Intro to Multi-sig wallets
Cryptocurrency tokens are usually held in wallets like Metamask, Exodus, etc. These wallets are majorly for personal use and have a single-key sign-off. A single-key wallet uses a private key to authorise transactions, which means that a single owner holds the sole control over their funds and can access them as they see fit.
However, single-key wallets come with a lot of security risks especially when handling enterprise treasury. One such threat with single-key wallets are cyber criminals that are constantly developing new phishing techniques to steal funds from single-key wallets. Additionally, if your keys are lost, damaged, or physically stolen with a single-key wallet, you won't have access to the funds.
Most projects and companies consist of more than 1 person with control of the treasury, so giving everyone access to the private key to your single-sig wallet is not only unsafe, but it's a poor way to manage the funds.
What are Multi-sig wallets?
Multi-sig is a multi-signature wallet that requires more than one private key to sign-off on transactions. This means that multiple parties must sign off on a transaction before it can be completed, adding an extra layer of security to the process.
Still confused? No worries!
Let's imagine there is a bank safe with two locks 🔒 and two keys 🔑. One key is held by you and the other is held by a stakeholder of your company. To open the safe both of the keys have to be used simultaneously. In this scenario, you wouldn’t be able to open the safe without the consent of the other.
Long story short, we use multi-sig wallets to execute crypto transactions most securely. A typical multi-sig configuration has 3 owners and needs at least 2 keys to move the funds.
Multisig wallets can also be used to create smart contracts that can automatically execute. For example, a smart contract could be set up to automatically distribute funds to multiple parties upon the completion of a project, provided that a certain number of signatures have been obtained. This can be especially useful in the world of Defi, where smart contracts are often used to facilitate complex financial transactions.
In addition to providing an extra layer of security, multi-sig wallets can also be used to streamline transactions. Multi-sig wallets have the added benefit of being non-custodial. This means that your assets are held on chain, and only the people with access to the approved keys can access the funds.
Here is a list of multi-sig wallets in 2023
Gnosis Safe: One of the most popular multi-sig wallets out there. It allows users to securely store and manage their digital assets, and provides advanced features such as customizable security policies and integrations with popular decentralized applications (DApps).
Cashmere: Multi-sig wallet that was developed for the enterprise. It is designed to be user-friendly and secure and offers integrations across the Solana ecosystem
Snowflake: Snowflake is a multi-sig wallet that's built on Solana. It has a plethora of features like recurring payments, Token vesting and an address book.
In conclusion, multi-signature wallets offer an extra layer of security and control for managing cryptocurrency assets. This can be useful for ensuring the security of funds in a shared wallet, streamlining transactions, and automating certain financial processes.
Want a consultation to understand how you can automate your bookkeeping from your multi-sig wallet?
Book a demo with Mensari. Our team has built a crypto accounting tool for web3 organisations & NFT projects, that streamlines day-to-day bookkeeping and accounting and directly links with your multisig wallets.