What are multisignature wallets?

Multisignature wallets, often abbreviated as multisig wallets, are a type of cryptocurrency wallet that requires multiple private keys to authorize a transaction. This adds an extra layer of security compared to traditional single-signature wallets, where only one private key is needed to access and control the funds.

In a multisig setup, the wallet is associated with multiple sets of public keys, and a predefined number of the matching private keys are required to sign a transaction for it to be considered valid. The configuration is often denoted as "m-of-n," where "m" represents the minimum number of signatures required, and "n" is the total number of public keys associated with the wallet.

For example, in a 2-of-3 multisig wallet, there are three public keys, and any two of them are needed to authorize a transaction. This introduces redundancy and improves security in various scenarios:

If one private key is compromised, the funds remain secure unless an attacker gains access to the required number of keys.

Multisig wallets are commonly used in shared ownership scenarios, where multiple individuals or entities jointly control the funds. For instance, a business may use a 2-of-3 multisig wallet, requiring approval from at least two company executives for transactions.

In financial transactions or smart contracts, multisig wallets can be used as escrow, ensuring that a certain number of participants agree before funds are released.

The use of multisig wallets adds complexity but significantly enhances the security and trust model in various cryptocurrency applications.

For the use of multisig on Bitcoin Cash, the Electron Cash wallet has the technical capabilities and is highly recommended.