A close friend of yours just told you a mind-blowing story, they’ve lost the private key to a wallet where $10,000 worth of cryptocurrencies is stored. He or she has searched their phone, computer, and at some point wished they’d memorized the private key, but 10k has just gone into thin air and will probably be lost forever. What if there was a way that could have been averted? Meet Multi-signature cryptocurrency wallets.
How Do Private Keys Work?
Now, cryptocurrency wallets are so cool that they are wallets which do not actually hold any coin but allow you to send and receive funds. All that you need, is to move about with a private key and your funds will always be yours as long as a hacker does not get ahold of the key.
Want to pay for pizza? Enter your private key in any Bitcoin wallet, and voila, you’ve paid for pizza (but you’ll have to transfer your coin first). What actually happens at that moment is that your $10 has been transferred to another address on the blockchain which you paid to. This brings us to Multisig keys.
What is a Multisig in Cryptocurrency?
Multi-signature in cryptocurrency means that more than one person is required to approve payment or transaction before it is actually sent. In this case, with the use of their own private key. To take advantage of this feature, you will need to use a multi-sig wallet and not the regular crypto wallets. Also worthy of note, is that these wallets can be of various types based on their set conditions.
Some conditions include:
- Payment should be approved only when M of N requirement has been met. (For e.g, only approve payments if at least 3 out of 5 people who are the signatory to the account approve payment.)
- Two people can share funds using the same account. (In the case of your friend, if they had been kind enough to make you a co-owner of their wallet using a multi-signature wallet, there would’ve been no need to bat an eyelid to that event.)
- Only send a particular amount of funds if it does not exceed a particular limit. If it does, one more approval should be required.
Benefits of MultiSig Wallets
We’ve already thrown light on what you stand to gain from using these wallets, but it can never be overemphasized. Other benefits from using a multi-sig wallet include:
A hacker may have successfully gotten a hold of your private key either by being dropped carelessly in the case of a paper wallet, or malware for mobile wallets, but other parties have to be in agreement before your funds can be stolen. Therefore, multi-sig wallets add an extra layer of security to your funds.
Ability to Access Funds Even With Lost Keys:
Being able to create more than one private key for a wallet means you can store them in different places. If you’re using an M of N (2 of 3) multi-sig key, then one key can be stored on phone, the other on a laptop, and the other in a cold store. If you happen to lose your phone or computer, then you can fall back on one device and the offline wallet.
Best Multi-Signature Bitcoin Wallets
If you’ve made up your mind to try the multi-sig feature and see how it really works, then you should check out some of the best multi-signature Bitcoin wallets listed below:
- BitGo: Web, Mobile, and Desktop Wallet
- Armory: Desktop Wallet
- Electrum: Mobile/Desktop Wallet
- Copay: Mobile/Desktop Wallet
- Coinbase: Web Wallet
Now that you know what multi-sig means and the wallets you can employ, it’s left for you to give one of these a try. They may come in handy when you least expect.