment to Bitcoin custody

By Mitch Kochman, Director of Platform Sales at BitGo

Over a decade ago, BitGo CEO Mike Belshe, pioneered the commercial use of multi-signature technology in Bitcoin wallets. When wallets are powered by multisig, rather than relying on one private key to sign a transaction, funds can be spent from a Bitcoin address with three or more private keys, needing any two of them to sign a transaction. Increased redundancy brings increased magnitudes of security, as a loss of a single key does not cause a loss of funds. Mike built BitGo into one of the digital asset industry’s most critical and trusted cornerstones with multi-sig technology at its core.

In BitGo’s Qualified Cold Custody, we hold digital assets in a multisig setup where two of three keys are needed to sign transactions and all three keys held are geographically dispersed by BitGo. BitGo secures these keys in cold storage, isolated from the internet. The events of the last year in the custodial space have shown there is certainly room for innovation and here at BitGo we intend to be at the forefront of it.

Using multi-sig, we have the ability to not only to split the keys geographically but split them across institutions — eliminating exposure to any single counterparty for loss or theft of funds. Should one key be compromised or an institution fail, the two remaining key-holding institutions can simply send funds to a new wallet with a new institution as a key holder.

Multi-institution custody will be the future architecture for securing significant balances of digital assets but the world has not yet seen it at commercial scale. The fundamental issue lies in the fact that across the major wallet providers, everyone is running different tech. The bitcoin protocol gives a pathway to resolving this issue with BIP 174, which introduced Partially Signed Bitcoin Transactions (PSBT)- a standardized format for sending and receiving partially signed Bitcoin transactions.

On the other side of the spectrum, in a post-FTX world we must do a better job as an industry of providing and scaling custody products for retail users. Leaving holdings on exchanges has become the norm for far too many. We’re entering into a critical cycle for the future of Bitcoin with ETF approvals on the way. It’s on us to provide differentiated custody alternatives to ETFs, educate on the benefits of having access to your own private keys, and provide solutions built off the unique capabilities a bearer asset like Bitcoin brings.

At BitGo, we are confident we have the strongest, most robust multi-sig wallet in the industry, battle-tested both by the open source community and from 10 years of proof of work. We want to help companies not only secure assets through BitGo wallets, but enable them to build products with our wallets.

BitGo has made the decision to invest in our Bitcoin infrastructure by enabling the signing of PSBTs from different sources, whether that be a separate trust company or a hardware wallet. We can do this from BitGo hot and cold storage, securing 1 key of a 2 of 3 multisig, and opening our wallets to assist a wave of new custody models in the industry.

Over the last few weeks, we’ve seen some of that innovation already come to market with a wide array of products built on BitGo infrastructure. Swan announced Swan Vault at their Pacific Bitcoin conference- an assisted custody product where users have 2 hardware wallets and BitGo enables the signing of a third “Swan key.” At the other end of the custodial spectrum, we’ve seen Onramp Bitcoin launch an asset management platform built on multi-institution custody architecture, the first of its kind, with BitGo, Kingdom Trust & Coincover as launch partners.

This is the future of custody and we must play our role in helping to securely advance the industry forward. We applaud innovation, new products and services using mult-sig technology. As we onboard the next generation of bitcoiners, we must continue to offer better custody options to users to ultimately make Bitcoin the success that we know it can be — sound money for the digital age.

We encourage you to build on BitGo and look forward to seeing a new wave of custody options come of it.

To learn more please contact us at sales@bitgo.com.

Disclaimer

©2023 BitGo Inc. (collectively with its affiliates and subsidiaries, “BitGo”). All rights reserved. BitGo Trust Company, Inc., BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless. The information provided herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. BitGo is not directing this information to any person in any jurisdiction where the publication or availability of the information is prohibited, by reason of that person’s citizenship, residence or otherwise.