What Is a Multisig Wallet in Crypto?

Do you know that over 60% of crypto custodians use multisig wallets? Bybit, Binance, and other major exchanges do. The now-trending perp decentralized exchange Aster had also minted 8 billion ASTER tokens to a multisig. 

All these go to show how popular multisignature crypto wallets have become. Multisig wallets balance between security and joint custody of crypto assets. They are much harder to screw up compared to regular wallets, like MetaMask, Phantom, etc., which are single-signature by design.

But multisigs are not without some risks. Earlier this year, Bybit lost $1.5 billion to hackers, and UXLINK recently lost $11.3 million, all of which was a result of compromised multisig wallets.

Starting with a breakdown of what multisig wallets are and how they work, we’ll show you the upsides and downsides of using one, and some of the best multisig wallets in 2025. 

Multisig Wallet Definition

Multisig is short for multiple signatures. A multisignature crypto wallet is one that requires two or more signatures to sign off on a transaction.

The way a Bitcoin multisig wallet works may differ from that of Ethereum multisig wallets or Solana multisig wallets. However, the idea of requiring multiple signatures to make a transaction remains the same.

When you initiate a crypto transaction on-chain, a digital signature is required to prove your ownership. That signature is basically a mathematical construct of your Private Key and the hash of the transaction you are making.

In the case of multisignature wallets, you will need more than one signature to send a transaction. The wallets are designed to allow multiple signers, each with their own unique private keys, to approve the transaction. 

Multisigs can be set such that a minimum or all of the signers are required to authorize a transfer from the wallet – more on this later in the article. 

How It Differs From Standard Wallets

Standard wallets like Trust Wallet, Phantom, and MetaMask, including Ledger devices, function as single-signature wallets. That means they only require a single private key or signer to authorize a transaction from the wallet. 

Single-signature wallets are just perfect for personal use, interacting with dApps, daily transactions, and holding small amounts. 

On the other hand, multi-signature wallets require many signers. No one signer can fully confirm a transaction without the other, which removes the single point of failure in regular wallets. That is why multisigs are the preferred choice for crypto firm and institutions that manages large crypto treasuries.

Individual investors can also decide to use multisigs, especially when dealing with a large amount of money, only that it adds an extra layer of friction where you have to share and require another signature from a trusted third party to spend your money.

Analogy With Traditional Bank Signatures

The concept of signature in crypto is not entirely new. One can even argue that it’s borrowed from traditional banking. 

Your handwritten signature does the same work as a cryptographic signature, which is to authorize transactions. For instance, when signing a cheque, you are telling the bank, “I authorize you to write this change (debit) on my account.”

The teller then compares the signature to the one on file. If verified, the bank accepts the cheque, and the transaction is written permanently into its records.

Traditional banks also have their own system for distributing control to eliminate a single point of failure, i.e., multisig. In joint and corporate accounts, banks can be instructed to require the signatories of some or all authorized persons before greenlighting a payment.

How Do Multisig Wallets Work?

Multisig wallets work very differently from regular wallets and are more technical to set up. But we can break it down into three segments, which shall include the public/private key generation, setting of the M-of-N threshold, and then the transaction authorization process.

Public and Private Keys in Multisig

During the setup, each participants first create their own standard private key, which is used by the wallet software to calculate their corresponding public key. 

Using a script/smart contract, the wallet owners then merge their public keys and agree on the M-of-N configuration on how many keys should be required to sign a transaction. The script is then used to generate the multisig receiving address, where the funds are sent. 

M-of-N Signature Model

The M-of-N signature model is the configuration used to decide the number of keys that are required to send a transaction from multisig wallets. The N represents the total number of keys that can sign a transaction, while the M represents the minimum number of signatures required to validate a transaction. There are three types of multisig wallets based on this model:

1-of-2

Two public keys are paired in this type of multisig wallet, but only one is required to sign a transaction. Such wallets are best suited for personal portfolio management or shared access between two trusted parties.

2-of-3

Only two signatures out of three total keys are required to make transactions from this multisig wallet. In the case of one key loss, the funds can still be accessed.

3-of-5

Multisigs of this type required a minimum of three out of the five total keys. You could still access your funds even if you lost two private keys.

N-of-N

Multisig wallets can also be set to require all key holders to sign a transaction. In numbers, it would look like this: “2-of-2.” 

If a dApp with two co-founders sets up a multisig wallet with such a configuration, this means that both founders would have to sign every time a transaction is initiated from the wallet. But this is a risky practice, given that access to the wallet may be impossible if one of the founders loses their private key. 

Transaction Authorization Process

The process of authorizing a transaction from a multisig involves the initiator and the signers, all of whom are key holders of the wallet. 

In the case of a 3-of-5 multisignature crypto wallet, when one of the key holders initiates a transaction to send, e.g., 1 BTC to another address, it remains pending and is passed to the other key holders, with only two signatures needed to authorize the transfer. 

The other holders verify the details of the transaction and then add their signature, which goes to show they are aware and approve of the transfer. Once the transaction has collected a total of three signatures from the key holders (the initiator and two signers), it is then marked as fully authorized and broadcast to the network.

Benefits of Multisig Wallets

There are some good reasons why crypto firms and security-conscious investors choose to use multisignature wallets over standard wallets. 

1. Enhanced Security Against Hacks

Requiring many signatures adds an extra layer of security to crypto wallets. Multisigs enforce a system where no single individual can move funds in the wallet, which removes the single point of failure inherent in regular crypto wallets. 

So, if hackers manage to gain access to one of the private keys, they cannot do much with it. With some wallets, you have the option to remove the compromised key, replace it, or add new key holders.

