How Can a Multisig Wallet Secure your Transactions

Crypto exchange platforms adopt advanced solutions to ensure security and reliability for users. Most of these exchanges are leveraging multisig technology to reinforce the security of their wallets. In this article, we will comprehend the issues with traditional custody solutions and how multisig feature is revolutionizing this ecosystem.

[sc_fs_multi_faq headline-0=”h3″ question-0=”What are the issues associated with traditional custody of crypto assets?” answer-0=”Traditional custody solutions lack transparency and do not provide full control to the owners of funds. Hacking of crypto exchanges and frozen accounts have been witnessed in the market which limits the interest of crypto holders.” headline-1=”h2″ question-1=”What are the benefits of multisig wallet storage?” answer-1=”Multisig technology prevents single point of failure and losses as keys are distributed across multiple regions and devices. It enables full transparency of transactions and efficient group decision-making is attained.” headline-2=”h3″ question-2=”Is it safe to keep crypto assets in the wallet exchanges?” answer-2=”No, it is not safe to keep crypto assets in an exchange’s wallet because there are chances of crypto exchange hacks. For instance, 7000 BTCs were stolen from Binance in May 2019 and UP bit lost 340,000 ethers in November 2019.” count=”3″ html=”false”]

What is a multi signature wallet?

Multi signature wallet is a digital wallet that requires more than one user to sign and validate the transactions. It functions just like a double lock system wherein different individuals hold private keys to maintain full security of the box.

Multisig wallets are not just limited to two signatures; it can go higher to any number depending on business needs.

Issues with traditional custody solutions

Traditional custody solutions lack transparency and do not provide full control to the owners of the funds. It has also been seen that huge sums of assets are lost from crypto exchanges. Even the most popular exchanges experienced hacks in recent years. Safe custody of crypto assets has become a major issue, and lately, self custody of keys emerged as a safe haven. So let us explore what are the various issues faced by the crypto holders.

• Hacking of exchanges: Crypto exchanges are one of the easy targets for hackers to conduct scams and frauds. The attackers target exchanges’ wallets to gain illegitimate access to users’ funds on the exchanges. For instance, 7000 BTCs were stolen from Binance in May 2019 and UPbit lost 340,000 ethers in November 2019.
• Compromised user accounts: In case there is a single user who is having access to a crypto wallet and if the wallet is lost, it may not be recovered. The username, password or even two-factor authentication may also be lost. The email address of the single user may be hacked; the phone may be stolen or number may be ported to some another device.
• Frozen crypto accounts: The exchanges may freeze the wallet and crypto account to prevent you from trading or withdrawing your funds. This may happen when a crypto exchange suspects some malicious activity or it may happen accidently.
• Risk of insolvency: The reserves that are maintained by exchanges in the name of crypto account holders may not be sufficient at the time of uncertainty. In case of any default in an exchange and hacking of crypto accounts, it becomes the duty of exchange owners to settle the loss incurred by the crypto owners. But due to price volatility, the funds may not be sufficient.

Because of the above-mentioned issues, crypto exchanges are fortifying their platforms with multi signature bitcoin wallet.

Multisig wallet: A solution for redundancy and single point of failure

A huge number of cryptocurrency holders buy their crypto assets from an exchange and store them in a hardware wallet. This mechanism increases transparency, enhances control over their funds and even mitigates the risk inherited in a centralized custodian of crypto assets.

But on the other hand, a hardware wallet faces a single point of failure. You may lose your funds even if you have stored or kept a backup of your wallet. The most worrisome situation happens when the hacker may be your known person. In this case, he need not hack an exchange but simply need to steal your hardware device.

A solution to this problem is multisig storage. Multi-signature prevents single point of failure and losses. Multisig wallets are the best and safer due to the following reasons:

• Keys are distributed: The keys are distributed among different geographical locations and across multiple devices, thereby creating a secure position for a user. A hacker would not be able to hack multiple distributed keys, thus keeping crypto assets in the safe hands of the user.

• Full transparency: Another benefit with multisig wallets is that the transactions are stored in the software and can be referred to any time. The withdrawals and transfers are maintained in the software and funds are never mixed or commingled.

• Redundancy against loss: Multisig wallets provide an extra layer of security by requiring multiple signatures to process a transaction. Even if a hacker manages to acquire one of the keys, he would be unable to withdraw funds from the wallet unless rest of the co-signers sign and validate the transaction.

• Group decision making: When the keys are maintained collectively by many co-signers, then the control of funds becomes safer and in a more organized manner. In this format, only unanimous decisions can be formed and implemented and thus a good decision is carried out effectively.

End Notes

The security, privacy and autonomy of transactions enhance with multisig feature in a cryptocurrency wallet. For creating a secure you can integrate other advanced security features into the wallet, apart from multisig, such as biometric authentication, password-protected access, two-factor authentication, and more.

At Antier, we specialize in providing white label multi signature wallet fortified with market-leading features like mnemonics, biometric authentication, multi-currency support, QR code scanner, NFC support, self-explanatory interface, and more. Besides, we hold the expertise to build a custom wallet for scratch, as per your business needs.