What Is The Difference Between A Single Sig & MultiSig Wallet

Multi sig vs single sig wallet

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When dealing with digital money, security is of the utmost importance since it is so easy to open yourself up to attacks. The internet as we know it today leverages far too many trust models and has abstracted away privacy and security measures. As internet users, we take for granted the security we have and because we don’t deal with it regularly. We use the internet thinking someone else will take care of security, so when we have to deal with it ourselves, it becomes a foreign concept. 

You may wonder why Bitcoin requires so many steps, why we stress the need to get these precautions in place and why managing your keys are so important. 

In Bitcoin, security is your responsibility which is why you need to take it so seriously. It would help if you had a Bitcoin security checklist and a regular rundown of all your security to ensure there aren’t any attack vectors you’ve let open. 

For most of us, security concerns will revolve around the type of wallets used to store Bitcoin. Wallets present a significant honeypot for threats to funds, and any opening you provide can see you lose your funds. 

When creating a Bitcoin wallet, you have two options, a single signature wallet or a multi-signature wallet. Each wallet implementation comes with its pros and cons, and you may want to use both methods for different situations.

What is a single-sig or single-key wallet?

If you’re using a hot wallet or a hardware wallet with its default settings, then it would normally be stored using a standard, single-key address. A single key address means that whoever possesses the correct private key is granted access to the funds. A user would only need one key to sign transactions and transfer the coins at will, be transferred from the wallet. 

The single-key address is method is faster and easier for a single person to use. However, the funds are only protected by a single point of failure.

Since YOU are the primary point of failure with a single key wallet, you open yourself up to the threat of cybercriminals are constantly developing new phishing techniques to steal the funds of Bitcoin users. Additionally, if your keys are lost, damaged or physically stolen with a single key wallet, it means you no longer have access to the funds. 

What is a MultiSig wallet?

A MultiSig wallet is a Bitcoin wallet that operates with multiple signature addresses. A MultiSig setup requires more than one private key to sign and authorise a Bitcoin transaction. From a security perspective, it provides an additional layer of protection since more than one private key is necessary to sign a transaction. If a pair of keys are lost or stolen, your funds are not at risk, as the case would be with a single key wallet. 

A MultiSig wallet can be split into “two of three” as a requirement or even more private keys to be signed to create a transaction signature. 

Advantages of a MultiSig wallet.

There are several benefits associated with MultiSig wallets, such as:

  • It is removing the single point of failure security concerns that come with a single private key mechanism.
  • MultiSig reduces the dependency on one person.
  • MultiSig makes cyberattacks difficult. 
  • MultiSig wallets lessen the dependence on one device. 
  • MultiSig leaves room for error in losing or forgetting your keys

Disadvantages of a MultiSig wallet.

Despite the apparent advantages, everything comes with a trade-off, and with increased security, you have to give up ground in the following:

  • Setting up a MultiSig address requires technical knowledge.
  • There are no legal custodians of funds deposited into a shared wallet with multiple keyholders. 
  • Transaction speed is often slow as you have to rely on the reaction time of the other key signers. 
  • The process of recovery in a MultiSig wallet is tedious. It requires importing each of the recovery phrases on a different device.

When would you consider a MultiSig Bitcoin wallet?

Enhanced security.

A MultiSig wallet enables users to create an additional layer of security for their funds since you need several keys to sign a transaction to the Bitcoin blockchain. 

Decision making.

A MultiSig can be used in a business partnership between several individuals who require a say in joint company funds. A wallet could be set up for the different majorities, such as a 4-of-6 wallet where each individual holds one key, and none of them can misuse the funds or gain access.

Escrow transactions.

A 2-of-3 MultiSig wallet is a popular method of creating escrow transactions between two parties. The transaction also includes a third party (C) as a mutually trusted arbiter if anything goes wrong.

Two-factor authentication.

Multisig can be used as a two-factor authentication since the private can be stored on different devices. However, there are risks with using this method. If you set up a 2-of-2 private key and one of the keys is lost, access to the funds is lost.

MultiSig can improve hot wallet security.

Hardware and paper wallets generate the keys offline to sign a transaction, so you have a little more protection. A hot wallet remains connected to the internet and stores private keys online, which exposes them to greater risk. 

If you require access to your funds regularly and hold a significant amount of Bitcoin in a hot wallet, you should consider using Multi-Sig addresses. Wallet security is thereby enhanced when private keys are stored in different locations and by separate entities.

MultiSig wallet custodians.

If you like the idea of Multi-Sig wallet but don’t have the technical knowledge to pull it off, then some services can assist you. Casa and unchained capital are two custodial MultiSig wallet providers that will help you get set up and coach you through the entire process. They will also help you distribute your keys and assist you with key management and even estate management of keys should you pass away or become incapacitated.

Security versus convience. 

In Bitcoin, you are constantly making different trade-offs; some prefer the convenience and are happy to take the risks that come with it. Others are not willing to compromise and would jump through the extra hoops to get their funds. 

Ultimately the decision is up to you. 

So are you using a single key or MultiSig storage? Let us know in the comments below.

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice. It is for educational and entertainment purposes only. As of the time posting, the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency, as all investments contain risk. All opinions expressed in these articles are my own and are in no way a reflection of the opinions of The Bitcoin Manual

2 Responses

  1. Why are multisig public keys different from single sig public keys? I noticed that multisig wallets require you to enter a different public key because of multisig. I never imagined these would be different than the regular single sog public keys.

    How are they different and why?

    1. So let’s say its a 2 of 2, so we both have 1 wallet each with 2 sets of private keys. We then have 2 public keys created attached to those seed phrases. What multi-sig does is take those 2 public keys and combine them in a script to generate a new multisig public address that normally starts with a 3

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