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A multisig transaction example using Algo and an Algorand wallet

A Multisig Transaction Example: 5 Steps to Sending Algo Securely with an Algorand Multisig Account

Multisig transactions are a great deal more secure than single-key transactions, and for good reason: you’re removing a single point of failure, and distributing signing responsibility to a greater number of keys. However, this can add a great deal of effort to the transaction process when it comes time to send your funds to another account.

In this article, I’ll walk you through an offline multisig transaction example using an existing Algorand account (follow the steps in this article if you have not already created an account). While this example shows you how to spend funds, the same steps will apply to registering a participation key, bidding on auctions, and (in the future) voting.

To begin, let’s review all the things we have so far:

  • An online computer with a working Algorand node installation.
  • An “Ubuntu” bootable USB drive, which can be used for an offline computer.
  • A “Keys” USB drive with algokey and a file with the keys for our multisig account
  • A “Transfer” USB drive for transferring files between the online and offline computers

We will use these components to securely send a transaction from our multisig account while keeping our spending keys totally offline. The process will be:

  1. Create an unsigned transaction on the online computer
  2. Move this transaction file to the offline computer
  3. Sign the transaction on the offline computer
  4. Move the signed transaction back to the online computer
  5. Send it to the network

1. Prep Spend Transaction and Save Out to tx File (Online)

The process starts on the online computer. We will prepare an unsigned transaction file that describes the transaction we want to execute. Our transaction will be to send 1 Algo from the multisig account we created in this post to a destination account with address: 5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY.

Open a terminal on the online computer and issue the goal node status command:

purestake@algo-node:~$ goal node status
Last committed block: 1630913
Time since last block: 2.7s
Sync Time: 0.0s
Last consensus protocol: https://github.com/algorandfoundation/specs/tree/5615adc36bad610c7f165fa2967f4ecfa75125f0
Next consensus protocol: https://github.com/algorandfoundation/specs/tree/5615adc36bad610c7f165fa2967f4ecfa75125f0
Round for next consensus protocol: 1630914
Next consensus protocol supported: true
Genesis ID: mainnet-v1.0
Genesis hash: wGHE2Pwdvd7S12BL5FaOP20EGYesN73ktiC1qzkkit8=
purestake@algo-node:~$

The goal node status command returns information about the node and its view of the blockchain. Make a note of the “Last commited block” value, which we will need when we construct our transaction file. The reason is that transaction files are only valid for up to 1000 rounds or blocks. So we need to specify a validity range with the last commited block as the starting value for the range. The goal clerk send command can be used to create the transaction file:

purestake@algo-node:~$ goal clerk send -a 1000000 -f FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY -t 5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY --firstvalid 1630913 --lastvalid 1631912 -o transaction.tx
Please enter the password for wallet 'MyWallet':
purestake@algo-node:~$

The goal clerk command above creates a file called transaction.tx in the working directory with an unsigned transaction that will send 1 Algo from FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY to 5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY with a validity range of block 1630913 to 1631912.

Note that the amount is specified in microalgo as 1000000. All the algorand command line tools generally take Algo amounts in microalgo, or millionths of an Algo. Be very careful when specifying amounts as arguments to these commands. Without commas to create visual separation, it is very easy to make a mistake with an extra or missing zero.

I used the previously-recorded block height value of 1630913 as the firstvalid argument. To come up with the lastvalid argument value I added 999 to the firstvalid value. Generated transactions can have a maximum validity of 1000 blocks. Blocks are being finalized every ~4.5 sec currently, so this means that the transaction file will be valid for roughly 75 min. This can make timing tricky, depending on the coordination needed to actually sign the transaction. However, you can specify validity ranges out into the future if you need more time to perform the signing action.

Inspect tx file (online)

It is always a good practice to check the transaction file for correctness before proceeding to subsequent steps. The file is a binary file so opening it in a text editor is not useful. But we can use the “goal clerk inspect” command to look at its contents. To inspect the file contents, run the following command:

purestake@algo-node:~$ goal clerk inspect transaction.tx
transaction.tx[0]
{
"msig": {
"subsig": [
{
"pk": "OBONCJ4D4WEUYFWRDLZEJOMAN22HWZGZPAEWSPK7S6VOIHDCAFR3ACUSTA"
},
{
"pk": "P7ZEFUIWTABXLMC77P3DAE5ZMU7BDY3HZ4KF7ZXSPTCYKZ4AOCKGRZTCUE"
},
{
"pk": "JPPERBQVBGKHMKTVZUOQKSZHVDYMC3AYYD6NHT355HEZHZXW5CLNUIMJT4"
},
{
"pk": "GW5J5C2X7L7F2NIWISELS5EQI74Y5W6VDZ2W45NLIYY256EUYLKORY7AJE"
},
{
"pk": "ANQADWSXUDMOHYYOVAKII3COO3KIBBXXLFF2RPSCFIVXQJZOZ76DKR5YPU"
}
],
"thr": 3,
"v": 1
},
"txn": {
"amt": 1000000,
"fee": 1000,
"fv": 1630913,
"gen": "mainnet-v1.0",
"gh": "wGHE2Pwdvd7S12BL5FaOP20EGYesN73ktiC1qzkkit8=",
"lv": 1631912,
"note": "y0+1BZ82wxY=",
"rcv": "5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY",
"snd": "FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY",
"type": "pay"
}
}

