Multi-Sig Wallets Explained: Extra Security for Your Crypto

Multi-signature (multi-sig) wallets require multiple private keys to authorize a transaction, adding a layer of security beyond single-key wallets.

How Multi-Sig Works

A standard wallet uses one key: you sign, transaction goes through. A multi-sig wallet requires M-of-N signatures. For example, 2-of-3 means any two of three keyholders must approve. The transaction only executes when the threshold is met.

• 2-of-3: Most common. Three keys; any two can sign. One can be lost without losing access
• 3-of-5: Higher security. Five keys distributed across locations; three needed to transact
• Key distribution: Store keys on separate Ledger devices, in different locations

Use Cases

• Personal security: Distribute keys across locations (home, office, safe deposit box). No single point of failure
• Business treasury: Company funds require approval from multiple executives
• DAO treasury: Protocol funds managed by elected signers
• Estate planning: Family members or lawyers hold keys for inheritance

Multi-Sig Solutions

• Gnosis Safe (now Safe): Most popular Ethereum multi-sig. Web interface, mobile app
• Bitcoin multi-sig: Native support. Use with Sparrow, Electrum, or Spectre
• Ledger integration: Each signer uses their own Ledger device. Safe supports Ledger for hardware-secured signing

Trade-offs

• Complexity: Setup and coordination are more involved than single-sig
• Recovery: Losing too many keys means losing access. Backup planning is critical
• Speed: Requires coordination between signers for each transaction
• Cost: Multiple devices, higher gas fees for multi-sig transactions on Ethereum

When to Use

Multi-sig is essential for organizations and high-value personal holdings. For individual users with moderate holdings, a single Ledger with a strong passphrase may suffice. As your portfolio grows, multi-sig becomes increasingly worth the complexity.