What is a Multisig Wallet?
Things to know:
Multisig wallets offer an extra layer of security for valuable assets, communities and more. Essentially it’s a wallet that requires two or more wallets to confirm every transaction. Let’s dive into what a multisig wallet is and how it works.
What is a multisig (aka multi-signature) wallet?
A multisig wallet is a type of web3 wallet that requires multiple signatures (or approvals from different parties) to authorize each transaction. This added layer of security ensures that no single individual can control the wallet's assets.
Multisig wallets enable better security, access control, and collaboration. By requiring multiple approvals, they reduce the risk of theft, hacking, or misuse of funds.
What is a multisig wallet for?
Multisig wallets are simply for added security, but there are countless reasons you might want to implement them such as:
Managing Team wallets for organizations, DAOs, and companies with multiple team members
Multisig wallets enable secure and controlled access to shared funds by requiring multiple signatures for transactions. This feature ensures that no single individual has full control over the funds, promoting transparency and collaboration.
Secure Backup and recovery
By distributing the required signatures among multiple trusted parties, a multisig wallet can act as a safety net in case of lost or compromised private keys. This setup helps to protect against single points of failure and ensures that funds remain accessible.
Creating Trustless Escrow services
Multisig wallets can be used to create trustless escrow services where an impartial third party, such as a mediator or arbitrator, is added as a signatory. The escrow process is secure and transparent, as funds are only released when all parties agree.
Shared wallets between family members and friends
Multisig wallets can be used to manage shared assets among family members or friends. By requiring multiple signatures, it ensures that all parties agree on the use of funds, promoting accountability and trust.
Pros of multisig wallets
Enhanced security
Multisig wallets require multiple signatures from different parties to authorize a transaction, reducing the risk of theft or unauthorized access. This setup helps prevent a single point of failure.
Collaboration and decision-making
By requiring multiple parties to approve transactions, multisig wallets promote collaboration and collective decision-making, ensuring that all stakeholders are involved in crucial financial decisions.
Customizable approval schemes
Multisig wallets can be set up with a flexible "M-of-N" signature scheme, allowing users to choose the number of required signatures (M) out of a total number of participants (N) for transaction approval. This feature enables users to tailor the wallet's security and operational requirements to their needs.
Improved access control
With multisig wallets, users can assign specific roles and responsibilities to different participants, ensuring strict control over digital assets and enabling clear separation of duties.
Cons of multisig wallets
Increased complexity
Multisig wallets can be more complex to set up and manage compared to single-signature wallets, as they involve coordinating multiple parties and their respective private keys.
Slower transaction times
Transactions can take longer to process in a multisig wallet, as they require the coordination of multiple parties to obtain the necessary signatures. This can be particularly cumbersome when participants are spread across different time zones.
Limited wallet compatibility
Not all wallet providers or blockchain platforms support multisig functionality. This can lead to a lack of support, resources, and compatibility with other tools or services.
List of Top Ethereum Multisig wallets
There are many Multisig wallet providers that users can start using today, each with its own unique features. Some of the most popular examples include:
Safe
Formerly known as Gnosis Safe, Safe is a multisig wallet designed to manage large funds in DeFi and DAO treasuries.
It allows for flexible multisig configurations (e.g., 2-of-3, 3-of-5) and is fully customizable. Plus, it has the optional integration of hardware wallets or hot wallets—the choice is yours.
Argent
Argent is a multisig wallet which operates using smart contracts which is compatible with both the Ethereum mainnet and layer 2 solutions. Argent offers a social recovery mechanism, where "Guardians" (trusted contacts or devices) can help recover the wallet in case of lost access. While it isn’t a traditional multisig wallet, it provides a similar solution for security. Since it uses a smart contract design, it doesn’t need to use seed phrases, making it very accessible.
Cashmere
Cashmere is a multisig wallet solution designed primarily for EVM chains and works via smart contracts. Much like Safe, it allows for multiple configurations of signatories. Since it’s EVM based, it’s well suited to DeFi integrations and Ethereum asset management.
The choice of a multisig wallet depends on your specific needs and preferences, as each multisig wallet has its unique features and benefits. We recommend researching the different options and comparing their capabilities to determine which wallet aligns best with your goals and requirements.
How to create a multisig wallet
To create a multisig wallet you will need to follow these steps:
- Choose a multisig wallet service. Always choose a reputable service such as Safe or Argent, as untrusted multisig wallet services could potentially access your crypto.
- Create the multisig wallet on your chosen platform, specifying how many signatories you will need to authorize transactions, and which wallets will form the group.
- Enjoy your new multisig wallet experience!
How to add multisig wallet capabilities to your app
With thirdweb auth, you can integrate multisigs into your web3 app. This makes it easy to manage multiple wallets for community leaders, DAO treasuries and more. Plus, thirdweb auth does a lot more than just facilitate multisig wallet management. You can also use auth to build seamless logins and authorize digital identities!