purestake@algo-node:~$

The first section shows that this is a transaction from a multisig account, and the 5 public keys for the multisig account are present. In the bottom section, you can find details about the transaction that we specified on the command line, such as the amount, firstvalid, lastvalid, the destination address, etc. The fee value is the fee for sending the transaction, which currently defaults to 1000 microalgo.

2. Copy tx File to the Air-gapped Machine

The transaction file transaction.tx is ready to be signed. But recall that we don’t have the spending keys on this online computer. The spending keys are on a USB device and will be used for signing on the offline computer. The unsigned transaction file cannot be used to send funds without being signed with 3 of the 5 spending keys associated with the multisig account, so it is reasonably safe to copy this file.

Copy transaction.tx to the “Transfer” USB drive.

As a next step, reboot the computer using the Ubuntu USB drive into an offline state and plug in the Transfer and Keys USB drives.

3. Sign tx File on the Air-gapped Machine (Offline)

Once we are booted to the offline Ubuntu desktop, we will perform the signing action for the transactions. We will create a folder on the Ubuntu desktop called tx and copy into it the algokey, the text file containing the keys, and transaction.tx. To sign transaction.tx, open a terminal to the tx folder on the desktop and issue the algokey multisig command to sign the transaction file:

ubuntu@ubuntu:~/Desktop/tx$ ./algokey multisig -t transaction.tx -o transaction1.tx.signed -m "expire wear husband fancy now until laundry token strong dignity arrow valley post raven pudding farm twin chalk cloud tenant cart off shop abandon trophy"
ubuntu@ubuntu:~/Desktop/tx$ ./algokey multisig -t transaction.tx -o transaction2.tx.signed -m "lucky dust hub crew barely leave gas crew canvas exhibit margin mixed impose air wasp chat athlete sketch ozone humble parent rail remind abandon host"
ubuntu@ubuntu:~/Desktop/tx$ ./algokey multisig -t transaction.tx -o transaction3.tx.signed -m "draft mule stamp run absent congress leopard notice minute hungry fresh physical flee favorite cram green salad promote remember route assume gentle early absorb during"

These 3 algokey multisig commands each perform a private key signing action on the provided transaction.tx that we created in a previous step, as outlined in this blog post. The private key is supplied on the command line as a mnemonic, and each invocation creates a different signed transaction output file, transaction1.tx.signed, transaction2.tx.signed, and transaction3.tx.signed.

4. Move tx Files Back From the Air-Gapped Machine

With the signed transaction files in hand, copy transaction1.tx.signed, transaction2.tx.signed, and transaction3.tx.signed to the Transfer USB, remove the Ubuntu bootable USB and the Keys USB, and reboot the computer back to its regular online mode. Once it is booted, log in and copy the 3 signed transaction files from the Transfer USB to a directory on the computer. In my case, I just put the files in my user’s home directory.

Merge the Signatures Back to a Single tx File

We can inspect one of the signed transaction files using the same goal clerk inspect command that we used before to inspect the unsigned transaction.tx file. Issue the following command:

purestake@algo-node:~$ goal clerk inspect transaction1.tx.signed
transaction1.tx.signed[0]
{
"msig": {
"subsig": [
{
"pk": "OBONCJ4D4WEUYFWRDLZEJOMAN22HWZGZPAEWSPK7S6VOIHDCAFR3ACUSTA",
"s": "M7dVRrm9zmcE0dLkZTMX7JTjk/tsZdIgLn0qQuL9sGDDCnPZfiKRE9kpBYpSyfZ9uWvtCijJzJIInIbtNijRBg=="
},
{
"pk": "P7ZEFUIWTABXLMC77P3DAE5ZMU7BDY3HZ4KF7ZXSPTCYKZ4AOCKGRZTCUE"
},
{
"pk": "JPPERBQVBGKHMKTVZUOQKSZHVDYMC3AYYD6NHT355HEZHZXW5CLNUIMJT4"
},
{
"pk": "GW5J5C2X7L7F2NIWISELS5EQI74Y5W6VDZ2W45NLIYY256EUYLKORY7AJE"
},
{
"pk": "ANQADWSXUDMOHYYOVAKII3COO3KIBBXXLFF2RPSCFIVXQJZOZ76DKR5YPU"
}
],
"thr": 3,
"v": 1
},
"txn": {
"amt": 1000000,
"fee": 1000,
"fv": 1630913,
"gen": "mainnet-v1.0",
"gh": "wGHE2Pwdvd7S12BL5FaOP20EGYesN73ktiC1qzkkit8=",
"lv": 1631912,
"note": "y0+1BZ82wxY=",
"rcv": "5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY",
"snd": "FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY",
"type": "pay"
}
}