2. Protection Against Key Loss

With threshold signature wallets like 1-of-2, 2-of-3, etc., you can still access your crypto assets even with a key loss. This is unlike Phantom, MetaMask, and other single-signature wallets, where losing your one private key makes your assets impossible to recover. 

3. Shared Control for Teams and Organizations

The M-of-N configuration of multisig wallets is ideal for shared control, which is why it is very common among teams and firms. With it, no single person is a custodian of the funds, and no transaction would be processed without the knowledge of other team members enlisted as key holders. 

4. Governance and Trust in DAOs

Multisig wallets are usually how Decentralized Autonomous Organizations (DAOs) get to manage their crypto treasury transparently and trustlessly. The community doesn’t have to trust that one key holder acts in good faith and not run away with their funds. Also, the DAO’s funds remain “SAFU” even if one key holder acts maliciously or becomes unavailable.

Risks and Limitations of Multisig Wallets

Despite having fantastic security benefits, there are a few limitations or downsides to using a multisignature wallet.

1. Complexity in Setup and Use 

From our breakdown earlier, you will agree that setting up and using multisig wallets can be complex. It’s usually technical, and that’s why many don’t recommend it for beginners or simple day-to-day spending.

2. Potential Delays in Transaction Approvals

The fact that multiple signatures are required to make a transaction presents its own problem. You can make a payment with just a few clicks on single-signature wallets, but multisigs require a certain number of key holders to review and approve the transaction, which delays processing time. 

3. Smart Contract or Software Bugs

The wallet software is prone to bugs, which can be exploited to compromise the wallet. This was the cause of the $1.5 billion Bybit hack in February, where the exploiters musked a transaction UI to change the smart contract logic of the wallet, leading to the theft.

4. Limited Support Across Platforms

Most multisig wallets are built for specific blockchains like Bitcoin, Ethereum, and Solana. That means a team or DAOs using a Bitcoin multisig, for instance, would need to set up a different wallet for crypto tokens based on Ethereum or Solana.

Popular Use Cases for Multisig Wallets

These are some of the popular cases where it makes more sense to use a multisig wallet.

1. Business and Institutional Funds Management

Multisig setups like 2-of-3 or 3-of-5 make it easier for businesses and institutions to manage large crypto assets, in that a consensus must be reached among key executives before funds can be moved. 

2. DAO Treasury Management

Multisig wallets are how DAOs establish trustlessness and the safety of funds. Even if a key holder goes rogue, the community treasury remains intact.

3. Joint Crypto Accounts (Families, Partnerships)

A 2-of-2 multisig wallet can be used by partners to collectively manage funds, where transactions can only be approved if/when both partners agree on it.

4. Escrow Services

The 2-of-3 setup is usually employed for escrow services, involving a buyer, seller, and a mutually agreed-upon third-party arbitrator. If a dispute arises, the arbitrator intervenes to release funds to the right party. 

Examples of Leading Multisig Wallets in 2025

Below are some of the best multisig wallets in 2025 used by the top crypto companies and high-net-worth crypto profiles.

1. Gnosis Safe

Gnosis Safe is now known as Safe. It is specifically built for the Ethereum ecosystem, meaning it can only be used to manage assets on the Ethereum blockchain, and other EVM-compatible chains can use it.

2. Casa

Casa provides a multisig wallet for Bitcoin, often called vaults. It was co-founded by Jameson Lopp and also supports a few stablecoins. 

3. Electrum Multisig

Electrum Multisig is another Bitcoin-focused multi-signature wallet. It may not be the friendliest for beginner users, but it’s quite popular among Bitcoiners due to its compatibility with Ledger, Trezor, and other hardware wallets.

4. BitGo

BitGo manages and also provides multisignature wallets for institutional clients using smart contracts on programmable networks like Ethereum. BitGo wallets support both multisignature and multi-party computation (MPC) signature schemes.

Multisig vs Other Security Solutions

Here is how multisig wallets compare with other wallet solutions like MPC, Ledger, and MetaMask.

Multisig vs Single Private Key Wallets

Most of the standard wallet is designed as single private key wallets, including hardware wallets. So, Ledger, Trezor, Trust Wallet, MetaMask, and so on, fall under this category. This means that they require one and only private key to sign off on a transaction. 

Multisigs like Casa, Safe, etc., can have more than one private key and require multiple signatures to approve a transaction.

Multisig vs Hardware Wallets

Although hardware wallets are under the single private key umbrella, they also vary from multisig counterparts in that they are physical devices. However, multisig wallets are usually smart contract-based software. 

Oftentimes, both can be combined to achieve optimal security. 

Multisig vs Multi-Party Computation (MPC)

With multisignature wallets, a certain number of private keys are generated, which are used for signatures. But in MPC, only one private key is generated and is split into a certain number of encrypted shares held by multiple parties. 

The goal with MPC is to remove a single point of failure of a single private key, while still allowing transactions with a single signature.

The Future of Multisig in Crypto Security

Most crypto companies and teams use multisig crypto wallets, especially for the use cases mentioned earlier, like shared crypto wallets management, escrow, etc., and it will likely remain so.

Integration With DeFi and DAOs

Multisigs have become the gold standard for DAOs and DeFi teams to manage treasuries. Multi-signature solutions will be an ongoing practice in DeFi.

Multisig + MPC Hybrid Solutions

Multisig + MPC solutions could become popular in the future. We could see more firms adopt such hybrid solutions for high-frequency institutional operations.

Growing Institutional Adoption

Over the past few months, several organizations have announced plans for a digital asset treasury. As this continues, we could see more adoption of multisignature wallets across different networks like Bitcoin, Ethereum, and Solana.