A multi-signature (multisig) wallet is a type of digital wallet that requires multiple private keys to authorise a transaction. This adds an extra layer of security by ensuring that no single person or entity has complete control over the wallet’s funds.
Multisig wallets can prevent the misuse of funds and fraud, which makes them a good option for retail users, exchanges, and institutions. One case scenario could be that each authorised person has one key, and a sign-off requires the majority of signing keys — it becomes impossible for any individual to unilaterally make unauthorised transactions.
For example, an individual using a 2-of-3 multisig wallet (meaning that at least two of three private keys are needed to manage the funds) can prevent losing access to the entire wallet in a case scenario where one key is lost (i.e., if a user loses one key, there will still be two other keys able to sign transactions). Wallet types that can have multisig versions include hot wallets, cold wallets, and hardware wallets.