This looks very similar to the unsigned transaction.tx that we inspected before, but note that the first public key (pk) in the top section now has an “s” value. This “s” value is the signature that was created using the private key for that address. It is not the private key itself, but it demonstrates that we had knowledge of the private key. The other 2 files look similar, but have an “s” value for public keys 2 and 3. What we need to do is merge all of these signatures into the same transaction file which we will call transaction.tx.signed. We can do this using the goal clerk multisig merge command like this:

purestake@algo-node:~$ goal clerk multisig merge -o transaction.tx.signed transaction1.tx.signed transaction2.tx.signed transaction3.tx.signed
purestake@algo-node:~$

We now have a merged signed transaction file called transaction.tx.signed in the working directory.

Inspect tx File Before Sending (Online)

Now let’s inspect the resulting merged transaction.tx.signed file:

purestake@algo-node:~$ goal clerk inspect transaction.tx.signed
transaction.tx.signed[0]
{
"msig": {
"subsig": [
{
"pk": "OBONCJ4D4WEUYFWRDLZEJOMAN22HWZGZPAEWSPK7S6VOIHDCAFR3ACUSTA",
"s": "M7dVRrm9zmcE0dLkZTMX7JTjk/tsZdIgLn0qQuL9sGDDCnPZfiKRE9kpBYpSyfZ9uWvtCijJzJIInIbtNijRBg=="
},
{
"pk": "P7ZEFUIWTABXLMC77P3DAE5ZMU7BDY3HZ4KF7ZXSPTCYKZ4AOCKGRZTCUE",
"s": "rjITXvqzQwFWZ5shfXjhkxpcAkPSJquv9s2gLACLljHKnaoYefTGUXjfKZHtGZixFIAGPWr22DMrk/rcdnf8CA=="
},
{
"pk": "JPPERBQVBGKHMKTVZUOQKSZHVDYMC3AYYD6NHT355HEZHZXW5CLNUIMJT4",
"s": "w08AQ3gJr9W8qVmV1HN4o7okFjU/ozWIHGs3kn4cWjRkx/j1xO3wv+bL5X7fFjt208zaFuacE0y6jKIIc2p3DQ=="
},
{
"pk": "GW5J5C2X7L7F2NIWISELS5EQI74Y5W6VDZ2W45NLIYY256EUYLKORY7AJE"
},
{
"pk": "ANQADWSXUDMOHYYOVAKII3COO3KIBBXXLFF2RPSCFIVXQJZOZ76DKR5YPU"
}
],
"thr": 3,
"v": 1
},
"txn": {
"amt": 1000000,
"fee": 1000,
"fv": 1630913,
"gen": "mainnet-v1.0",
"gh": "wGHE2Pwdvd7S12BL5FaOP20EGYesN73ktiC1qzkkit8=",
"lv": 1631912,
"note": "y0+1BZ82wxY=",
"rcv": "5DJNGUEXNRUKAQODHGO3KS2HXOHN4YMSLSZQGEAH5L3WMMDFKMZEQMURUY",
"snd": "FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY",
"type": "pay"
}
}

You can see that the first three public keys all have “s” value signatures. We only need signatures for the first three public keys because this is a 3-of-5 multisig and three valid signatures meets the threshold for the account. If we had signed with a fourth or fifth key, this wouldn’t cause any problems, but it isn’t necessary. This transaction is ready to be broadcast to the network.

5. Broadcast tx to the Network (Online)

To broadcast the signed transaction to the network we can use the goal clerk rawsend command:

purestake@algo-node:~$ goal clerk rawsend -f transaction.tx.signed
Raw transaction ID AAG34CUUNSMZJNNRKYV22UNOPFBQB57XPWNEF6D4CGSOT7ZRPSEB issued
Transaction AAG34CUUNSMZJNNRKYV22UNOPFBQB57XPWNEF6D4CGSOT7ZRPSEB still pending as of round 1631216
Transaction AAG34CUUNSMZJNNRKYV22UNOPFBQB57XPWNEF6D4CGSOT7ZRPSEB committed in round 1631218
purestake@algo-node:~$

The transaction id for your transaction will be unique and different than what you see above. Algorand finalizes blocks in under 5 seconds, so you shouldn’t have to wait long for the transaction to broadcast to the network. Once committed, you can check account balances to make sure you see the balance change that is expected. Once used, the transaction file cannot be used again. Sending it again will result in an error.

Conclusion: More Complex, But More Secure, Too

This multisig transaction example shows that the setup of a multisig account and execution of a transaction are a lot more complicated than just using a single spending key account directly on an online computer with an Algorand node installation. But, by using a multisig account, we can substantially improve the security of the setup and greatly reduced the risk of the private keys and thus the funds in the account from being compromised.

