• Multisignature security, or “multisig,” offers a different set of security guarantees than single-signature (singlesig) solutions cannot.
• It is imperative to understand what we mean by “wallet” before evaluating one type versus another and setting up a multisig wallet.
• Benefits of multisig include minimized trust, increased redundancy, and reduced single points of failure – however it can involve more operational effort and setup costs.
Multisignature security, or “multisig,” offers a different set of security guarantees than single-signature (singlesig) solutions cannot. A multisig wallet is referred to as a “vault” in apps like Bitcoin Keeper and Blue Wallet, while some also refer to it as the “coordinator” or “coordinating software.” It is basically a wallet that can talk to multiple signing devices and coordinate between them for signing transactions (generally using the PSBT format). In comparison, a singlesig wallet talks to one signer only. The singlesig wallet is also often the signer, meaning the keys are hot. An output descriptor or bitcoin secure multisig setup (BSMS) is a format that is used to define the configuration of a multisig.
Benefits Of Multisig
The obvious advantages of having multiple signers are to reduce single points of failure and increase redundancy in your setup. With multisig you can minimize trust in any one entity as multiple entities are involved. Having multiple signers also adds an extra layer of security due to their independent setup which makes it difficult for attackers to target all parties at once.
Considerations For Bitcoin Custody
Setting up and using multisig can be operationally more time consuming and include more pitfalls if not done correctly – therefore I recommend that users only consider multisig for long-term HODLing where regular transactions are not anticipated. Additionally while there are benefits such as minimized trust, increased redundancy, and reduced single points of failure – these come with associated setup costs which should be carefully considered when making this decision .
Advantages Of Singlesigs
Singlesigs have their own merits – they offer convenience since only one device needs to be managed whereas with multi-sigs each parties’ safety protocols need to be observed for the entire system’s integrity . It does introduce attack surfaces but these can be mitigated with proper use cases such as cold storage . Additionally when skillset with multi-sigs isn’t available yet , singlesigs do offer simplicity .
In my opinion anyone holding a non-trivial amount of bitcoin for the long term should evaluate both singlesigs and multi-sigs options depending upon their use case . Security should always remain paramount regardless of custody solution employed but understanding tradeoffs between each option will help inform decisions made on behalf of protecting your funds moving forward .