What is a multisig wallet?
A multisig wallet is a collection of single key wallets combined together to form a single address output. However, for any transaction to be moved out of the multisig wallet, a certain chorum of the keys used to create the wallet must sign the transaction. For example, in a 2 of 3 multisig, a total of 3 keys are used to create the wallet and any 2 are needed to sign the transaction in order to broadcast it to the network. This means that 1 key can be redundant in this setup, allowing the user to have the peace of mind of knowing that if he loses one key, the other 2 can still sign a transaction and thus the Bitcoin held in the multisig is still accessible. Other multisig setups can include a 2 of 2, 3 of 5, 5 of 7, 7 of 9 etc. Thus a custom multisig setup can be built for any security requirement.
Example of a multisig wallet
For instance, a company holds Bitcoin on their balance sheet and decides to make use of a multisig wallet for this purpose. They do not wish to rely on a single point of failure such as if they were to have all of their Bitcoin on one hardware wallet. They require that the CEO, CFO and Chairman of the board should be responsible for storing the keys to their multisig, so they make use of a 2 of 3 multisig wallet.
Thus each of the 3 hold a hardware wallet, but only 2 are required to sign for any transaction. If any one of them decide to try to steal the funds they are prevented by the fact that they only control 1 key each, and 2 are required to move any Bitcoin out of the multisig wallet.
Multisig wallets make use of software to coordinate the hardware wallets involved in the transaction. This software creates the multisig and is responsible for coordinating the hardware wallet keys when a transaction has been sent.
Like a hardware wallet, a multisig has a wallet coordination file which must be kept as well as the private keys of each hardware wallet which has been added to the multisig. This wallet coordination file is essentially a map which tells the software which hardware wallet addresses make up the multisig. This must be kept safe. Either as a text file or an animated gif of a QR code. The best way to store this file is on a flash drive with a paper backup copy of the text file.
Casa Keys Multisig App (Recommended)
Keys.Casa is a ready-to-use Multisig provider app that can be downloaded to your mobile device (Android or iOS).
It is around R2,000 per annum for the recommended Gold plan.
All you need to do is have a hardware device, a mobile and the Casa app.
Casa guides you through the setup process on their website, under Resources/Support.
If you wish to setup your own multisig coordination, continue to the next page.