Last week, I was at a mall to purchase some groceries and home items. When I finished selecting them, I took my bitcoin ATM card out and paid—tried to pay, sorry. It never went through. I thought it was a network issue, but I knew something was up when we tried five more times at 30-minute intervals. I quickly opened my mobile wallet and checked my balance. What I saw there made me break into a sweat in the low winter temperature.
Someone moved all my BTC. A malicious hacker gained illegal access to my wallet and moved my funds.
Hey, if you felt sorry for me there, don't; I woke to sweat, but I realized it was only a dream after getting myself a few moments later. But it felt so real, so much so that I delved into research to secure my wallet. Of course, I knew that having my security phrase meant that my wallet was safe. But it never occurred to me that I'd need more security for my wallet.
Interestingly, I found a solution that seems tailor-made for me; a multi-signature wallet.
What is a MultiSig (MultiSignature) Wallet?
A multi-signature wallet, or multisig for short, is any crypto wallet that requires multiple private keys to sign & perform a transaction. Users gain access after entering one set of correct private keys, but in multisig wallets, two or more different sets are required. If perhaps, I had that type of wallet in my dream world, I would not have fallen prey to the imaginary hacker.But multisig wallets have other essential uses based on the 2-level security model. Think of these: suppose there is an investment firm that holds large amounts of bitcoin or some other cryptocurrency in a wallet. They would likely give the private key to only one person or a group for security. But that is hardly a good solution because anything could happen, and the wallet would be compromised.
But what if the wallet had two or three private keys and they were given to a corresponding number of people? That makes more sense, right? Yes! This is how multisig wallets effectively remove the burden of single signature wallets and improve security by truly decentralizing access to wallets.
Now, let’s dive into the technical aspect of how multisig wallets work.
How MultiSig Wallets Work?
The technology of multi keys or multi-signatures has existed for centuries, but it only came to cryptocurrencies in 2012 when it was adopted and deployed for bitcoin. Bitcoin was launched in 2009 and only operated the single signature protocol before then. But the new multisig wallets were built to only open when the keys are entered one after the other. This is quite different from some bank vaults, where keys must be documented and turned simultaneously to gain access. Although it is similar, the multisig wallet protocol creates a kind of 2FA protocol since the keys are entered one after the other.Now get a cold lemonade.
Done with that? Leggo.
An essential aspect of multisig wallets is that the private keys must be more than one, typically two or three. So, you’d find that there are 1-of-2 or 2-of-3 multisig wallets; for transitions, only one key is required for the former, and two keys are needed. In that way, multisig wallets can have a wide range of use in different circles.
There are also multisig wallets that require all private keys to be used for authorizing transactions; in this case, you can have 2-of-2 and 3-of-3 keys required.
Let’s look at some of the benefits of multisig wallets and some creative ways to use them. Ready?
Advantages of Multisig Wallets
- Hot wallet security: A hot wallet is a cryptocurrency wallet connected to the internet and keeps its private keys in a secure online location. Hot wallets are standard and are the usual victims of phishing attacks. Multisig protocol enhances the security of hot wallets to prevent unauthorized access from phishing activities. Companies with considerable funds in hot wallets can easily create multisig wallets and store one or two of the keys offline. With multisig wallets, companies can now breathe a sigh of relief if one wallet signatory dies. Okay, that wasn’t funny. Or was it?
- Decentralization: Remember the first and true goal of blockchain? Decentralization. Multisig wallets bring the true power of decentralization as they reduce the dependency on one person or one wallet.
- Mitigate Risks: Multisig wallets, to an extent, circumvent the security risks associated with single sig wallets where malicious hackers can gain unauthorized access via the single key.
- Multi-Device Storage: Multisig wallets offer multi-device storage. Private keys can be stored on different devices. For example, one key can be stored online, another is kept on a mobile phone, and the last key is written on paper and held away. In that way, wallet owners can retain complete control of their wallets without worry.
Disadvantages of Multisig
Despite the immense benefits of multisig wallets, they are not without fault.- The essential drawback is that a multi-signature wallet is more difficult to set up than a single-signature wallet. Therefore, technical competence is required to set up a multi-signature wallet. Otherwise, one would have to rely on a third-party installation, which might jeopardize the wallet's integrity.
- Also, the recovery procedure in a multi-signature wallet is time-consuming. It is necessary to load each recovery phrase onto a separate device.
- You do not need to rely on any third party, device, or location to access the wallet and sign the transaction in a single key signature wallet. However, in a multisig wallet, a third party is required, which slows down transactions.
- Finally, the concept of a multi-signature wallet is relatively new. Therefore, there are few established safety nets and legal recourses if anything goes wrong.
