What is multisig?

Would you give a single person the only key to your shared fund? Multisig, short for multi-signature, lets you share responsibility for approving transactions without everyone needing to know the same secret.

Imagine a safe with three different keys that opens with any two of them. Likewise, in a 2-of-3 wallet there are three authorized keys, and signatures from two different keys are required to move the funds. Each signature is created with the corresponding private key, without revealing that key to the others.

The key holders review the same transaction and sign it. Once the required signatures are collected, the transaction can be executed. The rule is enforced through the network’s built-in features or a smart contract, depending on the implementation.

Why it matters

In a regular single-key wallet, anyone who gets hold of the private key can control the funds. In the multisig example above, compromising one key isn’t enough. Also, if one key is lost, the other two can still sign.

This serves groups that manage shared funds, but also individuals who want to spread their keys across different devices or locations. Different people aren’t strictly required. We think the real benefit is reducing dependence on a single key, as long as the separation is genuine.

What to watch out for

If all the keys and backups are on the same computer, much of the protection is lost. And if so many keys are lost that the required number of signatures can’t be reached, the funds may become inaccessible. Depending on the implementation, recovery may also require details of the wallet’s configuration, not just the key secrets.

Multisig is not the same as two-factor authentication (2FA): two login steps don’t mean two independent signatures on the blockchain. Nor does it protect against every mistake. If enough signers approve a malicious transaction, it can go through as normal. The extra security also comes with more coordination and, depending on the network, higher fees.