How to Use Multisig to Keep Your Coins Ultra-Safe
Multi-signature, or multisig, is a wallet setup that requires at least 2 keys to authorize a transaction. Commonly utilized by cryptocurrency exchanges to guarantee funds can't be moved by a rogue employee, multisig also has applications for end-users. If you're looking for a boost in the security of your noncustodial bitcoin wallet, multi-signature may be the response.
The Quest for the Perfect Custody Solution
There's no such thing as the best bitcoin wallet. Hardware wallets can be opened under pressure. Paper wallets can perish. Mobile wallets can get lost. And then there's custodial wallets, which are never more than an exchange hack or exit fraud far from being diminished. But there's one service that combines some of the best aspects of custodial and noncustodial wallets.
A multisig wallet needs a minimum of two key signatures to license a transaction. This suggests you will need to trust another party. Unlike saving funds on an exchange, nevertheless, you get to choose the identity of that third party, and even if that keyholder should betray you, they will unable to unilaterally access your funds.
P2SH is the address basic typically utilized for BTC multi-signature wallets. Many wallet companies support this standard, numerous of whom supply in-depth info on how to utilize their software to set up a multisig wallet. Before you get started, you'll want to think about the number of keys you want to license. There are many permutations available, ranging from 1-of-2, in which either party can sign transactions, to the more typical 2-of-3, which is popular with escrow-based services such as Localbitcoins, and 3-of-5, which is frequently used by exchanges to protect their hot and cold wallets.
The most popular desktop bitcoin wallet, Electrum is a feature-rich and relied on open source wallet that's been around for many years. It supports integration of hardware wallets such as Ledger and Trezor, and Electrum supplies a clear tutorial on how to create a 2-of-2 multisig wallet
Armory is an open source BTC wallet for advanced users that supports as much as 7-of-7 multi-signatures. It's perfect for establishing a multisig wallet where funds are most likely to be put in cold storage for a long period of time, and access will be infrequent. Armory is offered as a desktop build only.
For users who like the concept of multisig, but aren't positive with the technical or trust components that the setup demands, there is another option: outsource the job altogether. Casa offers Keymaster, a multisig service that turns over one the keys to Casa themselves. Their “Sovereignty-as-a-Service” offering includes a price, the 2-of-3 multisig starts at $300 annually, increasing to $1,800 a year for 3-of-5. For individuals and entities holding large amounts of cryptocurrency, nevertheless, the added comfort that this supplies might deserve the price.
There are numerous other wallet suppliers that support multisig for BTC, BCH, and other leading cryptocurrencies. Do your research, identify your preferred M-of-N signatures and then pick your fellow keyholders carefully.
What are your thoughts on multisig – have you tried using it to secure your coins? Let us know in the comments section below.
Image credits: Shutterstock, Casa, and Electrum.
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