How does a multisig wallet work?
Multisig wallets are built on smart contracts. Essentially they are “programmable wallets” that use the smart contract’s code to establish certain rules; including how many signatures are needed to approve a transaction and who the authorized signatories are. At its core, a multisig wallet is a smart contract deployed on a blockchain that contains the logic for managing addresses, signatures, and more.
What happens when you create a multisig wallet
When a multisig wallet is created, the following parameters are defined:
- The number of signatories: This represents the total number of authorized signers who can approve transactions from the wallet.
- The number of required signatures: This is the minimum number of signatures needed to validate a transaction.
- The list of signatories' public keys: These keys are used to verify the signatures and confirm the identity of the signatories.
How private and public keys work in a multisig wallet
A multisig wallet operates using a combination of cryptographic signatures and smart contract logic. When a transaction is proposed, it is stored within the wallet's smart contract, along with the required number of signatures. As signatories provide their signatures, the smart contract validates them against the public keys of the authorized parties.
When a transaction is initiated, it is broadcasted to the multisig wallet’s signatories, who must sign it with their private keys. The smart contract then verifies if the required number of signatures have been collected. If the condition is met, the transaction is considered valid and can be executed on the blockchain. Otherwise, it remains pending until the necessary approvals are gathered.
Once the required signatures are collected and verified, the smart contract executes the transaction. If the transaction involves transferring assets, it updates the wallet's balance accordingly. In the case of a function call to another smart contract, the multisig wallet's smart contract forwards the call to the target contract.
This mechanism in multisig wallets enables powerful use cases that are not typically possible in traditional web3 wallets.
Multisig wallets vs. MPC wallets: What’s the difference?
Multisig wallets and MPC wallets both serve to enhance security and control over digital assets by involving multiple parties in transaction approvals. However, they are not the same thing, as they operate based on different underlying mechanisms.
Multisig (short for Multi-Signature) wallets, require multiple signatures from different parties to authorize transactions. A multisig wallet is typically set up with an "M-of-N" scheme, where M signatures out of N total participants are required to approve a transaction. The private keys are not divided in this case; instead, each participant has their own distinct private key.
Multi-Party Computation (MPC) wallets, on the other hand, use a cryptographic technique where the private key is divided into multiple shares, with each share distributed among different parties. The key is never reconstructed in its entirety. Instead, the parties jointly perform computations required for transactions, such as signing, without revealing their individual key shares. This approach enhances security by eliminating a single point of failure.
So while both multisig and MPC wallets involve multiple parties in the transaction process, they differ in the way they handle private keys and transaction approvals. Multisig wallets require distinct private keys for each participant and a specified number of signatures for transaction approvals, while MPC wallets rely on splitting private keys into shares and performing joint computations.
Concluding thoughts: Are multisig wallets the future of Ethereum wallets?
Multisig wallets offer a powerful solution for managing digital assets securely and collaboratively. By requiring multiple signatures to authorize transactions, they enhance security and reduce the risk of single points of failure — unlocking decentralized collaboration and decision-making across various use cases.
We hope this blog post has helped you better understand what a Multisig wallet is, how it compares to other smart contract wallet solutions such as MPC wallets, and how to get started with Multisig wallets.
Frequently Asked Questions (FAQs)
Can a multisig wallet get hacked?
While multisig wallets provide an additional layer of security, they are not immune to hacking. If enough signatories are compromised, a multisig wallet can be hacked, so it's essential to follow best practices for securing your wallet and private keys.
Can I change the signatories of a multisig wallet?
Yes, most multisig wallets allow you to modify the list of signatories. However, the process typically requires signatures from the current signatories, ensuring that any changes to the signatories are agreed upon by the existing parties.
Are multisig wallets only available on Ethereum?
No, multisig wallets are available on pretty much every popular blockchain today. You’ll find smart contract multisig wallets for chains such as Solana and Cardano; and you’ll find other solutions for chains such as Bitcoin.
What is the best multisig wallet?
Selecting the right multisig wallet depends on factors such as the blockchain you are using, the number of signatories, the required number of signatures, and the specific use case. When choosing a multisig wallet, consider its security features, ease of use, and the level of community support and development.
Can I use hardware wallets with multisig wallets?
Yes, many multisig wallets support integration with popular hardware wallets like Ledger and Trezor. By using hardware wallets, you can further enhance the security of your multisig wallet by keeping your private keys offline and providing an additional layer of protection against unauthorized access.
Are multisig wallets more expensive to use than regular wallets?
Multisig wallets may have higher transaction fees compared to regular wallets due to the additional complexity of managing multiple signatures and smart contract interactions. However, these fees are generally nominal and are offset by the increased security and functionality provided by the multisig wallet.
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