Getting the advantages of a BitGo wallet one first has to create a 2-of-3 address. During the creation of an address is the only time in the entire process that two keys are on a single computer simultaneously. The user generates two keys while the server will provide one. The user will provide his key and a backup key.
The backup key is used to recover funds and is stored offline. The service can never use the backup key for the withdrawal of funds. The user needs to protect both keys with strong passwords. The server creates the third key and generates its password. In this manner, the 2-of-3 address is created.
To withdraw Bitcoins from an address, the user has to make the service aware that he/she wants to make a withdrawal. The user will have to pass a 2-factor authentication challenge to get the key. The service will send an encrypted private key to the user’s web browser after validation of the authenticity of the user.
The user will have to provide a password to decrypt the key. Upon submitting, a correct password, the transaction will recognize that it recognizes a single signature. The service will then provide the second signature using its private key. The third key will be required to withdraw large sums or if the user’s account was undermined.
The BitGo wallet offers much in the way of flexibility. By having three different parties have a key, trusted parties can access the funds in case one of them dies or is unable to manage the funds.