Multisig Wallet — a wonderful solution for property security

Multisig Wallet — a wonderful solution for property security

The configuration of a normal wallet in the blockchain will have 1 public key and 1 private key. If the user owns that private key, he or she will have full control over actions with that wallet address. This is very reasonable in case the wallet is a personal wallet, only one person should know the private key. But in the case of an organization or a group of people, giving full decision-making power to one person always carries risks. When the person holding that asset wallet has bad thoughts, or unfortunately loses the private key, it is very likely that the asset will never be recovered. That’s why the concept of Multisig Wallet was born.

What is a “Multisig Wallet”?

Multisig Wallet (or Multi-Signature Wallet) on Blockchain is actually a smart contract, it requires two or more private keys to sign and send a transaction. Inside the smart contract that stores that asset will be set up a logic, which will only approve the transaction when the signature it receives must be generated by the private keys specified earlier in the contract.

Multi-signature technology is being used a lot in the cryptocurrency world but its principle has been around for a long time. Multisig Wallet can be used in different contexts, but most of the use cases are related to security issues.

How does it works?

For example, a Multisig Wallet is set to a security level of 2 out of 3, that is, to make any transaction, it needs to have the consensus of at least 2 approval signatures, then that transaction can be done. We name the three holders of these decision private keys Alice, Bob, and Peter.

Let’s take a look at the real case of a payment transaction, Alice will create a transaction and sign it with his private key; he will then send this transaction to Bob, who will continue to use his private key to sign the transaction. From here, Bob can either send it back to Alice to complete the transaction, or send it to Peter to sign (although this step is not necessary, as only 2 of the 3 private keys are needed for the transaction to be approved).

The above is a typical example, but actually the number of private keys and the minimum number of approvals can be set depending on the specific case. For example, 4 out of 4 or 3 out of 5 can also be set.

Pros and cons of Multisig Wallet

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

Advantages

Multisig Wallet enhances the security of assets. The property now wants to be used, it needs the consent of the parties involved to be able to be implemented. It no longer depends on a single individual.

Disadvantages

Although Multisig Wallet is a very good security solution, it still has some limitations. For example, setting up a multi-signature address for an individual requires the user to have some technical knowledge, especially if you don’t want to depend on third-party vendors.

In addition, the Multisig Wallet is also not flexible in some cases, for example the consensus structure in Multisig is tied to addresses. So what happens when you want to change the Multisig Wallet access policy with an old party and they don’t cooperate?

Some impressive Multisig Wallets

Gnosis-safe

As a popular Multisig Wallet, it currently supports many Blockchain platforms. Users can create their own Multisig Wallet here

Armory (Desktop Wallet)

Armorory is an open source HD Bitcoin wallet with Multisig Wallet and cold wallet support. Users can create many different sig addresses to complete with the lockbox feature.

Electrum

Electrum was founded in the infancy of cryptocurrency in 2011, so it is one of the oldest and most trusted Multisig Wallet. It is also an open source and only supports Bitcoin.

Conclusion

So, it can be said that Multisig Wallet is a very useful and safe solution for fund assets. This technology, in addition to bringing many advantages, also has its own disadvantages, it is important that you understand its overview so that you can use it in the right cases.