Help understand multi-signature transactions

Question

I'm not a technical guy by any means, and I'm having alot of difficulty understanding Multi-signature Transactions.

Would an expert have time to try to "dumb down" the basics for me using some sort of analogy?

I'm really sorry if this has been addressed before but it is still escaping me.

I really appreciate any help.

Answer 1

A multi-sig address is created in a deterministic manner using the parameters and addresses which can spend funds from the account.

For example:

• I would like to sell you a GPU, but we do not know each other
• We find an escrow service (or common contact to serve as escrow) we both trust
• We create a multisig address with parameters 2 signatures required < your address > < my address > < escrow address>, the address is deterministic so we will both get the same address
• You send coins for the GPU to this address, I verify the coins are received and ship the GPU to you
• You receive the GPU and create a transaction paying out to < my address > and sign it with the key for < your address >, I sign the transaction with < my address > and broadcast it to the network
• If there is any dispute (e.g. you don't receive the GPU or it arrived not as described), you contact the escrow agent and if he agrees with your case, he creates a transaction sending the coins to < your address > and signs it with < escrow address >, you sign the transaction with < your address > and broadcast it to the network

Since 2 signatures are required any dispute must be settled by the escrow, and you get to choose your own escrow. If we both agree to on where the funds should end up then escrow is not needed.