Multisig Wallets?…Let’s Learn About It!

Multisig or Multi-signature wallets are also known as shared wallets. But first, let me remind you of what wallets are in blockchain technology 😌.

A wallet popularly known as a crypto wallet is a digital wallet that stores your private keys, keeping your crypto safe and accessible. Another great feature of a crypto wallet is that it allows you to send, receive and spend cryptocurrencies like Ethereum and Bitcoin.

A transaction is usually created and signed when you want to send funds from your wallet. Signing a transaction means you are claiming ownership of the funds, you approve the transaction and you have the keys needed to manage them.

Okay…so just as we have multisig wallets, there’s also single signature wallets. A single signature wallet also known as basic wallet requires just one signature to sign a transaction. On the other hand, a multi-signature wallet requires one or more signatures to sign a transaction.

A multisig wallet is a wallet shared by two or more users. We can call these users co-payers. The number of signatures needed to sign a transaction will be lower or equal to the number of co-payers of the wallet but this greatly depends on the kind of wallet.

Let’s take a break and dive into our imaginations💆🏽‍♀️:

Imagine three friends, Isabella, Melanie and Angel have a business idea to own a big fashion brand…hmm, so to set their idea in motion, they decided to have a secret vault where they can save funds. All three of them have different keys and these keys are needed to unlock the vault. Also, for any of them to have access to the money from the vault, at least two of them have to present their keys to unlock it.

If Isabella wants to withdraw money from the vault, either Melanie or Angel or both of them have to approve the withdrawal by presenting their keys else Isabella won’t be able to unlock the vault. Likewise, if Melanie or Angel wants to withdraw some money. Which means that at least one or two of them have to approve before they can unlock the vault and have access to the funds.

Pros to Multisig Wallets…

There are many benefits associated with multisig wallets.

• A multi-signature wallet helps to get rid of the security concerns that come with a single private key mechanism.
• Multisig reduces the dependency on one person.
• Multisig makes cyberattacks difficult by increasing the number of potential failure points that hackers encounter.
• Multisig wallets reduce the dependency on one device. For example, Crypto users can save one private key in their mobile phone and another on their desktop or laptop device.

Cons to Multisig Wallets…

Despite multisig wallets being a good solution for various problems, there are still some risks and limitations to keep in mind:

• Setting up a multisig address requires technical knowledge.
• There are no legal custodians of funds deposited into a shared wallet with multiple keyholders. If something goes wrong, seeking legal help can be difficult because blockchain and multisig addresses are relatively new concepts.
• Transaction speed is often slow. The speed is impacted because multisig depends upon either a third party, device, or location to access the wallet and sign the transaction.
• The process of recovery in a multisig wallet is tedious. It requires importing each of the recovery phrases on a different device.

Conclusion:

In this article, we learned about multisig wallets, its pros and cons. Feel free to peruse the multisig wallet I built here🤗.