What Are Multi-Signature Wallets, and How Do They Work?

What Are Multi-Signature Wallets, and How Do They Work_@2x 2

Smart contract wallets are evolving, forcing more rapid massive Web3 adoption. Multisig wallets - that offer higher security and new features - significantly upgrade the entire Web3 wallet experience for both seasoned users and newcomers.

Users report that the existing wallet experience has long been poor, with most popular wallets like MetaMask, Rainbow, and Coinbase Wallets remaining risky and complex to use. That is where smart accounts come into the picture with a much better solution. 

Thanks to Etherium's introduction of ERC-4337 (also known as account abstraction), many providers now want to provide a better wallet experience by using different types of smart wallets.

And one of the most popular types of Web3 wallets is Multisig (or Multi-signature) wallets. But what does it even mean, and how does it make the wallet experience better? 

We created this article to showcase all the information you may look for related to Web3 multi-signature wallets, how they work, how they differ from the rest of the options, and their key features. Let's get to the point.

Understanding Multi-Signature Wallets

A multi-signature wallet (Multisig wallet for short) is a cryptocurrency wallet that performs a transaction by collecting many signatures. In contrast to using one signature to execute transactions, such wallets use different cryptographic private keys, though a defined threshold of keys signs a transaction for validation.

The workflow of a multi-signature wallet remains the same irrespective of the number of signees. Therefore, all parties can initiate a transaction signed with their private key, but the transaction will only be displayed as pending when other parties sign it.

The most popular working process is an N-of-N setup where all parties must validate the transaction in advance. Another similar example is a 2-of-2 method, meaning two signers should validate a transaction for it to happen.

Alternatively, an N-of-M setup will require a specific subset of parties to approve a transaction. Let's take a 3-of-4 wallet as a tangible example. Here, three out of four parties should sign the transaction for it to be executed. 

The key idea behind multisig wallets is the ability to sign different documents as a group rather than as an individual. Parties using a multisig wallet are named "copayers". 

What are the Types of a Multisig Wallet?

The multisignature wallet will differ depending on the number of keys required for a transaction. Let’s explore three of the most popular options in use today:

  • 1-of-2 Signatures - Two parties (preferably those who trust each other) could use a wallet to share crypto coins without the need for translation to be verified by the other.
  • 2-of-3 Signatures - Being the most popular type of multisig wallet, this setup requires two private keys to execute a transaction. The common practice here will be having one key online and another offline, while the third one is stored in a security company.
  • 3-of-5 Signatures - Here, wallet owners store their private keys in different offline or online locations, while the fifths remain with the provider of the wallet or a security company. Access to multiple cryptocurrencies is possible when two of the four keys are available.

The difference between multisig wallet vs singlesig wallet

Multisignature Wallets vs Single-Signature | Difference

There are three most popular ways you can use to manage your cryptographic keys or secure your cryptocurrency. These include Single Signature (Single-sig), Multisignature (multisig) wallets as well as Multi-Party-Computation (MPC).

The main difference between multi-signature and MPC wallets is the signing process. A multi-sig wallet employs separate signatures from several private keys for security, while MPC uses just one signature, regardless of how many private key shards contribute.

Below, you will see an overview of multi-sig and single-sig wallets with a focus on their difference, functionality, and security aspects.

Single-Signature Wallets

Single-sign wallets tend to have the lowest security level, though they are still a preferable option thanks to their convenience element, making them easy to use for both experienced and newcomers. As you might have expected, a single-signature wallet uses only one private key that can verify a transaction, which is the most vulnerable approach.


Easy to use - users are able to gain access just by setting up a single account (username and password) and getting access to multiple wallet functionalities.

Efficiency - single-signature wallets require only one signature, which saves time and is much more convenient for users since it reduces the need to create and remember multiple passwords and usernames.

Streamlined access - these wallets let users transfer from one functionality or survive to another without re-authentication.


Low-security level - using one signature makes it easier for hackers to compromise a set of credentials, potentially enabling access to many services, applications, and systems.

Higher chances of failure - failure here means a higher risk of losing access to all resources in case of losing your single set of credentials.

Privacy issues - typically, a provider or an authority is managing users` credentials, which raises concerns about tracking users        

Multisignature Wallets

In contrast to the single-signature method, multisig wallet is exactly what the name implies. It uses two or more private keys and has several parties responsible for verifying the transaction. All signatures are equally required for a transaction to be considered valid.


Higher security level - multisignature acts as an extra security layer that requires all signees to be involved in the authorization and validation process. This layer makes it much harder for unauthorized parties to gain access to a wallet.

Reduced risk of unwanted access - In case any of the parties lose their credentials, attackers would not be able to gain access unless all signees participate in the transaction.

Customization - users can assign different roles and levels of authority to other parties, which increases control and significantly reduces the risks of internal threats.


Increased complexity - the number of users involved in the process makes it harder to create a multisig wallet and use it.

Risks associated with delays - transactions could be delayed because of multiple parties required to validate them, which could potentially be a disadvantage in time-bounded operations.

Dependencies on parties - transactions within multisig wallets depend on all parties involved, meaning someone may become unavailable, or the transaction would not be possible if there are internal coordination issues within signees.

Use Cases of multisignature wallet

What are the Use Cases of Multisig Wallets?

