People who are familiar with cryptocurrency probably know what is a multisig wallet. But now we will explain to beginners what this concept means in more detail. So, Multisig Wallet is an abbreviation for multi-signature wallet. That is, this wallet is based on the principle of multiple signatures. Its essence is that one person can manage a traditional wallet. If several people are allowed to make transactions, it will not increase security, but on the contrary, it will only aggravate the situation.
In this case, it is common to use a Multisig Wallet. In it, each user has the same level of access, but making a transaction requires the signature of several participants. This technology will be beneficial for various companies to secure their capital from unwanted transactions.
How to create and use a Multisig Wallet?
To begin with, it is worth noting that Multisig architecture is based on increasing the security of transactions because to transfer funds, the consent of all owners will be required. That is, even if attackers want to steal your assets, they will have to either gain access to the personal keys of all signatories or trick them into signing up for the transaction.
By the way, Multisig Wallet has varieties. Here are the most popular ones:
– M-of-N wallets. This type means that N people own, but the transaction requires the confirmation of M people.
– Hardware. The peculiarity of this type is that all keys are stored on a separate device without access to the Internet. To confirm, you insert it into the computer.
– Software. Here the keys are stored in specialized applications. If you want to ensure the transaction, you can do it only through it.
The algorithm for working with Multisig Wallet is straightforward:
- You create and customize a wallet with N number of signatories.
- Any of them initiates a transaction.
- Each signatory analyzes it and either signs and agrees or not.
- The transaction is either executed or canceled.
Multisig Wallet is not only convenient. It has several advantages over regular wallets. Among them, we can highlight such as:
- High level of transparency of all transactions. No one will be able to “quietly” steal funds because the money transfer will require several signatures.
- Users are not afraid of personal mistakes. Lost your key? No big deal, because other participants can approve the transaction. The same factor increases security against hacking and theft.
- If one of the owners somehow loses access to the wallet, Multisig Wallet will allow you to restore it with the help of backups quickly.
- All wallet owners have the same level of access, which means that the responsibility for the safety of funds is evenly distributed among them.
- Compared to a regular wallet, the user does not have to entrust his private key to a third party.
Agree, such several advantages is worth your attention.
Defiway on Multisig Wallet use cases
The experts from Defiway divide Multisig Wallet use cases into three categories: individual wallet, company wallet and government use.
Such a wallet is easily used in everyday life. For example, it could be a shared savings account for family or close friends. With Multisig Wallet, you can save up to buy real estate or expensive things. The most important thing is that everyone has equal access to the funds. It is also possible to use this wallet as a family inheritance account so that all heirs are on equal footing.
For companies, this feature will also be helpful. For example, Multisig Wallet facilitates joint ventures and helps manage supply chains. Plus, Defiway suggests using Multisig Wallet to pay their employees as it will increase transparency. Plus, this technology can be used for charity as it will nullify the chances of anyone stealing funds for personal use.
Setting up and possible risks – Defiway’s guide
If you think that Multisig Wallet is complicated to use after reading the above, you are mistaken. This tool will be handy, and the main thing is understanding the settings. The setup process described in the article from Defiway consists of five simple steps:
- The primary task is to find a multisig provider that suits your needs.
- Then, generate two keys: a public key and a private key.
- The public key should be given to each of the co-owners of the Multisig Wallet.
- Set the number of signatures needed to approve the transaction.
- The final step is to test the correct operation of the Multisig Wallet.
The most difficult step is choosing a Multisig Wallet provider. You must choose among the following companies: BitGo, Armory, Defiway, Coinbase, and Copay. We recommend using the Defiway service, which is the safest and most reliable.
Unfortunately, even such safe technology has its drawbacks. Multisig Wallet requires minimal experience in the cryptocurrency sphere. Also, this wallet is vulnerable to human error, so be careful. Most importantly, don’t lose access to your account.
Multisig Wallet is a new technology that still has a lot of ways to go. It still lacks standardization. Unfortunately, there are interoperability issues, meaning users may have problems transacting between different wallets and blockchains. However, the Defiway service easily offset this disadvantage, as it completely removes all boundaries between blockchain platforms.
Well, Multisig Wallet is an innovative feature useful for individuals and companies. Such technology is more secure than standard wallets because multiple people have control. Even if one account is hacked, the others will prevent fraudsters from conducting transactions.
Unfortunately, this mechanism can be very complicated for inexperienced users. Therefore, we highly recommend reading the complete overview of Multisig Wallet technology on the Defiway blog. In addition, you can read other articles that will expand your understanding of decentralized finance, cryptocurrencies and blockchain. When choosing a Multisig Wallet provider, study the blockchain networks provided. We recommend you use the Defiway cryptocurrency wallet, as this innovative technology will ensure the safety of your funds and comfortable use.