The Algorand multisig features can be used to create multiple keys which can be used to split the secrets needed to spend funds across different people and locations. The exact number, locations, storage, and people will vary according to the environment and situation, but it opens the door for a much more secure setup than a single key account.

Keeping the spending keys totally offline is another substantial improvement to Algorand account security for high-value accounts. Most of the attack vectors for compromising keys involve online scenarios, malware, or other network exploits. By never having the secrets on an online computer, the risk of key compromise is greatly reduced. Another way to improve the security of an Algorand account is to use a ledger hardware wallet, which will be the subject of a future blog post.

How to Use Multisig Accounts in Algorand

How to Use Multisig and Offline Keys with Algorand

Multisig accounts and offline keys provide a great deal of added security, but are not always simple to set up. To help you get started, I’ve outlined the steps you will need to take to create a multisig account with Algorand and store keys offline on an air-gapped device.

For this tutorial, you will need at least 3 USB drives:

  1. “Ubuntu” to serve as a bootable Ubuntu USB device
  2. “Key” to hold the algokey binary and private keys
  3. “Transfer” to move transaction files to and from the offline computer

If you are going to store significant funds in the account being created, make sure that they USB drives are new, so there is no chance of any unwanted data or malware on the drives. It may seem excessive to use so many USB drives, but in the case of the private key drive, it is important that it never is plugged into a computer that is on the internet.

While the ideal approach to using multisig keys offline is to have a separate, dedicated laptop or computer, that will not be necessary to complete this tutorial. I will demonstrate how to use a bootable USB device in place of a dedicated offline machine.

Setting Up Your USB Drives

1. Download and Install the Algorand Node Software

On your online computer, download and install the Algorand node software.  This software will be used to interact with the Algorand network. Installation instructions for Algorand node software on different platforms can be found here: https://developer.algorand.org/docs/introduction-installing-node

For my examples, the online computer will be running Ubuntu 18.04 with Algorand installed using the debian package from the official repositories using the following instructions: https://developer.algorand.org/docs/installing-ubuntu

2. Create an Ubuntu Bootable USB Device

In order to create an Ubuntu bootable USB device, you can follow the instructions below depending on your OS:

Windows: https://tutorials.ubuntu.com/tutorial/tutorial-create-a-usb-stick-on-windows#0

Mac: https://tutorials.ubuntu.com/tutorial/tutorial-create-a-usb-stick-on-macos#0

3. Label Your USBs

When we need to perform sensitive signing actions on our offline computer, we will boot our computer using the bootable USB device you have just created.  Label it “Ubuntu” or something similar to identify it as the bootable USB device.

The second USB device will hold the algokey binary and the private keys that we will use to sign transactions on the offline computer.  Just label this USB drive “Keys” or similar for now. Do not plug this drive into the online computer.  This USB drive should never be plugged into any computer other than the offline computer.  We will put the algokey binary on it in a later step.

The third USB drive will be used to transfer files to and from the online and offline computers.  Label the drive “Transfer” or similar.

4. Copy the Algokey Binary to the Transfer USB

The algokey binary is part of the algorand node installation, but is a standalone executable that can be copied to a different computer running the same architecture / operating system without needing to perform a full node installation.

From our online computer that has a node installation based on the debian package, the algokey binary can be found at /usr/bin/algokey.  Copy the algokey binary to the Transfer USB drive. We will later move algokey to the offline computer and ultimately to the Keys drive, but we will do that once we have the offline computer set up.

Creating an Algorand Multisig Account (Offline)

Let’s start by creating a new 3-of-5 multisig account that we will use to store Algo securely.

Before we start issuing commands, we need to use the Ubuntu USB drive to boot into our offline computer.  Insert the Ubuntu USB drive into your computer and reboot the machine. You may need to enter the bios of your computer to tell the computer to boot from the USB device.

Once you are booted from the USB, you want to indicate that you want to try Ubuntu (not install Ubuntu).

After the computer is booted, you will be logged into an ephemeral Ubuntu desktop without networking.  This will be our offline environment for signing transactions.  Create a folder on the desktop that we will be working in. In the examples below, I called mine “tx.” Insert the Transfer USB device and copy the algokey binary to the tx directory.  Open a terminal window to the tx directory and change the permissions of algokey to make it executable, and test running it to make sure everything is working:

 

ubuntu@ubuntu:~$ cd Desktop/tx
ubuntu@ubuntu:~/Desktop/tx$ ll
total 22472
drwxr-xr-x 2 ubuntu ubuntu       60 Sep 2 10:48 .
drwxr-xr-x 4 ubuntu ubuntu      100 Sep 2 10:48 ..
-rw-r--r-- 1 ubuntu ubuntu 23011080 Sep  2 10:48 algokey
ubuntu@ubuntu:~/Desktop/tx$ chmod 755 algokey 
ubuntu@ubuntu:~/Desktop/tx$ ./algokey -h
CLI for managing Algorand keys

Usage:
  algokey [flags]
  algokey [command]
 
Available Commands:
  export      Export key file to mnemonic and public key
  generate    Generate key
  help        Help about any command
  import      Import key file from mnemonic
  multisig    Add a multisig signature to transactions from a file using a private key
  sign        Sign transactions from a file using a private key

Flags:
  -h, --help   help for algokey

Use "algokey [command] --help" for more information about a command.
ubuntu@ubuntu:~/Desktop/tx$ 

 

We are going to use the algokey utility to create 5 accounts with 5 associated private keys.  These accounts will later be combined to form one 3 of 5 multisig account. We perform this account creation step on the offline machine so that we can record the 5 secrets securely, and so that these secrets are never online.  We will do this by running the “algokey generate” command 5 times.