With their increased security and opportunity to collaborate, multisig wallets are often used in the following scenarios:

Escrow Transaction Protection

Escrow transactions happening between two parties could benefit from using 2-of-3 multisig wallets. Considering the fact that two parties are involved in the agreement, the transaction proceeds without a hitch. And in case of any errors, lost keys, or disputes, the third party could act as arbitrate, deciding on the transaction direction.

Decentralized Finance

Decentralized finance could use the multisig wallet for trading, borrowing, and lending, enabling seamless collective decision-making without involving intermediate parties. In that case, a transaction is considered valid when there is a consensus among the minimum threshold of key holders.

Collaborative Ownership

There are cases when parties collectively own crypto assets. That is where a multisig wallet makes it easier to build trust among key owners. Here, the transaction that involves several shared assets would happen when all wallet users agree to use the funds.

The crypto industry is known for several huge fraud cases, so making your wallet secure is paramount. Additionally, the business exit scams make collaboration and investment an issue. Changing the crypto landscape and the evolution of the Web3 idea makes multisig wallets an excellent option to address all the challenges mentioned above and grant asset holders better control of their assets while keeping them secure.

Increase Asset Security

As we mentioned, multisig wallets are highly secure. Using them means asset owners can rest assured knowing that even in case of one key being lost or compromised, the funds will still remain safe.

For example, you can create a 2-of-3 multisig wallet, storing each private key in different places (offline) or devices (online crypto storage). So even if the phone was stolen, attackers won't be able to access your funds using only 1 out of 3 keys.

Overall, multi-signature technology also prevents other types of hacking, like malware infections and phishing attacks, since the attacker would most likely have access only to one key or device.

Two-Factor Authentication

If you create multisig wallets requiring two keys, then you also create a two-factor authentication mechanism to access the funds. Therefore, multisignature wallets can act as a trusted two-factor authentication requiring users to provide both keys to access assets.

Decision Uniformity

Let's take a corporation made up of four boards of directors as an example. Setting up a 4-of-6 wallet gives each board member access to one private key. Therefore, it eliminates the chances of one member misusing the funds since the decision agreed only upon by the majority of members can be executed.    

The Best MultiSig Wallet in 2023 

Spatium, as one of the leading Web3 wallet providers, advocates for open access to the blockchain ecosystem for everyone. Following this goal, Spatium developed an unbeatable tech stack that significantly facilitates web3 wallet creation.

Spatium offers three key solutions:

Wallet SDK

The crypto Wallet SDK provided by Spatium allows users to build a fully featured wallet or integrate an existing wallet provider with third-party SDKs. They offer everything you need to create your Web3 wallet easily based on business needs.

Wallet Cloud

Spatium makes a reliable and scalable cloud Web3 wallet by letting users align wallet cloud API with Wallet SDK. With Spatium, you will have an easy-to-set-up wallet infrastructure that manages 500+ types of coins, NFTs, and tokens. This infrastructure will store, receive, and send your assets, allow you to buy and sell crypto, and assess DeFi and dApp functionality.

Spatium Wallet UI

Spatium Wallet UI includes modular and reusable components that are designed to match the brand's stylistic and business needs.

  • Spatium's Crypto Wallet UI Kit is compatible with Figma, so it is automatically responsive to different screens.
  • Wallet UI Kit uses well-thought UX that could be integrated into ready-to-use workflows. In addition, UD logic could be customized when required.
  • Spatium Crypto Wallet UI elements reduce the need to design every visual from scratch, making locating and finding layers easy and quick.
  • All components of Spatium's Wallet UI could be easily integrated into the app front-end while also perfectly matching with Spatium's Wallet SDK.

Wrapping Up

Multisig wallets are used to enhance security and control over digital assets by involving several parties in transaction approvals instead of one. Multisig wallets, requiring signatures from different parties to make the transaction valid, are usually set up with an "M-of-N" scheme. Here, M signatures out of N total participants are needed to approve a transaction. In addition, the private key is not divided; each participant gets their own distinct private key.

The functionalities that underlie the concept of multisig wallets are considered to be promising instruments for the future of crypto. With the use of multiple private keys, these wallets provide assurance of better security and opportunities for collaboration. While the multisig wallet requires technical knowledge, Spatium, as a trusted Web3 wallet provider, makes the process of Web3 wallet creation and use as easy and convenient as possible.

Spatium web3 wallets


What is a multisig wallet?

As the name suggests, the multisig crypto wallet is a wallet that acts based on smart contracts (a code that happens only when a specific set of conditions is met) that requires several signatures to make a transaction valid. 

What type of wallet is a multisig wallet?

A multisig wallet is a type of wallet laying under the umbrella of a smart contract wallet term. Therefore, it works on smart contract technology, where a set of conditions should be met to perform a transaction.

Is MetaMask a multisig wallet?

The short answer is no. In contrast to a popular Bitcoin multisig wallet, MetaMask is a single-signature wallet. Even though it has one key by default, it can integrate with multisig wallet smart contracts to perform transactions.

Can a multisig wallet get hacked?

Multisig wallets have higher security compared to other types. However, they are still not immune to hacking. We recommend following best security practices to keep crypto safe. For example, encrypt the wallet with a strong password, opt for a hardware wallet disconnected from the internet and store your backups in multiple locations after wallet backup.

What is the difference between hot or cold wallets?

The key difference between hot wallets and cold wallets is that hot wallets could be connected to the internet through phone or a laptop, while cold wallets are hardware devices keeping your data offline.


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