Multisig brings various benefits of security for transactions in the virtual currency market, but many people don’t know much about this platform. So, in this article, we will introduce and explain for you about Multisig’s information, pros and cons, its mechanism, and some exchanges that can install this wallet.
1. What is Multisig?
Multisig or Multisig wallet is an abbreviation of Multisignature, which is a technology that requires many secret keys in transaction signatures.
When compared to Singlesig that has only one secret key, Multisig has advantages such as a higher level of security, easy to handle when the secret key is lost. Furthermore, it is used in exchanges and Multisig Wallets.
2. Pros and cons of Multisig
The great benefits of Multisig are increased security and risk management in case of loss of secret keys. But it also has disadvantages that we should know.
2.1. Pros of Multisig
- Increasing security: Assuming that even one secret key information is hacked and leaked, you will not lose your property if your account requires 2 or more signatures. And It is, of course, obvious that you must not lose all the necessary secret keys of transactions. Anyway, Multisig gets less risk than Singlesig.
- Reducing the risk of corruption: At a company, or exchanges, accountants take full responsibility of managing all, so, in some cases, they have a chance to conduct corruption. However, you don’t worry much when creating Multisig for many levels in order to reduce the risk of corruption.
- Risk management of losing secret keys: in reality, when you lose your key that is used to enter your transaction wallets, you cannot touch the money inside. But, if you set up Multisig “2-of-3” that means “registering 3 public keys with 2 or more signatures to be accessible”, even if you lose 1 secret key, you still use money. And, you should note that if you lose all of your keys, you cannot take money.
2.2. Disadvantages of Multisig
- Spending time for set-up: the process of setting Multisig up “2 of 3” wastes time, because you must gather 3 public keys, and build up the secret keys for each one, store it at separate places as well in some cases. If you register more public keys, you will set up more secret keys. Furthermore, you want to enhance the security, you have to conduct many steps in the Multisig wallet. But, you can use DNS to simplify addresses to reduce the process of setting up.
- Increased service fees: compared to regular Singlesig, this is a complex function that uses many secret keys, so there is an additional service fee for setting up and sending money to others.
- Be Unable to deal with The exchange’s security flaws: When conducting virtual currency transactions, you need a wallet (electronic wallet). Users deposit the wallet at an exchange and make a transaction. However, users cannot directly manage the e-wallet. In other words, if the secured exchange is weak, there is a chance that the secret key will be leaked, and they cannot respond to the exchange’s management method. Moreover, even if the exchange supports Multisig, it is not certain that security is absolute, so you must disperse risk by “not keeping a secret key at any exchanges”.
3. Multi-sig mechanism
Simply, we can imagine it as a secure deposit box with two locks and two keys. One key is held by you, and another by your mother. The only way you can open the box is to have both keys at the same time, so one person cannot open the box without the other’s consent.
Basically, funds are stored on a multi-signature address that can only be accessed using 2 or more signatures. Therefore, using a multi-signature wallet allows users to create an extra layer of security for their funds.
That is the multisig mechanism, users can look when having intention to join the virtual currencies like Etherium, Bitcoin, Ripple,… And next, we will introduce to you about 3 platforms that support Multisig in order to make it easier without coding.
4. Electronic wallet supporting Multisig
4.1. ELECTRUM wallet
This is a wallet to manage Bitcoin on PC, as it is equipped with Cold Wallet function, and Multisignature as well in order to ensure higher security. But, this wallet doesn’t support mobile.
How to create a Multisig wallet with ELECTRUM?
- You should install ELECTRUM at first
- Next, you can change the wallet’s name “default wallet” into your favorite name.
- Select “Multi-signature wallet” on your PC
- Creating secret keys and choosing how many keys you want to open.
- Registering public keys
- Entering the primary public key of co-signer and finish.
This is step by step to generate Multisig that you can apply when using the ELECTRUM platform.
If you are using Copay, you can easily set up Multisig Wallet for Bitcoin, and this supports either mobile as well as PC.
Way to create Multisig address with Copay
- Downloading Copay is the first step that you need to do.
- Then, you should click “add wallet”, àn select “add new wallet”
- Choosing the “shared wallet”
- Selecting the required number of registered public keys and necessarily secret keys. In the case of using someone else’s public key, let’s send the displayed QR code for that person to read.
- Clicking “join the shared wallet”
- Now, clicking the public key to use
- Finally, you just click “join” and finish.
4.3. Nano wallet
You can set up a Multisig wallet for NEM if you use Nano wallet, and this is also available for mobile and PC.
Step by step for installing Multisig with Nano wallet
- Creating new wallet in Nano wallet and log in
- Click in “Change to Multisig”
- Entering public keys to register
- Entering number of secret keys to conduct transactions and complete.
In conclusion, that is the information of Multisignature that is secure for your transaction based on the increasing number of signatures. Although it also has some disadvantages, we cannot deny that Multisig will be applied more in the near future on the exchanges.