Multisignature crypto wallets require more than a single signature to sign a transaction.
What Is a Multisignature?
When you want to send funds from your wallet, a transaction needs to be created as well as signed. By signing this transaction, you are saying in a digital way that you are the owner of the funds in question, you have a key to manage them and you approve the transaction.
Now, to truly get a grasp of how multisignatures works, we’ll need to discuss a single signature. A single signature cryptocurrency wallet will typically only need one signature to sign the transaction, and this is simple to grasp. Multisignature, on the other hand, is a kind of wallet that requires more than a single signature to sign a transaction.
A multisignature wallet is a wallet that is shared by two or more users, and these are called co-payers. Depending on the type of wallet, the number of signatures that are required in order to sign the transaction will typically be lower or equal to the number of copayers on the wallet.
In terms of the features found within a multisignature wallet, all of the copayers can see the funds as well as the transactions of the multisignature wallet. This type of wallet requires one or more copayers to sign a transaction in order to send funds from the wallet, and this feature adds a higher level of security to your funds as a result. A unique recovery phase is set for each of the copayers as well; however, if one of the recovery phrases is lost, there could potentially not be enough copayers to sign a transaction, and without enough copayers to sign the transaction, you will not be able to spend the wallet’s funds. While this adds a higher level of security, it also adds a higher level of risk associated with it.