Handling Donations via Multisig

Keeping Funds Safe

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Establishing Trust in a Trustless World

In order to safely handle community donations and community funds, the Eco community has decided to use a multisig wallet. In the following, you will learn more about what these wallets are and how they help us to secure the community’s funds.

What is a multisig wallet?
A multi-signature wallet is a specific, smart contract-enabled wallet that allows multiple signers to agree on a particular course of action on the blockchain before the transaction is ultimately executed. Funds that are being stored on a multi-signature address can – by definition – only be accessed if two or more signatures are provided.

How do multisig wallets work?

A multisig wallet is the digital equivalent of a secure deposit box that has multiple locks and keys. We can better understand this type of wallet by having a closer look at how such boxes work. First and foremost, the only way to open a secure deposit box is to provide all the available keys at the same time. If only one key is available, the box cannot be opened. This security mechanism allows the co-owners of the box to ensure that its contents are only accessible when every owner agrees to open the box. At the same time, no single individual or group of people can open the box if other owners do not provide their keys.

A multisig wallet functions similarly but it also introduces more flexibility than a traditional deposit box. Similar to a deposit box, the funds stored on a multisig address can only be accessed when its owners agree on signing a transaction. This means that co-owners of such an address are not able to individually decide how the wallet’s funds are handled. In contrast to a secure deposit box, the creators of the multisig wallet can decide how many co-owners will be required to sign a transaction. This could mean that there are five co-owners of a wallet and transactions are executed once at least three co-owners have signed a transaction.

What are the advantages of multisig addresses?

Why did the Eco community decide to use a multisig address to handle community funds and what are the benefits of it?

  • Increased security: Instead of having community funds handled by one single individual, the confirmation of multiple owners is required to access the wallet’s funds. This modus operandi helps to prevent losing access to the funds if one signer loses their private key. Similarly, the theft of community funds by a malicious individual can be prevented.

  • Establishing trust: Potential co-signer candidates of Eco’s multisig address have been selected based on reputation, participation/engagement, points, and duration of the membership. Once the list of candidates was created, the community decided through a voting process which of these candidates would become co-signers. This process allows the selection of reputable co-signers that are highly trustworthy and have an excellent standing in the community.

Details about the multisig safe of the Eco community

To secure the funds of the Eco community, a multisig safe was created. Here are the details on the safe:

  • Number of co-signers: 15 signers from the community and the Eco team

  • Signing transactions: 9 of the 15 co-signers need to sign transactions to execute a transaction

  • Signer spots for the Eco team: The Eco team is assigned 5 signer spots for increased security

  • ETH and xDAI: Two multisig safes have been created, one on Ethereum, the other on xDAI

  • Bridging of funds: Funds are bridged from xDAI to ETH before a transaction is made

  • Community-driven decision: The community voted on the final signers of the wallet in an open and transparent process.

Process overview

Funds for community initiatives (such as donations) are collected from the Eco community via xDai and ETH. Both options were chosen to allow experienced users to save gas costs on xDai but to also allow less experienced users to use ETH for donations. Funds from the xDai safe are then sent to the ETH safe once a total of 9 signers have signed the transaction. The remaining DAI in the ETH safe is then swapped for ETH. After this, the multisig wallet’s co-signers will sign the transaction that sends the agreed amount of ETH to the agreed destination address, such as a charity.

When is the signature of a co-signer required?

Co-signers of the multisig wallet have to sign a transaction whenever funds are transferred or bridged. The same holds true for removing or adding signers and policy changes.

How are funds bridged from the xDai safe to the ETH safe?

The xDai Bridge dApp is used to act as a bridge between the Eco community’s safes. Here’s an overview of the bridging process: