• Multisig security offers a different set of security guarantees than single-signature solutions cannot.
• A multisig wallet is a “vault” that coordinates between multiple signing devices for signing transactions.
• Minimizing trust, operational effort, and setup costs are considerations for bitcoin custody when using multisig wallets.
What is Multisig?
Multisignature security, or “multisig,” is a type of wallet that can talk to multiple signing devices and coordinate between them for signing transactions (generally using the PSBT format). It is often referred to as an “m-of-n,” where you need “m keys out of n” to sign a transaction. An output descriptor or bitcoin secure multisig setup (BSMS) is used to define the configuration of a multisig.
Benefits of Multisig
The obvious advantages of having multiple signers are to reduce single points of failure and increase redundancy in your setup. With multisig, trust in any one entity can be minimized as multiple entities are involved. Additionally, common examples of attacks on multisig can be applied even with singlesig custody.
Considerations When Using Multisignature
Setting up and using multisig can be operationally more time consuming and include more pitfalls if not done correctly; therefore it should only be considered for long-term HODLing where regular transactions are not anticipated. Additionally, there may be additional setup costs associated with multi-vendor solutions when compared to single-signature solutions.
When To Use Single Signature?
Single signature solutions are great forms of custody when one is just getting started with Bitcoin or managing small amounts; however, anyone holding a non-trivial amount of Bitcoin for the long term should evaluate a multisignature option due to its added benefits and security guarantees.
Ultimately, both single signature and multi signature solutions offer their own unique sets of benefits and drawbacks depending on the user’s needs; therefore it’s important for users to consider which type best meets their specific use case before setting up any form of Bitcoin custody solution.