What is Multisig Wallet? How Multisig Wallet Works

Crypto storage wallets in general are quite familiar to users at the present time when everyone has at least one for themselves, however Multisig wallet is not that popular. In this article, let Weakhand learn about what Multisig Wallet is? Why do investment funds or large organizations often use this type of wallet to store their assets?

What is Multisig Wallet

A Multisig Wallet is a type of cryptocurrency wallet that requires multiple signatures from different participating parties to perform transactions.

Instead of requiring just one signature from a single owner, multi-signature wallets require confirmation by at least two or more different signatures, thus providing a higher level of security for the accounts. electronic money products.

Multi-signature wallets are often used for means of payment or to store important crypto assets, helping to prevent monopolistic parties from controlling and dominating account transactions.

Thanks to its ability to avoid manipulation from a certain party, Multisig Wallet is often used by large companies, organizations, and investment funds to safely store their assets.

In the DeFi market, DAOs also often use Multisig Wallet to preserve DAO assets in the most decentralized way.

How Multisig Wallet Works

Multisig Wallet’s operating mechanism includes the following steps:

1. Create Multisig Wallet: The user will create a Multisig Wallet by determining the required number of signatures and adding different wallets to it. For example, if a user needs 3 signatures to make a transaction, they can add 3 different wallets to Multisig Wallet.
2. Request a transaction: When a transaction is requested, Multisig Wallet will request the required number of signatures to execute that transaction. For example, if creating a multi-signature wallet with 3 required signatures, at least 3 different signatures must be provided to execute the transaction.
3. Sign the transaction: Users need to provide signatures from their wallets in the Multisig Wallet interface to make transactions.
4. Conduct transaction: Once the minimum number of signatures is provided, Multisig Wallet will execute the transaction and confirm the transaction has been completed.

With this operating mechanism, Multisig Wallet allows multiple users to control and manage crypto assets at the same time, while emphasizing higher security for crypto transactions.

Multisig Wallet Application

Multisig Wallet is an important and widely used tool in cases where it is necessary to ensure security and avoid risks in cryptocurrency transactions. Here are some applications of Multisig Wallet:

• Used in organizations and businesses: Multisig Wallet is commonly used in organizations and businesses to control crypto assets. Instead of needing just one signature, cryptocurrency transactions need to be confirmed by multiple signatures, thereby minimizing risk and increasing security.
• Create a separate storage wallet: Multisig Wallet is also used as a way to create a separate storage wallet, managed by many different users, thus minimizing the risk of crypto assets being lost or stolen.
• Asset management of the wealthy: Multisig Wallet is a useful tool for wealthy people when using cryptocurrency to store assets, because it helps avoid one owner having exclusive control and domination of account transactions. .
• Used in large purchase transactions: Multisig Wallet is also used in large cryptocurrency transactions, where parties can negotiate and agree on the use of multi-signature wallets to confirm and execute transactions.
• Used for KNIFE: Decentralized autonomous organizations in the current DeFi market are not managed by any single organization or individual, so Multisig Wallet will be very suitable to use for storing DAO assets .

Development Process of Multisig Wallet

The development of Multisig Wallet started in 2011 when people began to realize the disadvantages of single-signature wallets, when only one wallet owner can make transactions without needing anyone else’s consent. .

People have started building Multisig Wallets through the use of multi-signature wallets such as the P2SH (pay-to-script-hash) mechanism on the Bitcoin platform. However, the popularity of Multisig Wallet did not gain prominence until Ethereum and other blockchain projects started using smart contracts to implement multi-signature functionality.

Currently, Multisig Wallet is widely used in many blockchain applications such as cryptocurrency investment, asset management, and token ownership trading.

Advantages of Multisig Wallet

Advantages of Multisig Wallet include:

• Increase security: Multisig Wallet helps increase security by requiring the consent of multiple owners before making transactions. This helps avoid risks associated with loss or theft of crypto assets.
• Convenient asset management: Multisig Wallet allows multiple holders to more conveniently manage assets through extension functions or condition-based protocols.
• Suitable for investment purposes: Multisig Wallet meets the needs of investors, especially institutional investors or those who want to increase the security of their investment strategy.
• Flexibility in management: Multisig Wallet allows customization of the number of signatures required to make a transaction, creating more complex scenarios for asset management.

In short, Multisig Wallet helps increase security, conveniently manage assets and is suitable for investment purposes, while providing flexibility in management.

Disadvantages of Multisig Wallet

Although it has many advantages, Multisig Wallet also brings a few disadvantages to users as follows:

• More complex: Using Multisig Wallet can be more complicated than using a regular cryptocurrency wallet. The process of setting up and managing signatures requires technical knowledge and understanding of blockchain.
• Difficulty in changing methods: Changing the way Multisig Wallet operates needs to be done carefully and with the consent of all owners, this may cause unnecessary problems when implementing the procedure. this program.
• High cost: Using Multisig Wallet may require higher transaction fees than using a regular cryptocurrency wallet, due to the need to create and manage signatures.

How to Create Multisig Wallet

Currently, most blockchains will have their own Multisig Wallet platform, whether EVM or non-EVM, but for EVM platforms at present, Gnosis Safe wallet is the most commonly used.

Step 1: Connect for fit

• Visit: https://app.safe.global/new-safe/create
• Connect to the Metamask wallet and switch to the network where you need to create a wallet.

Step 2: Create wallet

1. Name the wallet and click next.
2. Add a wallet owner by selecting “Add new person” then fill in information such as the co-owner’s name and wallet address. The default wallet owner will be the wallet connected in step 1.
3. In the “Threshold” section, people will choose the minimum number of signatures for each transaction and continue with the following steps.
4. Step 2 will be a very important step because once created, the wallet information cannot be edited.

Step 3: Use wallet

• After creation, everyone will be taken to the general interface of the wallet, there will be a wallet address that allows people to transfer assets such as tokens or NFTs to the wallet.
• To create a trade, people will need to go to the “Asset” section to create a trade.
• The transaction will be considered completed when there is a minimum number of signatures from the wallet co-owners in the “Transation” section.

Summary

Above is what you need to know to understand what Multisig Wallet is as well as how to create and own a Multisig wallet for your individual or organization. Hopefully, through this article, Weakhand has brought everyone good knowledge to apply in their research process.