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What is Multisig Wallet?

What is Multisig Wallet? Why use Multi-Signature Wallet?

What is Multisig Wallet? How does Multisig Wallet’s technology work? Should multi-signature wallets be used to store cryptocurrencies?

Multisig Wallet is one of the commonly used technologies in Crypto. In today’s article, we will learn what multi-signature wallets are, how they work, as well as their pros and cons.

What is Multisig Wallet?

Multisig Wallet (or Multi-Signature Wallet) is a cryptocurrency wallet that requires two or more private keys to sign and send a transaction. This storage method allows the creation of a multi-signature created by a combination of multiple signatures.

Currently, multi-signature technology is being used a lot in the cryptocurrency world, but its principle is already present. Multisig Wallet can be used in different contexts, but most of the use cases are related to security issues.

Multisig Wallet

A simple example for you to understand how multi-signature wallets work:

Imagine a safe deposit box with 2 locks and 2 keys to open the box. One key is in your hand, another is in the hand of someone you trust, currently the only way to open the box is to provide both keys at the same time, so this person cannot open the box. box without the consent of the other.

How does Multisig Wallet work?

Imagine Justin, Vittie, and Craig setting up a multi-signature crypto wallet where each holds a key and two of the three keys must agree to be able to send a transaction.

For payment, Justin creates a transaction and signs it with his key; he will then send this transaction to Vittie, who will sign it with her key.

From here, Vittie can send it back to Justin to complete the transaction, or send it to Craig for him to sign (though this last step isn’t necessary, as only two of the three keys are needed to unlock the wallet).

How Multisig Wallet works

By extension, the person setting up the Multisig Wallet can choose how many keys are allowed to open the vault, as well as the minimum number of keys required to unlock it.

  • A 4-of-4 multi-signature wallet means a total of 4 signatures and requires four signatures to unlock a transaction.
  • Similarly if it’s 2-of-4 then there are 4 signatures in total and it takes two co-signers to sign a transaction.

Advantages and disadvantages of Multisig Wallet

Like other cryptocurrency technologies, Multisig Wallet offers many advantages, but besides that, it also has its own limitations:


One of the strongest advantages of Multisig Wallet is that it will help increase security if used correctly. By using a multi-signature wallet, users can prevent problems caused by lost or stolen private keys. So even if one of the keys fails, the funds will still be safe.

Imagine that Jack generates a 2-of-4 multi-signature wallet address and then stores each private key in a different place or device (e.g. mobile phone, personal laptop, computer tablets and Telegram). Even if Jack’s mobile phone is stolen, thieves will not be able to access Jack’s fund with only 1 of the 4 keys.

Similarly, phishing and malware attacks are less likely to succeed, as hackers are more likely to gain access to only one device and one key. On the other side, if Jack loses one of his private keys, Jack can still access his funds using the other 2 keys.

In addition, a multi-signature wallet will help a DAO (decentralized autonomous organization) manage funds efficiently, DAOs now often use multi-signature wallets to control access to the project’s funds.

References: What is a DAO?

For example, by setting up a 15-of-20 wallet, where each admin member holds a key, there is no way a single member or a small group of admin members can eat blocking or misuse of funds. Only decisions with a unanimous majority can be enforced.

Disadvantages of multi-signature wallet

While Multisig Wallet is a good solution to a wide range of problems, it is important to keep in mind it still has some risks and limitations.

Setting up your own multi-signature address requires some technical knowledge, especially if you don’t want to depend on third-party vendors.

In addition, multi-signature wallets are also not flexible in some cases, basically, the access structure in the Multisig solution is tied to the address. So what happens when you want to change the multi-signature wallet access policy with an old party and they don’t cooperate?

Or as in the case of OKEx users a few months ago, when the exchange was suspended from withdrawing, they explained that one of the main owners of the multi-sig wallet kept his funds. Users who are cooperating in an investigation with the government have “lost contact” (I personally find this reason a bit unreasonable). So OKEx cannot let users withdraw money.


Wallets allow you to store and transfer cryptocurrencies by generating and using private keys, but in the evolving crypto world where hacking attacks are common, you may lose your private keys. This means you lose your crypto holdings.

To enhance the security of cryptocurrency wallets, people have used multisig wallets, this technology offers many advantages but also has its own disadvantages, it is important that you should understand its overview so that it can be used in the right cases.

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