M-of-N

An m-of-n setup refers to a type of multisignature (multisig) arrangement often used in cryptocurrencies like Bitcoin. In this configuration, n stands for the total number of authorized private keys, while m is the minimum number of signatures needed to approve a transaction. For example, a common setup is 2-of-3 multisig: three separate keys exist, but any two of them must sign off for funds to move.

Multisig addresses offer greater security compared to the standard single-signature addresses. They are particularly useful for group accounts or situations where trust should not be placed in a single person or device. If one key is lost or compromised, as long as the threshold number (m) of secure keys remains, the funds stay safe.

Here's a real-world scenario: Alice, Bob, and Charlie run a business together. They each control one unique private key. To spend funds from their joint Bitcoin wallet, at least two out of the three must agree and provide their signatures. This prevents one partner from unilaterally moving the funds and helps guard against theft or accidental loss of any single key. A script encodes these requirements, and the Bitcoin address generated from this script holds the company’s funds. This arrangement, requiring two out of three signatures, is referred to as a 2-of-3 multisig.