What is a Multisig Wallet?
There are many types of web3 wallets and multi-signature wallets (also known as multisigs) are special. A multisig wallet is a digital wallet which requires multiple signatures to approve a blockchain transaction. While all multisigs are smart contracts, not all of them have the same account abstraction features that smart contract wallets can have.
If you’re new to multisigs, think of it as a safe that only opens when you have multiple keys.
How Does a Multisig Wallet Work?
As described above, a multi-signature wallet is like a safe that only opens with multiple keys (this is only metaphorical and has nothing to do with private keys). When you start, you need to decide who gets those keys.
When you create a multisig wallet with a solution like Safe, you need to list wallet addresses as “signers” of the wallet. These can contribute to approving transactions. You can add as few signers as 2 or as many as you’d like.
After defining the signers, you need to define how many signatures are required for transactions to be approved. If you start a startup with two friends, you could define all three of you as signers and require two signatures.
That would mean any two signatures are enough to send a transaction, interact with a smart contract or do other things on the blockchain.
Once you’ve defined everything, you only need to deploy your smart contract from your wallet and enter the dApp when you need to want to send a transaction from the multisig.
When Should You Use a Multisig Wallet?
- Sharing control: If you're in a team that needs to agree before spending crypto (like the treasury of a DAO), multisig is perfect. It ensures agreement before any transaction goes through—and keeps any one team member from running off with the funds.
- Extra safety: You can set up your own cold wallet as a second signer to give your funds an extra layer of security.
- Backup plan: Scared of losing your crypto if you lose your keys? Appoint people you trust as signers so that they can send your funds back to you.
The only downside of using a multisig for these use cases is that they can be cumbersome. That’s why account abstraction is so promising: It makes multi-signature functionality easy to access and would give wallets capabilities to add additional signers to some, but not all, transactions and give you more flexibility.
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