What is a Multisig Wallet, Most Secure Crypto Storage?

TABLE OF CONTENTS
User profile photo
By Max
Estimated reading: 6mins
What is a Multisig Wallet, Most Secure Crypto Storage?

A multisignature (multi-sig) wallet is a type of cryptocurrency wallet that provides enhanced security by requiring multiple private keys to authorize transactions. For example, a 2-of-3 multisig wallet needs 2 out of the 3 authorized private keys to sign and validate transactions. Multisig wallets help prevent theft or loss of funds, which is why they are recommended for securely storing digital assets like Bitcoin and Ethereum.

What Are Multisignature (MultiSig) Wallets and How Do They Work?

“Not your keys, not your coins.” You may have heard this expression if you use Web3 wallets like Metamask. This saying refers to the fact that if you keep your coins on centralized exchanges or you use smart contracts with admin keys, then you aren’t actually in possession of your coins. This runs contrary to the whole point of decentralized finance (DeFi) which is to help users regain control of their assets.

Regardless of which crypto wallet you use, they all have a seed phrase and private key. If you think you don’t have these, you might be using a custodial wallet where other companies have your keys instead (not good). Whoever knows those codes has admin rights over your wallet.

That’s why you should never share your private keys. But that doesn’t mean you can’t share your wallet! Multi wallets are special apps that allow multiple users to manage one wallet account without losing self-custody.

It’s like your personal blockchain. Depending on risk levels, you can assign different security for each action:

  • Request 4 of 5 signatures to sign app smart contracts
  • Request 3 or more signatures to approve payments and transfers
  • Request all signatures to add new signatures (or remove) to the multisig wallet
  • Set your account as Admin to perform most actions with only 1 or 2 signatures
  • Request all signatures when adding or removing new entries to the address whitelist
  • Actions don’t perform if they don’t reach enough signatures within a certain time, or if one person rejects it.

A “signature” is the contract you sign from another wallet. It’s similar to granting apps permission to connect to Metamask. Each wallet has a multisig feature, along with its own balance, private key, and seed phrase.

How Multisig Wallets Work

Multisig wallets are convenient ways to send crypto and NFTs:

  1. Let’s say you want to send 1 ETH from your multisig wallet to your other private wallet
  2. From the multisig platform, enter your other address, cryptocurrency, and amount
  3. Sign the transaction to start the confirmation process.

For example, in a 5-owner multisig wallet, you control 2 of the 5 private keys. To send funds, you would:

  1. Initiate and sign the transaction from Wallet 1
  2. Connect to the multisig platform with Wallet 2
  3. Review pending transactions
  4. Confirm the transaction with your second signature

If you configure the wallet to only need 2 confirmations, this would execute the transaction. If instead, it needed 4 out of 5 signatures, then you need 2 of the three other owners to follow the same steps. Some platforms have a six-owner limit, some have no limits.

Imagine how useful these can be. Multisig wallets allow friends and teams to manage the same funds and keep accurate records. You can decide to approve or reject actions in one click to make sure others use them properly.

If you don’t want to share access to your wallet, multisig is just another way to protect it. You can use the same device or different ones to create signatures. When you want to send crypto, you log into all devices and confirm the transaction.

What is Gnosis Safe?

Gnosis Safe is one of the most recommended multisig wallets. It’s a beginner-friendly dApp that supports 15 blockchains, including Ethereum and Binance Chain. Thousands of teams use the Gnosis app on mobile, desktop, and browsers.

Gnosis is a developer community focused on improving DeFi security. It offers several apps besides Gnosis Safe, such as the GnosisChain blockchain, Gnosis protocol (GNO), GnosisDAO, and conditional tokens explorer. Martin Koppelmann and Stefan George developed Gnosis in 2015 and after its launch in 2017.

Gnosis Safe is an independent wallet where you can send funds to share with other owners. Others can use these funds to transfer cryptocurrency, send NFTs, and use decentralized applications (dApps). You can also create safes across different blockchains and then use bridge apps to transfer funds between them.

After you create your “safe,” (multisig wallet) it will generate a new public key so you can send crypto from your private wallet. Once the safe has funds, you can also set spending limits and policies. Gnosis Safe doesn’t store any private keys (you would need to breach every Metamask wallet linked).

Besides basic payments, Gnosis Safe can use every network’s exclusive dApps. For example, clicking in 1inch (DEX integrator) will open the 1inch dApp connected to your safe address. Even though there are a dozen apps supported, you can connect to any dApp that supports WalletConnect (like Uniswap).

How to Create a Multisig Wallet on Ethereum

The simplest way to create a multisig wallet on Ethereum is on Gnosis Safe:

  1. Go to gnosis-safe.io or download the app. Click on Open App in the top-right corner.
  2. Connect your Web3 wallet to the network where you want to add multiple signatures (Ethereum by default)
  3. Pay a small network fee to create the multisig wallet
  4. Once created, the wallet you connected becomes the primary owner
  5. Set rules as to how many signatures you want for sending assets and managing owners. This is important because if it’s too low, a bad actor could add many alt accounts and take over your wallet.
  6. To add new users, create a username and add their wallet address. Once there are two or more, adding new members may require multisig approval.
  7. You can now add funds and safely share your wallet.

Common Multisignature Wallet Questions

Quick-fire answers to common questions:

Does Ledger Have Multisig?

While Ledger itself doesn’t support multi signatures, you can use the device to set multisig wallets on other apps. For example, you connect Ledger Nano X when creating a new wallet on Electrum. Gnosis Safe doesn’t integrate with Ledger because it doesn’t allow setting gas prices manually, which can lead to failed transactions.

Does Metamask Have Multisig?

Metamask has multisig just like any other Web3 app. Multi-signatures are smart contracts, so any decentralized wallet can sign them. That’s also why multisig wallets can connect to DeFi apps just like Metamask.

How To Connect Gnosis Safe To More Apps?

If an app doesn’t appear on Gnosis Safe, do this:

  • Go to the app and check if you can connect with WalletConnect. Click on it to get a QR code or clipboard code.
  • Go to Gnosis Safe, go to apps, click on custom apps, and enter the address.
  • Once entered, you go back to the app, which now will be connected to your Gnosis wallet. Do not close the Gnosis Safe window while in the app.

Join The Leading Crypto Channel

JOIN

Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

User Avatar

Max

Max is a European based crypto specialist, marketer, and all-around writer. He brings an original and practical approach for timeless blockchain knowledge such as: in-depth guides on crypto 101, blockchain analysis, dApp reviews, and DeFi risk management. Max also wrote for news outlets, saas entrepreneurs, crypto exchanges, fintech B2B agencies, Metaverse game studios, trading coaches, and Web3 leaders like Enjin.

Latest Video
Latest Youtube Video
Latest Podcast
Latest Podcast
Newsletter Subscribe
Share This Article

Copyright © 2023 Crave Management.
All Rights Reserved.

The LL Librarian

Your Genius Liquid Loans Knowledge Assistant