As a crypto holder, you are supposed to keep your private key safe to avoid losing your assets or access to your wallet. This is a huge responsibility for one individual, and that’s why blockchain companies have decided to develop multisig wallets. But what are they? Well, this article is meant to explain in detail everything you need to know about multisig wallets, so keep reading.
What’s a Multisig Wallet?
A multisig (multi-signature) wallet provides owners with the option to access their crypto assets using multiple private keys. These keys can be distributed to various parties that set the conditions required for a certain task to be executed from the wallet, such as the minimum number of private keys to conduct a crypto transfer.
That said, multisig wallets boost the security of funds as they offer multi-factor authentication. They are useful where digital assets stored in a wallet belong to several parties, like decentralized autonomous organizations (DAOs).
Most multisig wallets have three keys, with crypto transfers requiring two of keys to be executed. This means the possibility of losing your crypto reduces since even if you lose one private key, you can still use the other two to access your wallet.
Benefits of Multisig Wallets
Multisig wallets have several advantages, including:
Decentralized Access: These wallets eliminate the risk associated with having one person control a particular crypto wallet. For example, in 2019, Canadian exchange QuadrigaCX lost over $140 million in customer funds after the firm’s CEO, who was the only person with access to the cold wallet, passed away.
Such an incident won’t happen when using a multisig wallet since access is granted to various trusted parties.
Transparency: Since the smart contracts powering multisig wallets are accessible to the public, it is easy for interested parties to audit these codes to better understand the individuals holding the private keys of the wallets.
Bottlenecks of Multisig Wallets
While multisig wallets are useful, they come with some disadvantages, including:
Technical Knowledge: Like any other decentralized crypto wallet, a multisig wallet requires users to have a deep understanding of blockchain technology in order to operate. But this technology is still in its early stage, so some people may find it tough to use a crypto wallet.
Slow Transactions: Since multiple parties are required to approve a transaction, it may take some time before the transaction is initiated, thus causing delay.
Use Cases for Multisig Wallets
Multisig wallets have several use cases in the crypto space. Here are some.
Decentralized Finance: This sector is filled with rug pulls. But with a multisig wallet, the developer of a particular DeFi project can grant a certain number of investors access to the funds to ensure they are also involved in approving any transaction.
Business Use: Crypto companies have learned a lesson from the QuadrigaCX incident. They now want access to their crypto holding to be decentralized to various parties to ensure they do not lose the funds forever. And this can only be made possible through the use of multisig wallets.
Examples of Multisig Wallet
Unipass: This multisig wallet is designed for Web2 users who want to explore Web3 platforms. Unipass does not come with seed phrases or gas fees, thus simplifying the process of entering the crypto space. The wallet supports various networks, including Ethereum, Polygon, Optisim, BNB Chain, Arbitrum, and Avalanche.
Castle: With this multisig wallet, involved parties can purchase Ethereum NFTs on Genie.xyz, Gem.xyz, and OpenSea within the app. Currently, Castle only supports the Ethereum network.
Liminal: The wallet is compatible with over 18 networks, including the most popular ones, like Ethereum, Bitcoin, Solana, BNB Chain, and Cardano. Liminal is primarily designed to serve crypto companies.
Goki: With this wallet, the owner has the ability to add or remove private key holders. It can be used by both companies and individuals. Goki only supports the Solana blockchain as of July 17, 2023.
It is evident that multisig wallets provide an extra layer of protection to your crypto assets. However, it is advisable to ensure the people you grant access to your wallet are trustworthy.
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