Overview of Multisig Wallets
• Multisig wallets have existed in Bitcoin since 2012 and are a great security aid for self-custody practice.
• There are DIY wallets and collaborative multisig wallets that involve a third party to manage one of the private keys.
• Collaborative multisig wallets offer convenience and reliance on customer service, but come with a cost to privacy due to KYC procedures and geographical restrictions.
Risks of Using Bitcoin Wallets
Bitcoin users need to keep their wallet secure at all times from online threats such as malware programs, hacks, and phishing attacks. Losing your own private keys can lead to losing funds with no way of recovering them. Recent examples include leaving bitcoin in centralized exchanges that have gone bankrupt or vanished due to potential rug pulls.
DIY wallets enable users to buy their own components and build devices that leave no trace and securely generate private keys. This approach benefits users from countries where conventional hardware wallets are not allowed to be sold or have poor delivery services, as well as those looking for low-cost solutions.
Collaborative Custody Wallets
In collaborative multisig wallet setups, which usually involve 2-out-of-3 key management, the user will hold control over one private key while the third party holds the second private key online and the third key offline in cold storage. The advantage is convenience and reliance on customer service for managing the keys if anything happens; however this comes at a cost to privacy due to KYC procedures required by companies.
Multisig wallets present an opportunity for bitcoiners looking for additional security when storing their digital assets in self-custody arrangements. Users can opt for DIY solutions that provide low costs while maintaining privacy, or collaborate with custodial companies who may offer customer service support in exchange for personal information requirements.