What is a Multisig Wallet?
Multisig stands for Multi-signature, which is a type of digital signature technique where two or more than two signatures required to do the transaction through the wallet.
How Multisig Wallet works?
Assume a safe-deposit-box having a special type of lock that can be opened only by using two keys at the same time.
These two keys are now owned by two different parties A & B. So, A alone can’t open the lock of safe or even B also unable to open the lock of safe alone.
But both A and B together can open the lock of safe anytime whenever they want by using their keys at the same time.
The same things happened in where these keys are the digital signatures and the safe-deposit-box is the Bitcoin Wallet in which Bitcoin can only be transferred when both parties A and B sign the transaction with their keys or signatures.
Multisig Wallet Provides Ultra Security
As Multisig wallets do not disclose the private-key makes them more secure and with the multi-signature requirement, it enhanced the security of wallet to a high level.
In the Multisig wallet, a hacker can’t steal your funds even after he got the access of your device because the hacker will be unable to transfer the funds from your wallet with one signature as multi-signature wallets transactions require the signing of the transaction from all the participants to transfer or move funds from the Multisig wallet.
So Multisig wallets are ultra-secure and used by mostly those companies which have big amounts of holding of funds like exchanges.
Applications of Multisig Wallet
- Two-factor authentication wallet: In order to spend your coins In this type of Multisig wallet you will need to provide the 2FA code to the third-party co-signer company known as Trusted Coin. It increases the security to one more level as attackers need to access not only your wallet file but also the authenticator code from your mobile device (Google-2FA) or hardware device (Yobikey) in order to steal your coins from your multi-sig wallet.
- Decentralized cold storage vault: It is a 2-of-3 Multisig wallet where one is securely held by you in your own home and the second key is stored in the bank safe deposit box, the copies of the third key can be shared with your relatives, friends and stored in your office. Now, none of your friends can steal your funds and you will not lose your funds even if one of the keys will be lost or corrupted.
- Improved hot wallet security for businesses: It is also a 2-of-3 Multisig wallet but in this type of wallet one key is held online by the business firm itself like exchanges and one key is stored securely offline on the paper backup. The third key holds by the trusted third party bitcoin security firm online and will only sign the transaction on some certain conditions like 2FA codes, Blacklists, and whitelist, per transaction limit, etc.
- Building Smart Contract Addresses: Lightning Network is built by using the smart contract on the Multisig wallet. The smart contract on Multisig wallets also helps in building coin swaps.
Famous Multisig Wallets
- Electrum: The most popular and trusted open-source decentralized bitcoin desktop wallet. It also provides you the two-factor authentication Multisig wallet. It also supports the hardware wallets integration of Trezor and Ledger.
- Armory: It is the most advanced open-source bitcoin wallet which supports up to 7-of-7 multi signatures.
- Casa: The Casa Multisig wallet provides the full control of the key to the owners with round-the-clock support via phone and email, and protection from threats such as theft, fire, and end-of-life.
Also read: How to secure your Bitcoin Privacy? Make your BTC safu