What is a Multisignature Wallet?

A multisignature wallet (multisig wallet) is a cryptocurrency asset management tool that requires multiple private key holders to jointly authorize transactions. Unlike a standard single-signature wallet, which only requires one private key to execute transfers, a multisig wallet implements a collaborative management system through an “m/n” signature rule (meaning at least m signatures are required from n private keys). For example:

• 2/3 model: Out of three private keys, at least two signatures are needed (balancing security and fault tolerance);
• 5/8 model: Five out of eight board members must agree to access funds (suitable for enterprise-level risk control).

The concept of multisig wallets is not new. It originated from traditional banking systems, where accessing a safe requires two keys: one from the bank and one from the customer. In Web3, private keys are managed through blockchain technology, achieving a balance between security and flexibility.

How Multisig Wallets Work

The implementation of multisig wallets relies on the underlying blockchain protocol or smart contracts, with different technical paths across various chains:

Bitcoin’s Multisig Solution

Bitcoin natively supports multisig addresses (starting with “3” for P2SH addresses), where the core mechanism is defined through a script hash (ScriptHash). For example, the script logic for a 2/3 multisig address is:

OP_2 OP_3 OP_CHECKMULTISIG

When a user initiates a transfer, they must construct an unlocking script containing at least two signatures OP_2 and combine it with the locking script to execute. This script requires at least two valid signatures to unlock the funds, and private key holders can collaborate through a wallet client to complete the signature verification. If the number and validity of signatures meet the preset rules, the transaction is validated by the network.

Ethereum’s Smart Contract Solution

Ethereum does not natively support multisig addresses and requires the use of smart contracts:

• Initialization: Set the administrator addresses (owners) and the minimum number of required signatures during deployment.
• Transaction Submission: Any administrator can propose a transaction, and the contract records the target address, amount, and status.
• Signature Collection: Other administrators sign the proposal, and once the threshold is reached, the transaction is automatically executed.
• Permission Management: Supports dynamic addition or removal of administrators or modification of signature rules, requiring majority consent from existing administrators.

This solution offers high flexibility, allowing dynamic rules through smart contracts, but it also incurs contract risks and gas costs.

Both approaches are rooted in cryptography, but the differences in technical paths reflect the fundamental distinctions between the UTXO model and the account model. In the future, the integration of cross-chain atomic swaps and MPC (Secure Multi-Party Computation) may further unify the underlying logic of multisig technology.

Applications of Multisig Wallets

Multisig wallets have numerous application scenarios, including:

Personal Asset Protection

• Private Key Disaster Recovery: Users can store private keys across hardware wallets, mobile apps, and offline devices using a 2/3 model. Even if one device is lost, operations can still be restored through other devices.
• Family Co-management: Family members can jointly manage savings, for example, parents and children setting up a 2/2 model to prevent any one party from misappropriating funds.

Institutional and DAO Governance

• Project Treasury: DeFi protocols or DAO organizations can store treasury assets in a multisig wallet, requiring multiple signatures from the core team to access funds, thus avoiding internal corruption.
• Permission Management: Smart contract administrator permissions can be controlled by a multisig wallet; for instance, adjustments to Uniswap’s protocol parameters require signatures from 5 out of 9 core developers, ensuring decentralized decision-making.

Transaction Risk Control

• Error Interception: Corporate financial transfers require multiple reviews; if a member mistakenly fills in an address, other signers can refuse authorization, preventing asset misdirection.
• Supply Chain Collaboration: In cross-border trade, buyers, sellers, and guarantors can use a 2/3 model to ensure that payments are released only after acceptance, reducing default risks.

Custody and Compliance

• Exchange Cold Wallets: Many platforms store the majority of assets in multisig cold wallets, preventing single-point breaches.
• Judicial Supervision: Regulatory agencies can participate in the multisig of corporate funds to ensure that fund usage complies with legal requirements.

Advantages and Disadvantages of Multisig Wallets

Advantages

1. Significantly Enhanced Security:
   Multisig wallets reduce the risk of single points of failure through distributed private key management. Even if a single private key is stolen or lost, attackers cannot independently transfer assets. Data shows that this design reduces the success rate of phishing attacks by over 70%.

2. Strengthened Organizational Governance and Trust Mechanisms:
   In collaborative scenarios (such as DAOs or partnerships), multisig wallets require consensus for key decisions, preventing internal abuse of power and mitigating risks from individual actions. For example, a project fund pool managed through multisig ensures that expenditures must be approved by technical, financial, and operational teams.

3. Flexible Adaptation to Complex Scenarios:
   Multisig rules can be customized based on needs (e.g., 3/5, 4/7), suitable for custody services, inheritance planning, etc. Some jurisdictions also use it as a compliance tool, requiring institutional clients to use multisig wallets to meet anti-money laundering regulations.

Disadvantages and Challenges

1. Increased Operational Complexity and Efficiency Loss:
   Multisig transactions require coordination among multiple parties, leading to longer processing times. For example, urgent fund transfers may be delayed if some signers cannot respond promptly. On-chain data shows that multisig transaction confirmation times are, on average, 3-5 times longer than single-signature wallets.

2. Cost and Scalability Limitations:
   Multisig transactions involve more blockchain interactions, making gas fees typically 30%-50% higher than single-signature transactions. Additionally, cross-chain compatibility is poor, making it difficult to manage multi-chain assets uniformly, increasing operational burdens for enterprises.

3. Private Key Management Responsibility Not Fully Eliminated:
   If users manage multiple private keys independently, there is still a risk of backup omissions or physical damage; relying on third-party custody may introduce centralized vulnerabilities; if multiple private keys are stolen simultaneously, it poses a significant risk to assets.