What is a multi-signature wallet?
When you send Bitcoin, you aren’t really moving it between addresses. The Bitcoin is essentially stored in a digital vault where it stays regardless of the owner. What you’re actually doing is changing the locks to fit the recipient(s)’s key rather than your own.
Cryptocurrency wallets will either require one or several signatures (or ‘keys’, as in the example above) to gain access and sign and send a cryptocurrency transaction. If several signatures are required, it’s known as a multi-signature (multisig) wallet. If it’s one signature, it’s known as a monosignature (monosig) wallet.
Multi-signature (multisig) wallets are considered more secure than mono-signature (monosig) wallets in that they require multiple signatures, or keys, to use.
Multisig wallets are often used when there is a high value of coins to hold or where access to coins needs to be controlled for optimal security. But multisig wallets could also be used for everyday purposes; a couple may want to open a joint crypto wallet, for example.
Wallet configurations can either require one of two signatures (1-of-2), or two of two, three of five or other combinations. A 7-of-7 multisig wallet, for example, would be extremely secure, but the more signatures required, the more cumbersome the transactions become.
Multisigs had a bit of a bad rap before the Taproot upgrade to the Bitcoin network, as it was easy to identify multisig wallets on the blockchain, possibly drawing unwanted attention from bad actors. This potential issue was fixed with the introduction of Schnorr signatures, which made all wallets indistinguishable from one another.