Use Cases of MultiSig Wallets
Here are the most popular ways in which multisig wallets are being used today:
- Decision-making: Company boards can store funds on multisig wallets and assign members seven or more private keys. For any transaction to occur, all or most board members must agree and then provide the keys to approve transactions.
- 2FA: As mentioned earlier, multisig wallets are like authentic 2-factor authentication protocols. Since keys must be entered one after the other, transactions may not occur if the second key is wrong or absent!
- Escrow transactions: An escrow service uses a third party to secure funds during a transaction. The escrow holds the funds from the buyer and will only release them to the seller when the product or service has been confirmed. Multisig wallets are perfect for escrow services since two or more private keys will be required before funds are transferred.
- Enhancing security: Multisig wallets are statistically the best and most secure way to keep cryptocurrency wallets safe. Even if a malicious hacker gets one (typically stored online), the other keys stored offline are safe and may never be compromised at the same time. Thus, you can adopt the multisig protocol for crypto storage to enhance cybersecurity and prevent avoidable loss of funds.
- Smart contracts: Smart contracts are executable blockchain transactions only executed when certain conditions are met. Multisig wallets can be smart contracts; contracts can be programmed for execution only when the other keys are entered.
Best MultiSig Wallets in the Market
Let’s now look at some of the best multisig wallets in the industry today:[h3][color=rgb(255, 153, 0)]Zebec[/color][/h3] Zebec is a programmable continuous payment protocol and a multi signature treasury management f[color=rgb(23, 22, 23)]or payroll, investments and more. Zebec is[/color] built on Solana Blockchain. Zebec was founded by Sam Thapaliya in 2021 and has raised over 20 Million dollars in funding as of Apr 2022.
I hope you are still following?
Features of Zebec
- Payment streaming
- Multisig wallet
- Fully customizable platform
- Multi-token vault
- Automated Dollar Cost Averaging
- Custom Debit Card (Upcoming)
- Yield farming (Upcoming)
For now, Zebec is only available on PC and not on mobile. However, the Zebec multisig wallet can be integrated for payroll across many coins on the Solana blockchain.
[h3][color=rgb(255, 153, 0)]Gnosis safe[/color][/h3] Gnosis Safe is an intelligent contract crypto multisig wallet built and deployed on the Ethereum blockchain. Gnosis offers a multisig wallet protocol to protect funds. With Gnosis, users can set a minimum number of signatures to authorize transactions based on the a-of-b model. For example, if there are five signatures, the users may set up a minimum of two or all five of all signatures.
Gnosis safe was built by Martin Köppelmann and Stefan George and published in 2015. Since then, Gnosis has offered advanced security for private and co-shared wallets. Some features of Gnosis are:
- Multisignature
- Open-source\xa0
- Formally verified\xa0
- Gasless signatures\xa0
- DeFi integrations (smart contracts)
- Privacy
- NFTs
[h3][color=rgb(255, 153, 0)]Casa[/color][/h3] Casa is one of the top multisig systems available, intended to make your funds as secure as possible.
They are a crypto custodian firm that has been in operation since 2018. Also, there is no need to fill out any KYC information because they prioritize privacy. Depending on your preferences, you may keep track of your funds in-house or have Casa handle that task entirely.
Currently, Casa allows you to build multisig up to 3-of-5 authorizes at various fees.
[h3][color=rgb(255, 153, 0)]Electrum[/color][/h3] Back in 2011, Electrum was established as a Bitcoin-focused software wallet. Without any doubt, it\'s one of the safest desktop Bitcoin wallets around, and its multisig feature is user-friendly.
It is a free and open-source technology, meaning anybody may set up a server using it. In addition to being one of the oldest and most reputable Bitcoin wallets, it also includes cold storage and multisig capabilities.
With Electrum, you may create up to 15-of-15 multisig wallets, making it suitable for big organizations who need to manage their BTC holdings. Additionally, Electrum may be used with hardware wallets from Ledger, Trezor, and Keepkey, in addition to desktop and mobile platforms.
Phew! Now I feel tired and have to take a nap. Before I go, I\'ll summarize this long article. First, remember that standard crypto wallets have a single private key (single signature) and recovery phrase. If the private key is lost or compromised, you may lose funds in that wallet forever. To fix that, some smart developers thought of a multi-signature protocol that allows users to set a number of private keys that can be stored offline.
Now, upon the loss or compromise of one set of private keys, funds in a multisig wallet are safe until the other key is found. This simple protocol makes it easier to secure crypto wallets from malicious users.
I hope that’s clear? Au revoir!
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