What is Multisig?
Multisig is an authorization setup that requires multiple signatures for a transaction to be executed.
What is Multisig?
Multisig is a mechanism that requires approval from multiple keys for a transaction to take place. It stands for “multisignature.” For example, a 2-of-3 setup indicates that a transaction can be processed with signatures from any two of three defined keys. In this example, the compromise of a single key is not sufficient to authorize a transaction.
This method can be used for corporate treasuries, shared funds, or personal backup setups. Keys can be held by different people or in different secure locations. However, storing all keys on the same computer reduces the benefits provided by physical separation.
A Practical Example
A team might use a wallet that requires at least two out of three managers’ keys. A single manager cannot make a payment alone. If one key is lost, transactions can still be performed with the other two. Conversely, the loss of two keys together can prevent access; the theft of two keys could grant an attacker sufficient authorization.
Therefore, requiring more signatures is not always better. The feasibility of daily operations and a recovery plan must be designed alongside security. If one of the signers becomes unreachable for an extended period, it could halt business operations.
What Should Be Backed Up?
In addition to the keys, information explaining the wallet setup and spending conditions may also be required. Depending on the software used, the wallet descriptor, public keys, or the contract address are important for recovery. Storing recovery words for only one device might not be enough to restore the entire structure.
In smart contract-based multisig wallets, modules, update authorities, and permissions can create additional risks. Instead of signing with the assumption that “the other person will check anyway,” every signer should verify the recipient, the amount, and the authorization granted by the transaction. Multisig does not eliminate the responsibility for review.