A multisig or multi-signature wallet is a blockchain wallet where there are two or more signatures required to send funds somewhere else. This adds an extra layer of security and is usually set up in order to eliminate the possibility of a single person having complete control over the funds on a wallet - multi-signature wallets are commonly used by exchanges, crypto companies and DAOs to manage their token treasuries, exchange wallets and any other wallets with significant amounts of crypto held in custody by a company or a group of people and not an individual.
Picture a modern bank heist movie - the robbers have their masks on, guns out, and they need to find and open the safe, get the money and disappear. They bring the profusely nervous bank manager to the safe and try to force him to open it - he shows them a small key he takes out of his pocket, but points with his other hand to the safe and suddenly, there’s a problem.
On opposite sides of the bank vault door, there are two keyholes. In order to open the vault, you need to unlock both at the same time with two small keys. And, the second key required for this is nowhere to be found. This is essentially how multi-signature wallets work.
Now, let’s have a look at how this works in crypto.
If you have experience with software wallets such as MetaMask, you already know how signing transactions works. If you don’t, it’s quite simple - let’s say you want to transfer ETH to an exchange wallet, you input the receiving address and amount to be sent and then click on Send. Right after, the wallet app will show you a summary of the initiated transaction and also an Approve/Confirm button.
When you approve the transaction by clicking on this button, what actually happens under the hood is that this transaction is signed by your private key - this confirms you are the owner of that particular wallet to the blockchain. Then, the transaction is broadcasted to the blockchain and then confirmed - and voilà, the funds have been successfully moved from one wallet or address to another.
In this example, the transaction only required one signature to be approved and sent. With multisig wallets, you cannot send any funds out of the wallet with a single signature, instead, multiple signatures are required for a single transaction to go through (usually two or three, but the number of signatures required is technically unlimited).
Even though we mention two or more signatures, in reality it’s most commonly two or more people whose wallets can sign the transaction (even though you can set up multisig for managing your own funds too as an individual, this isn’t usually necessary if you’re already managing your seed phrase well, but can be useful if you want to take your setup to the next level - more on this below).
Multi-signatures wallets are not your standard blockchain wallets (EOAs - externally owned accounts, basically end user wallets) where the user of the wallet has direct access to the private keys, multisig wallets are set up and controlled by smart contracts.
This means that multisig wallets are managed by code and cannot be restored via a seed phrase like EOAs can, but EOAs are actually able to govern multisig wallets on chain (as you need them to sign the transactions).
The number of required signatures is usually set up to be x out of y, where y is the total number of private keys whose signature will be accepted, and x is the lowest required amount for the transaction to be actually signed. With most crypto projects, you will see two out of three, or three out of five setups.
Can I use multisig as an end user just to manage my funds?
Yes, of course you can. If you’re already a GridPlus Lattice1 user, this is way easier for you, as you can leverage the SafeCard system for this and use just one device. Let’s say you want to set up a three-wallet system with two wallets necessary for transaction approval - all you have to do is set up three SafeCards, each with a different wallet, and then use a multisig app such as Safe on Ethereum.
For the most robust setup, you’d also want to store each SafeCard with a unique wallet in a different location and have multiple copies of each (as outlined in the aforementioned seed phrase management guide). If you’re not a Lattice user (yet), you can also do this with multiple other hardware wallets. We generally don’t recommend using software hot wallets for a multisig setup.
Setting up multisig will be most useful for your long-term holdings or other wallets you don’t use that often and just stack sats or gwei in.
Some Bitcoin wallets that let you set up a multisig wallet include Sparrow and Electrum. Ethereum users can use XDEFI, Castle or Safe (or any account abstraction services). The leading multisig solution for Solana is the Squads protocol.
Security is always top priority in the crypto world
The thrill of crypto is undeniable, but keeping your hard-earned tokens safe can feel like a constant battle. Here's where GridPlus steps in, offering a fortress for your digital assets: the Lattice1 hardware wallet.
Unmatched security
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Say goodbye to clunky interfaces: the Lattice1 boasts a user-friendly touchscreen that makes managing your crypto a breeze. Review transactions with crystal clarity before signing, and enjoy a smooth experience that puts you in control.
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The GridPlus Lattice1 is the perfect blend of ironclad security and intuitive design. Learn more about how the Lattice1 elevates your crypto security and lets you navigate the digital asset world with full confidence.