Even though cryptocurrencies are still “new” to many, anyone interested can ask, where should I store my significant crypto investment? And the answer to that can depend on person to person.
Some people prefer to live on the edge and use traditional, custodial, less secure wallets. At the same time, it becomes necessary for giant organizations or corporations to use a more secure, private, functional, and safe crypto wallet.
And for many, a multisig wallet checks those boxes. Multisig wallet has been around for a long time and gained quite a reputation, so let’s delve deeper and understand what a multisig wallet is.
What Is a Multisig Wallet?
A multisig wallet is a digital wallet that uses multiple signatures or addresses. A multi signature wallet will use more than one private key to authorize and make crypto transactions.
In cryptocurrencies, Multisig wallets have been present for a decade. In 2013, BitGo introduced a multisig wallet, which became an industry standard. People concerned about the security of their crypto investments use Multisig wallets.
Traditional crypto wallets require you to hold only one private key when making any transactions on your crypto assets, and these can be custodial or non-custodial, hot or cold. Still, the exact requirement to make transactions is just one private key.
How Does a Multisig Wallet Work?
You can imagine a wallet multisig as a safe deposit box that requires at least two keys to open. Both, or how many keys the safe deposit box requires, need to be inserted simultaneously for the box to open.
This simple premise is how a multisig wallet works, and to make and authorize crypto transactions; you will need multi-signature addresses to make transactions. This is beneficial for individuals or companies holding significant crypto investments.
Generally, Multisig wallets can exist in many configurations, such as 1-of-2, 2-of-3, etc. In the case of 2-of-3, the primary premise is that two keys will be required to access the wallet, and for 3-of-4, three will be at least required.
This is significant for couples looking to make a joint crypto wallet or parents who want to oversee their kids’ crypto investments. A multisig wallet can also help if your partner meets an untimely demise, as you can access the wallet with your private key.
Benefits of Using a Multisig Wallet
The most significant benefit of using a multisig wallet is that it significantly enhances your crypto assets’ security. The risk of theft or losing access to your private key is significantly reduced when using a multisig wallet.
In the case of traditional one-signature wallets, if your private key is lost, then all of your crypto assets are lost forever unless you create a backup of the key. And if that private key is stolen, anyone can access your wallet and get a hold of your crypto assets.
There are better options for a company with plenty of crypto investments than relying on a single private key. If a company decides to make an investment or a transfer, Multisig wallet would be more beneficial as it will require multiple keys to be present at the time of the transfer.
What are the risks of using a Multisig Wallet?
With all the benefits of a multisig wallet, some risks or disadvantages are involved. First, you will lose your crypto investments forever if one of the keys is lost. Especially in the case of 2-of-2, if one of the keys is lost, there is absolutely no way to access the wallet. Not even a back door.
Secondly, Multisig wallets are a bit more complex to use than traditional wallets. Some users find multisig wallet inconvenient and complicated to use. Along with that, a proper backup solution is also necessary to keep the private keys safe.
Things become more difficult when you cannot contact another member who holds the other private key. Transactions that ordinarily take only a few seconds could wind up taking days.
Best Multisig wallet to use?
There are many best multisig wallets, ledger multisig, Armory multisig, Electrum multisig, and more that can have multiple configurations for everyone’s needs. Multisig wallet Solana is one of the most secure ways to protect an individual’s crypto assets.
Multisig wallets can have different features and sometimes restrict to only one cryptocurrency. Armory, for example, is only for bitcoin. More on Armory and how to set it up is later in the blog, so keep reading.
Are Multisig wallets safe?
Yes. Multisig wallets exist as an alternative to overcome traditional wallets’ risks. As mentioned before, multiple signatures or private keys are a great way to authorize significant transactions from a crypto wallet. Multisig wallet binance and Multisig wallet Ethereum needs smart contracts for on-chain multisig.
Multiple signatures are another method of two-factor (2FA) authentication that you can use. You can still prevent someone from withdrawing money from your account even if they manage to steal one of your keys. You can keep all private keys for yourself or distribute them to others. In either case, it ensures that every transaction is thoroughly verified before it is finalized.
There are plenty of non-custodial open-source multisig wallets. However, they are DIY. This is why setting up a multisig wallet is a complex process for some people. But throughout the years, the process has been simplified as many wallet companies have seen the potential of multisig wallets and have presented a reliable and easy solution.
Is MetaMask a multisig wallet?
Metamask can be used as a multisig wallet. Gnosis safe is one of the most popular multisig wallet metamask. It works with most cryptocurrencies, such as bitcoin, ether, and more. It is available on both desktop (Windows, macOS, Linux) and Mobile (iOS, Android) as an application.
Gnosis can easily be integrated with metamask to set up and manage your crypto assets, such as NFTs. It even integrates seamlessly with popular decentralized protocols, or DeFi for short.
Is Coinbase a multisig wallet?
Unfortunately no. Coinbase can be called a non-custodial wallet, but it works with two private keys. One is a private key that is used to make and authorize transactions. However, the second key is an encrypted key that Coinbase stores itself.
The second key is unlocked when you enter your password to login into your account on their platform. Both keys are used to authorize transactions of your crypto assets. Coinbase used to support multisig wallet, but they don’t anymore.
How to create a Multisig wallet?
Something to remember is that different multisig wallets will provide different features. And some wallets might not support the cryptocurrency of your choice. However, most popular cryptocurrencies are very well supported.
Armory is known as the “best” multisig wallet bitcoin. It is practical because it offers a variety of wallet designs and includes built-in security against some hacks. Armory is also a multisig hardware wallet, meaning you can store your private keys on USBs, which is a huge benefit.
Armory is very easy to set up. Just be aware that if you want to use specific features, you might have to pay transaction fees, and Armory works with the entire blockchain, so you need plenty of storage.
You can install Armory and set up a wallet if you match the requirements. The first step is to go to their website and download the multisig wallet app for your operating system, Windows, macOS, or Linux.
Once downloaded, open the installer and follow the on-screen instructions. And once that is done, you must follow the on-screen instructions again, which will lead you to create an address.
After you create an address, you can send or receive assets. The UI is intuitive, and all required options should be relatively easy to find on the main page, but it might change with future software updates.
At this point, you should take a backup of the private keys. Please keep it safe and secure in a private and safe place, away from any harm, as these keys will be the only way to restore access to your wallet.
Now come back to where you should store your crypto investment. Hopefully, this blog has cleared up some doubts about whether multisig wallet should be a choice you should make for your crypto assets.
While multisig wallet provide many benefits, the features can depend on your specific platform or wallet. Some might download the entire blockchain, and some might give you the option to store it locally on a storage drive. Regardless of the features, multisig wallets are great, and if the number one priority is security, then you should not look the other way.