What is a multisig wallet? Understanding the basics
Have you heard stories of lost and stolen bitcoin? When you secure your own wealth, it’s important to pay close attention to your security, and securing your assets isn’t as complicated as you might think.
At Casa, we help our members take self-custody of their assets with multisig vaults. Here’s a quick introduction to multisig security, an excellent way to protect your bitcoin.
How is securing bitcoin different from securing other assets?
Before bitcoin was created, people stored their wealth in a central location, such as a bank, safe, or buried treasure chest, which didn’t always work. A government could freeze your bank account. A burglar could break into your safe. The first mate on your pirate ship could dig up your treasure or, worse yet, you could forget where you buried it. Centralized storage puts your wealth at risk of accidental loss and theft.
Bitcoin was designed with this predicament in mind. Your bitcoin balance is stored online and verified across a robust, encrypted network. As long as you have your private key and an internet connection, you can access your bitcoin, but that goes for anyone. If a thief gets ahold of your private key, they can steal your bitcoin.
Therefore, private keys present a challenge for beginners and experienced investors alike. If you store a private key in a bank vault, personal device, or underground, you’re back at square one — your wealth is centralized and at risk once again.
What is a multisig wallet?
Decentralized assets deserve decentralized security — that's where multisig comes in. Multisig is short for multisignature, a security feature with more redundancy and flexibility than a single hardware wallet.
The premise is similar to two-factor authentication, but more robust. To send bitcoin from a multisig wallet, you must access multiple private keys to sign the transaction, making it much harder for your funds to be lost or stolen.
A multisig wallet is an application that helps you manage your private keys, balances, and addresses. This setup allows you to distribute your risk across multiple devices and locations to protect you from breaches, burglars, and hardware failure.
Variety is good for security
Have you ever received an email or text message for two-factor authentication (2FA) while trying to log into an account? It actually isn’t that strong of a security practice. If you’re using a mobile device to log in and you get a 2FA code sent to the same device, you didn’t really accomplish much. An attacker could use the same device for both.
Security is about increasing the level of difficulty for attacks while still preserving your ability to recover assets. Using multiple devices is one way to increase your protection since it’s harder to compromise more than one device with stealth.
At Casa, our multisig security plans are all designed with different types of devices. For instance, our Premium plan includes two different types of hardware devices. We do this because diversifying hardware creates more robust protection.
Spread your keys across different locations
Have you ever heard the saying, “Don’t keep your eggs in one basket.” Centralization creates risk and increases the probability of losing all of your bitcoin.
Our security protocol is designed to prevent you from losing funds from just one incident. Having multiple keys allows you to spread your risk across multiple locations. Proper key distribution is crucial to ensuring the integrity of your keyset. You defeat the purpose of a multisig wallet if you have most of your keys in the same location.
For instance, if you participate in our introductory Standard plan, you hold two of three keys: most often a hardware wallet and a mobile key stored on your iPhone or Android device. With a mobile key, we encourage you to place your hardware wallet somewhere other than your primary residence if you usually keep your phone with you.
As a side note, you can also choose to swap out the mobile key and replace it with another hardware wallet, but the principle remains the same. Make sure you don’t have a key quorum (both of your keys) at your immediate disposal if you don’t intend to send a transaction.
Lose a key? Don’t sweat it.
Hey, life happens. If you end up misplacing one of your keys, it’s handy to have a backup. This is what multisig wallets allow you to do. One lost key doesn’t mean lost funds.
Casa helps you balance security against both external and internal threats, such as accidents. We make it so you never have to worry about your bitcoin — that’s our signature. Learn more about our plans here.
Want to learn more about privacy and security?
Bitcoin security is about staying ahead of new and evolving threats. Our weekly Casa Security Briefing helps you stay in the know with stories, analysis, and tips. Sign up below.