 

ubuntu@ubuntu:~/Desktop$ ./algokey generate
Private key mnemonic: expire wear husband fancy now until laundry token strong dignity arrow valley post raven pudding farm twin chalk cloud tenant cart off shop abandon trophy
Public key: OBONCJ4D4WEUYFWRDLZEJOMAN22HWZGZPAEWSPK7S6VOIHDCAFR3ACUSTA
ubuntu@ubuntu:~/Desktop$ ./algokey generate
Private key mnemonic: lucky dust hub crew barely leave gas crew canvas exhibit margin mixed impose air wasp chat athlete sketch ozone humble parent rail remind abandon host
Public key: P7ZEFUIWTABXLMC77P3DAE5ZMU7BDY3HZ4KF7ZXSPTCYKZ4AOCKGRZTCUE
ubuntu@ubuntu:~/Desktop$ ./algokey generate
Private key mnemonic: draft mule stamp run absent congress leopard notice minute hungry fresh physical flee favorite cram green salad promote remember route assume gentle early absorb during
Public key: JPPERBQVBGKHMKTVZUOQKSZHVDYMC3AYYD6NHT355HEZHZXW5CLNUIMJT4
ubuntu@ubuntu:~/Desktop$ ./algokey generate
Private key mnemonic: primary tone inquiry video bicycle satisfy combine pony capable stamp design cable hub defy soup return calm correct cram buyer perfect swim tone able math
Public key: GW5J5C2X7L7F2NIWISELS5EQI74Y5W6VDZ2W45NLIYY256EUYLKORY7AJE
ubuntu@ubuntu:~/Desktop$ ./algokey generate
Private key mnemonic: seminar screen join potato illegal vacuum predict measure cable reject crazy document edit erosion decline giggle neutral theory orient keen slow walnut reject absorb rain
Public key: ANQADWSXUDMOHYYOVAKII3COO3KIBBXXLFF2RPSCFIVXQJZOZ76DKR5YPU
ubuntu@ubuntu:~/Desktop$ 

 

A few important things to note.  First, you will get different accounts and secrets when you run “algokey generate.”  DO NOT USE THE ACCOUNTS LISTED ABOVE, they are example accounts created for this tutorial, and most importantly, the spending keys are right here on this webpage.  Anyone reading this post can spend the funds in these accounts or any multisig account based on these accounts.

Second, note that every time you run “algokey generate,” you get a valid single key account with a public key and a private key.  In Algorand, you will often hear the public key referred to as the address, and the private key as the spending key or mnemonic.

Third, observe that the private key mnemonic has 25 words which is quite unusual.  In other crypto systems, you will typically see word lists that encode a seed phrase or secret using 12 or 24 words.  Algorand uses 25 words, so make sure you get all 25 words. If you plan to use something like Cryptosteel to store the seed phrase, the 25th word will overflow a single plate, which is designed to hold only 24 words.

The public and private keys need to be securely recorded for your accounts.  One way to do this would be to write them down on 5 separate pieces of paper, store them on 5 separate USB drives, etc.  Having a paper backup is a good idea in case the USB drives fail. To more securely store them on the USB drive, they can be saved in a file which is then encrypted using pgp or similar, and the encryption passphrase is then securely stored separate from the drive.

In terms of distribution, you could put the keys in 5 different locations or give them to 5 different people for safekeeping.  There are many ways to securely store these keys, including bank safety deposit boxes, cryptosteel plates, and other options.

For purposes of this tutorial, I will put all 5 keys in a file on the same USB drive labelled “Keys,” but this is not recommended for production use.  It is important to number the keys 1 – 5. The order of the keys will be important when we go to set up the multisig account in the next step.

Set Up a Wallet and Multisig Account (Online)

For this step, you need to go back to the online computer with the online Algorand node.  If you are sharing the same computer for both online and offline needs, remove all USB drives and reboot the computer to bring it back to its online state.  Log in to the computer and open a terminal. We will first create a wallet using the goal command:

 

purestake@algo-node:~$ goal wallet new MyWallet
Please choose a password for wallet 'MyWallet':
Please confirm the password:
Creating wallet...
Created wallet 'MyWallet'
Your new wallet has a backup phrase that can be used for recovery.
Keeping this backup phrase safe is extremely important.
Would you like to see it now? (Y/n): n
purestake@algo-node:~$ 

 

In the example above, I named the wallet “MyWallet,” but you can name it whatever you want.  I also specified a password for the wallet. The reason I elected not to see the backup phrase is that I do not plan on having any secrets on this online node.  I’m only going to use it for looking at balances and sending transactions which have already been signed elsewhere.

