{"id":7397,"date":"2022-04-25T00:15:00","date_gmt":"2022-04-25T08:15:00","guid":{"rendered":"https:\/\/www.cultofmoney.com\/?p=7397"},"modified":"2022-04-24T08:12:42","modified_gmt":"2022-04-24T16:12:42","slug":"multisig-wallets","status":"publish","type":"post","link":"https:\/\/www.cultofmoney.com\/multisig-wallets\/","title":{"rendered":"What Are Multisig Wallets (And How To Set One Up)"},"content":{"rendered":"
<\/span><\/p>\n A standard cryptocurrency wallet relies on a public address and a private key<\/a> to control funds. The public address is used to receive digital assets, and the private key lets you actually authorize transactions.<\/p>\n But Multisig wallets support two or more private keys, so wallet control is shared between multiple parties. This offers additional security and prevents one party from controlling funds in a wallet.<\/p>\n However, multisig wallets, short for multi-signature wallets, can be complicated. And they don\u2019t always make sense for the typical cryptocurrency user. <\/p>\n Here\u2019s a closer look at how multisig wallets work, how to set one up, and when using one makes sense.<\/p>\n A multisig wallet is a <\/strong>cryptocurrency wallet<\/strong><\/a> that requires two or more private keys to sign and authorize transactions<\/strong>. <\/strong><\/p>\n <\/strong>If you\u2019ve ever seen a movie where two generals have to put in different keys simultaneously to launch a missile, the idea is somewhat similar. But instead of physical keys and rockets, multisig wallets use virtual keys and unlock the contents of crypto wallets for outgoing transactions.<\/p>\n Multisig wallets exist because it’s often risky for a single entity to have control over a wallet if that wallet address has enormous amounts of crypto. By splitting control over a wallet across multiple keys, multisig wallets help increase security and remove the risk of a single point of failure.<\/p>\n Mutisig wallets can work functionally in several ways as well. For example, a single private key may be split in two, requiring both halves of the key together to enter an outbound transaction.<\/p>\n Others use more elaborate techniques where two or more wallets are used to unlock a third wallet, which holds the currency.<\/p>\n Multisig wallets are ideal for institutional cryptocurrency holders, like exchanges<\/a>, brokerages, investment firms, and family offices. In short, any entity that holds an immense amount of digital assets can benefit from using a multisig wallet.<\/p>\n These are all situations where having two or more people controlling private keys makes sense. If you\u2019ve seen a business check that requires multiple signatures over a certain amount, multiple signature wallets offer similar financial protections.<\/p>\n There are also several examples of times investors could have avoided a major security incident by using multisig wallets. Some of the most infamous cryptocurrency losses of all time resulting from a single point of failure include:<\/p>\n There\u2019s a clear trend here: having customers’ assets in the hands of a single person doesn\u2019t tend to work out well.<\/p>\n While it\u2019s challenging to prevent solo founders of small exchanges from pulling escape acts like this, working with reputable exchanges should prevent you from falling victim to this type of theft. This is because major exchanges like Coinbase<\/a> and Gemini<\/a> invest heavily into security and backups, including multisig wallets, to protect customer funds.<\/p>\n Personal investors generally wouldn\u2019t need a multisig wallet unless they want to protect a considerable amount of currency.<\/p>\n Another situation where multisig could make sense is investing together with friends or family. You could create a setup where at least two of three keys are required to unlock the wallet, or whatever else makes the most sense for your investing and storage needs.<\/p>\n If you want to use a multisig wallet to increase security, you’re in luck. There are several popular multisig wallets you can use, with popular options including:<\/p>\n Choosing the right multisig wallet largely depends on how many keys you want to create and require for authorization.<\/p>\n For example, Electrum is popular because its 15-of-15 capacity is useful for larger teams that want to share wallet control. In contrast, some people prefer using hardware wallets to software wallets and should therefore stick with Ledger.<\/p>\n Setting up a multisig wallet is getting easier and easier as mainstream wallet providers add multisig support. For example, wallets like Electrum offer native support for multiple signatures. And hardware wallets like Ledger<\/a> continue to integrate with more multisig wallets.<\/p>\n As for setting up your multisig wallet, the process takes four simple steps:<\/p>\n Understanding what a multisig wallet is and how they work is the first step in deciding if you need one if the first place. Additionally, there are several pros and cons you should consider before using a multisig wallet.<\/p>\n Pros<\/strong>:<\/p>\n Cons<\/strong>:<\/p>\n Most individual cryptocurrency users don\u2019t need a multisig wallet. Instead, a quality hardware wallet or software wallet like Trust Wallet<\/a> is enough to keep most users’ digital assets extremely secure.<\/p>\n But for substantial wallets or business use, a multisig wallet is probably the best way to go.<\/p>\nWhat Is A Multisig Wallet?<\/h2>\n
When Should You Use A Multisig Wallet?<\/h2>\n
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Popular Multisig Crypto Wallets<\/h2>\n
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How To Set Up A Multisig Wallet<\/h2>\n
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Multisig Wallet Pros & Cons<\/h2>\n
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Should You Use A Multisig Wallet?<\/h2>\n
The Bottom Line<\/h2>\n