The Power of Multi Sig

Hi Plebs,

If you’re reading this, you’ve likely already taken the crucial first step of getting your Bitcoin off an exchange and into self custody using a hardware wallet.

Congratulations!

You’ve regained full control over your private keys and eliminated the counterparty risk involved with leaving your coins on a third-party platform. Don’t worry if you haven’t because I can help you with this if you need it, just reach out.

However, self-custody comes with its own set of responsibilities - namely, ensuring your hard earned Bitcoin remains secure for years to come. While hardware wallets provide robust security against remote hacking attempts, they can’t protect you from the risk of physical theft and loss. This is where Multisignature (Multisig) setups come into play.

Eliminating Single Points of Failure

The core idea behind multisig is simple: rather than relying on a single private key to secure your Bitcoin, you create a system involving multiple keys that must cooperate through an “m-of-n” signing quorum. By requiring more than one signature to move coins, you essentially eliminate the concept of a single point of failure.

For example, with a 2-of-3 multisig setup, you would generate three private keys and store them securely in different locations. Two of those three keys would be required to spend any Bitcoin sent to the addresses derived from the combined multisig configuration. Even if one key is lost, stolen or compromised, your funds remain secure thanks to the redundancy provided by the remaining keys.

Contrast this to a singlesig hardware wallet - if your device is misplaced or damaged, or your seed phrase is compromised, you face the terrifying prospect of being permanently locked out of your Bitcoin. With multisig, you’d simply use the backup keys to regain full access and transfer your coins to a newly created multisig setup.

A Spectrum of Security Models

Multisig comes in various flavours catering to different security models and risk profiles. On the simpler end, you could create a 2-of-3 multisig wallet entirely through open-source software and leverage something like Shamir’s Secret Sharing protocol to distribute shards of your seed across multiple locations. This gives you the privacy of a purely non-custodial solution.

Alternatively, you could opt for a collaborative custody arrangement like those offered by Unchained Capital and Casa. In this model, you would generate and control the majority of the keys (e.g. 2 in a 2-of-3), while a professional third-party partner maintains a single revocation key. They can never move your coins, but can assist with inheritance procedures or gaining access if you lose keys.

The choice comes down to your personal needs, technical ability, and risk tolerance. But in an era where centralised custodians have shown themselves to be untrustworthy, multisig provides the robust self-sovereignty that aligns with Bitcoin’s core values.

A Worthwhile Investment

Setting up multisig does require more upfront effort and planning than singlesig wallets. You’ll need to devise a coherent storage strategy that makes keys redundant yet secured against correlated risks. Transaction fees may also be marginally higher for more complex quorum setups.

These are ultimately minor considerations weighed against the catastrophic risks of permanent loss or theft that single sig storage entails, especially for significant holdings. Bitcoin is often described as “digital gold” - a secure store of value across generations. Utilising multisig is ensuring you’ve adopted best practices to guarantee its preservation.

So if you’ve already taken that critical first step into self-custody, take the time to fortify your set up for the decades ahead. Your future self will thank you.

Cheers, and onwards with Bitcoin.