The next step is to use the goal command to create a new 3-of-5 multisig account using the keys we generated in the previous step.  This will add the multisig account to the wallet and let the wallet know what the constituent parts of the multisig account are. But the private keys for the account will not be in the wallet, and the wallet will have no control of or ability to spend funds in the multisig account.  By putting the multisig account in the wallet we can work with the multisig account on this node even if we plan to sign multisig account transactions with our spending keys on the offline machine. If you skip this step, transaction files you create for the multisig account on this node will be invalid as the node doesn’t know what the multisig account is and what the component parts of the account are.

 

purestake@algo-node:~$ goal account multisig new OBONCJ4D4WEUYFWRDLZEJOMAN22HWZGZPAEWSPK7S6VOIHDCAFR3ACUSTA P7ZEFUIWTABXLMC77P3DAE5ZMU7BDY3HZ4KF7ZXSPTCYKZ4AOCKGRZTCUE JPPERBQVBGKHMKTVZUOQKSZHVDYMC3AYYD6NHT355HEZHZXW5CLNUIMJT4 GW5J5C2X7L7F2NIWISELS5EQI74Y5W6VDZ2W45NLIYY256EUYLKORY7AJE ANQADWSXUDMOHYYOVAKII3COO3KIBBXXLFF2RPSCFIVXQJZOZ76DKR5YPU -T 3
Please enter the password for wallet 'MyWallet':
Created new account with address FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY
purestake@algo-node:~$ goal account list
[offline]       Unnamed-0 FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY      0 microAlgos [3/5 multisig] *Default
purestake@algo-node:~$

 

Note that the 5 public keys we created on the offline computer are listed here as arguments to the goal account multisig new command.  Be very careful, as the order of the keys matters. Changing the order of the public keys results in a different multisig address. Recall that we numbered the keys 1-5: always list them in that order, so you will get consistent results.

The “T” flag specifies the threshold, or how many of the associated spending keys in the multisig account need to sign transactions.  In this case we specify 3 making this a 3-of-5 multisig account. The resulting address of the multisig account is: FHYPIFKSTJTUT4QCR4MJWZUY2Y4URVFHF2HIXGZ4OHEZSIEQ5Q64IIGEMY.  The “goal account list” command confirms that this is a 3/5 multisig account with 0 Algo in it.

Now you have successfully created a 3-of-5 multisig account (albeit, with no balance). Next week, I will publish a follow-up tutorial that demonstrates how to sign a transaction with your newly-created multisignature keys, enabling you to spend funds, bid on auctions, and more.

Three Keys Will Unlock a 3-of-5 Multisig Account

How the Use of Multisig Accounts and Offline Keys Improves Security

Many blockchain networks have added native support for multisig accounts as a more secure option compared to the default single-key accounts that most people use.

While a multisig approach has many far-reaching advantages, the primary benefit is drastically improved key security: to complete a transaction, you will need two or more valid keys. This eliminates single points of failure while opening the door for additional security measures to protect account funds.

One of those measures is the ability to keep multiple private account keys in different physical locations, completely offline, on an air-gapped machine, or in cold storage. By combining a multisig account with offline or cold key storage, you can greatly increase the security of accounts, particularly those storing and managing larger amounts of digital currency.  A regular account has a single spending key associated with it that is needed in order to spend funds and sign other transactions. By contrast, a multisig account has multiple keys associated with it.

Jerry Brito, Executive Director of Coin Center, provides a great overview of multisignature technology and the increased security it provides to users of cryptocurrencies in this video from the Federalist Society.

 

 

Determining the Number of Keys for Your Multisig Account

When you set up a multisig account, you will need to specify how many total keys will be part of the account, and how many of those keys are needed in order to spend funds in the account.  Sometimes this is referred to as M-of-N keys, where N is the total number of keys that are part of the account, and M is the number of keys needed to spend funds from the account. In practice, M is typically less than the total number of keys that the account has. For example, I could create a 2-of-3 multisig account where there are three private keys for the account, but any two of them can be used to spend funds in the account.

The 2-of-3 setup has good security properties.  Consider this: if you secure each of the three keys in different locations, even if one of the keys is compromised, it alone cannot be used to steal funds.  If you know that one of the keys has been compromised, you can use the other two keys to move the funds to another account, thus moving your funds to safety. The same scenario applies to the (possibly more likely scenario) where one of the keys is lost. You can use the other two keys to transfer the funds to a new account, thereby invalidating the lost key.

Requiring multiple people to sign a transaction provides an opportunity to implement a governance process around the movement of funds.  For these reasons, multisig accounts are very often used to provide an additional layer of security for funds in an account.

