What is Multisig Wallet?

Multisig, short for multi-signature, refers to a distinct form of digital signature enabling two or more users to collectively sign documents. Consequently, a multi-signature results from the amalgamation of several distinct signatures. While multisig technology has been prevalent in the realm of cryptocurrencies, the underlying principle predates the inception of Bitcoin.

Within the realm of cryptocurrency, the concept was initially used for Bitcoin addresses in 2012, ultimately resulting in the development of multisig wallets the following year. Although multisig addresses can be utilized in a variety of situations, security-related use cases account for the majority of them. We go over their usage in bitcoin wallets here.

How Multisig Wallets Work

We may see a safe deposit box with two locks and two keys as a straightforward analogy. Alice is holding one key, while Bob is holding the other. One cannot access the box without the other's permission since they must both provide their keys at the same time in order to unlock it.

In essence, just two or more signatures are required to access the money kept on a multi-signature address. Thus, users may add an extra degree of protection to their money by using a multisig wallet. However, before continuing, it's crucial to comprehend the fundamentals of a typical Bitcoin address, which uses a single key rather than several.

Single Key vs Multisig Wallets

Bitcoins are often kept in conventional single-key addresses, which means that the money are accessible to the owner of the matching private key. This implies that just a single key is required to sign transactions, and that anybody in possession of the private key can move the coins whenever they choose without requiring permission from anyone else.

Although single-key address management is simpler and faster than multisig address management, there are certain drawbacks, particularly with regard to security. Because there is only one key, there is only one point of failure to secure the assets, which is why hackers are always coming up with new phishing schemes to attempt to take advantage of cryptocurrency users' money.

Furthermore, single-key addresses are not the most advantageous choice for companies using cryptocurrency. Consider a large company's cash being kept on a standard address with a single private key that corresponds to it. This would suggest that the private key would be given to one person or to several people at once, which is obviously not the safest course of action.

Multisig wallets provide a viable method to address both of these issues. Funds held on a multisig address, in contrast to single-key, may only be transferred with the provision of multiple signatures, which are produced by using several private keys.