A multi-signature wallet (often abbreviated to “multisig” wallet) is a type of wallet that requires two or more signatures to approve transactions. The signature consists of the input of private keys by the owners of the wallet.
Private keys are cryptographic codes comparable to passwords. In this case, they can be held either by several individuals, called co-payers, or stored within separate devices.
The number of signatures required varies depending on the wallet and the combination set. Some of the most common combinations are:
- 2 out of 3: two out of three signatures are required to approve a transaction;
- 2 out of 2: signatures of both owners are required.
Compared to a traditional crypto wallet, where only one private key is required to authorise a transaction, multisig wallets provide an additional layer of protection. If a hacker wanted to appropriate the funds deposited in a wallet, for instance, he would have to obtain all the necessary private keys.
Multi-signature wallets can also be used as a form of two-factor authentication (2FA), or to decentralise control of an organisation’s funds.