Consider the previous 2-of-3 multisig example where, instead of three different locations, you give each of the three keys to a different person for safekeeping. A single person cannot decide to spend the funds in the multisig account — they will need at least a second user to agree before any funds can be spent. In a corporate setting, dividing authority in this way and requiring a quorum can be a useful tool for governance processes.

Choosing the correct values for M and N will be specific to the scenario, and multiple factors need to be considered. Examples of factors include: the amount of funds or assets in the account, the number of people involved in managing the funds in the account, and the frequency with which funds need to be accessed or moved. Very common configurations include 2-of-3 and 3-of-5, but higher numbers such as 7-of-10 are not uncommon.

As with many security-related things, there general is a tradeoff between security and convenience. A single key account is the most convenient but the least secure. A 7-of-10 multisig account, where you put each of the 10 keys on a Cryptosteel in 10 different bank safety deposit boxes in 10 different cities, has a lot more security. But assembling 7 of these 10 keys to send a transaction is a lot more work than the single-key setup. You have to decide the right place to be on the convenience-vs-security spectrum for any particular use case.

Always Keep Secrets Offline

The spending keys associated with a multisig account are best kept totally offline for storage, and only used on an air-gapped machine.  This machine should not have an internet connection and should never have been on the internet. Any time a computer is on the internet, there is a risk that data on that machine has been compromised, so the risks of an online attack are greatly reduced by never having had an internet connection at all.

One approach to storing keys offline is to have a dedicated computer or laptop whose only purpose is to keep the account secrets and to perform signing actions.  Theoretically, this would be the best and safest setup. However, this may not be practical or cost-effective for individuals who only have one computer, or don’t want to dedicate a computer to this task.

A less expensive (but still good) option is to use a bootable USB device.  An Ubuntu 18.04 LTS bootable USB can serve well as an air-gapped machine. If you boot your computer with an Ubuntu bootable USB drive, you will have a full yet ephemeral Ubuntu installation without networking and that has never been on the internet.

Learn how to create your own multisig account using this step-by-step tutorial I created.

Participation Keys in Algorand Blog Banner Image

Participation Keys in Algorand

What Are Algorand Participation Keys?

In Algorand, there are 2 types of nodes: relay nodes and participation nodes. Relay nodes serve as network hubs in Algorand, relaying protocol messages very quickly and efficiently between participation nodes. Participation nodes support the consensus mechanism in Algorand by proposing and validating new blocks. Participation keys live on participation nodes and are used to sign consensus protocol messages.

A participation key in Algorand is distinct and totally separate from a spending key. When you have an account in Algorand there is an associated spending key (or multiple keys in the case of a multi-sig account). The spending key is needed to spend funds in the account. A participation key, on the other hand, is associated with an account and is used to bring stake online on the network. Importantly, participation keys cannot be used to spend funds in the associated account, they can only be used for helping to support the consensus protocol.

Participation Keys Are Good

Having distinct keys for spending the Algo in an account, and staking the Algo in an account, results in several key security improvements.

In any crypto network, protecting the spending keys is of the utmost importance. Situations that require having spending keys on an internet connected computer are inherently dangerous and always contain the risk of loss of funds.

In Algorand, the spending key never has to be online. The spending key can be kept on an airgapped computer or other offline setup and only used for signing transactions offline. The participation key, in contrast, lives on the participation node and signs protocol messages, but the participation key cannot spend any funds in the account.

This separation of duties in 2 different keys improves the security of Algorand infrastructure substantially. Spending keys can always be kept totally offline and an attacker, if they are able to compromise an internet connected participation node, cannot spend or steal any of the funds in the associated account.

Of course, this doesn’t mean that participation keys shouldn’t be highly protected and secured. If an attacker does compromise a participation key, they can stand up a second participation node with the same participation key. This will result in protocol messages being double-signed, which the network will see as malicious behavior and will treat the node / associated stake as offline.

There is no bonding or slashing in Algorand, and staking rewards are still coming in the future, but regardless: being forced offline due to double signing is undesirable and means that the stake in question will no longer be supporting the consensus mechanism.

Participation Key Mechanics

My examples assume Algorand Node v1 software is installed and running in a participation node configuration on the Algorand MainNet. The software is installed using the Debian package on Ubuntu 18.04, with a standard non-multi-sig Algorand account with some Algo in it, and a separate offline computer with the spending key for the account.

To create a participation key you will need to use the “goal addpartkey” command and specify the account that you want to create the part key for and a validity range:

goal account addpartkey -a WHNXGKYOVIQADYS4VTYBG6SGWFIG6235C5LMXM76J3LHE475QJLIHUC5KY --roundFirstValid 789014 --roundLastValid 4283414

A few things to note. The account specified in the -a flag in the command above (WHNXGKYOVIQADYS4VTYBG6SGWFIG6235C5LMXM76J3LHE475QJLIHUC5KY) is made up and you would need to replace it with your account. Do not use this account as it, and the associated spending key, are not real. Any funds sent to this address will be permanently lost.

