Multi-signature wallet is a smart contract that allows multiple users in a blockchain to sign digitally on agreeing on the transaction. In muti signature wallets you can set up multiple owners for a wallet with multiple private keys by which no one can send a transaction without those multiple signatories.
Thus Multi-sig holds enormous potential like trust-less escrow, trust less margin, user funds security, allowing the faster transaction, simplified access of wallets etc.
- If only a single key is used to access funds and that key is lost or hacked it is not possible to regain the funds.
- In such situation, 3 keys are issued to the users in which 2 of them are used to access funds for the transaction.
- The first key will be kept in an online wallet and the second key in a safe offline location and the third key is held by the multi-signature provider.
The multi-signature provider cannot hold or have the access to your funds, they can only hold the key for only approving the transaction. Thus multisig wallet adds the layer of security for cryptocurrency transactions.