The validity range is specified in rounds. Rounds are equivalent to blocks in Algorand. So if you, for example, want to have a key that is valid from now until a point in the future, you need to find the current block height for the roundFirstValid and a future block height for the roundLastValid flag corresponding to the validity range you want.

To find the current block height you can use the “goal node status” command:

derek@algo-node:~$ goal node status Last committed block: 789014 Time since last block: 2.4s Sync Time: 0.0s Last consensus protocol: https://github.com/algorandfoundation/specs/tree/5615adc36bad610c7f165fa2967f4ecfa75125f0 Next consensus protocol: https://github.com/algorandfoundation/specs/tree/5615adc36bad610c7f165fa2967f4ecfa75125f0 Round for next consensus protocol: 789015 Next consensus protocol supported: true Genesis ID: mainnet-v1.0 Genesis hash: wGHE2Pwdvd7S12BL5FaOP20EGYesN73ktiC1qzkkit8=

The last committed block, which is the same as the current block height, is reported as 789014, so we use that for our roundFirstValid. Figuring out the right value for the roundLastValid is a little more involved.

First, you have to determine what time range you want. It is a good practice to rotate participation keys and not to create a key with a really long validity range. In our example, we will use a time range of 6 months. What round corresponds to 6 months from now?

To figure that out, we have to do a little math. 6 months is approximately 182 days. So 182 days x 24 hours / day x 60 min / day x 60 sec / min = 15724800 seconds. At the time of writing, each round in Algorand takes about 4.5 sec. So 15724800 seconds / 4.5 seconds per block = 3494400 blocks. Now we need to add 3494400 to the current block height to get the height 6 months from now. E.g. 3494400 + 789014 = 4283414. This is where the 4283414 in the command above comes from for the roundLastValid.
As the network grows, the 4.5 second block time may not be a safe assumption. This may make the validity range slightly different than 6 months. You need to monitor for key validity and make sure to put a new key in place before the old one expires.

Once the addpartkey command has executed, you can find the participation key at:

/var/lib/algorand/mainnet-v1.0/WHNXGKYOVIQADYS4VTYBG6SGWFIG6235C5LMXM76J3LHE475QJLA.789014.4283414.partkey

It’s beyond the scope of this article, but this file is actually a sqlite database with N number of keys in it which will be internally rotated through automatically during the validity window. This is an additional security measure that is part of Algorand, where the keys used to sign protocol messages are rotated as rounds progress.

With the participation key created, the next step is to bring the account online. An account being online in Algorand means that the Algo in the account is supporting the consensus mechanism. We bring an account online by using the “goal account changeonlinestatus” command. Note that this action requires that you have a small amount of Algo in the account to pay for the transaction. If you have the spending key for the account directly on the participation node you can simply run this command

goal account changeonlinestatus -a WHNXGKYOVIQADYS4VTYBG6SGWFIG6235C5LMXM76J3LHE475QJLA -o=1

However, having the spending key on the participation node is not recommended and kind of defeats the whole purpose of having participation keys in the first place. It is much better to have an airgapped and totally offline computer that has the spending key on it. The process is a little more involved with this setup, but it is much more secure. With this setup you would issue the following command instead:

goal account changeonlinestatus -a WHNXGKYOVIQADYS4VTYBG6SGWFIG6235C5LMXM76J3LHE475QJLA -o=1 -t online.tx

This will produce a transaction file called online.tx in the current directory which has an unsigned transaction to bring the account online. This transaction file then needs to be securely moved to the airgapped computer with the spending key on it. Once on the airgapped computer you can use the algokey utility to sign the transaction file. The command would be:

algokey sign -k spendingkeyfile -t online.tx -o online.tx.signed

Note that algokey is standalone and does not need a running Algorand node. Also, the spendingkeyfile is the file that has the spending key for the account. This file can be created by algokey when you first set up your account.

There is also an option to specify the spending key mnemonic instead of a file, but I find this option worse as it leaves the mnemonic in the shell history, etc. The result of this command is that online.tx.signed will be created in the current directory. This file contains the signed online transaction and it needs to be securely moved back to the running participation node.

Once you have online.tx.signed back on the participation node you can send it to the network with the following command:

goal clerk rawsend -f online.tx.signed

Wait a little bit for the transaction to be processed, and your account should now be online. The creation of a transaction file, movement to the airgapped machine to sign the transaction, movement of the signed transaction back to the online node, and then sending the signed transaction to the network is a general pattern for sending transactions in Algorand without ever putting your spending key online.

Final Thoughts on Participation Keys in Algorand

The design of Algorand using separate keys for spending funds and for participating in network consensus improves the security of nodes running on the Algorand network substantially by protecting spending keys and removing the need for them to ever be online. I think this was a good design choice and wouldn’t be surprised if other protocols adopt this approach.