Several transactions in the crypto and blockchain technological space are basic concepts and ideas generated from the traditional finance models.
However, such models require deep thinking, which the developers have taken their time to create in order to generate the expected results that are applicable to the traditional finance models.
A practical example of this transaction is the requirement of multiple signatories to affect the execution of a financial transaction in a traditional banking system.
It is expected that such a transaction must have the signatures of the financial secretary or treasurer of the organization, the president, and one other executive to ensure that the transaction is valid.
The same is applicable for blockchain technology and the crypto space where the use of multisig wallet system would warrant the validation of multiple wallets (who are signatories) to that transaction to validate the transaction.
What is a Multisig wallet?
A MultiSig wallet is a digital wallet deployed by an organization or a group of individuals that operates with multi-signature addresses.
This invariably means that it requires more than a single private key to sign and authorize a crypto transaction or, in some cases, that several different keys can be used to generate a signature to effect a successful transaction.
A Single signature, otherwise known as a “basic” cryptocurrency wallet, simply requires one signature to sign a transaction. On the other hand, a Multisig is the shortened name for multi-signature, and, as the name indicates, requires one or more signatures to sign a transaction.
A multisig wallet is a wallet shared by two or more users called co-payers.
Depending on the kind of wallet, the number of signatures required to sign a transaction will be lower or equal to the number of co-payers of the wallet.
This is usually implemented from a security perspective. It is vital that tokens or coins are stored in a way that eliminates the risk associated with a single vulnerable point or users which can eventually lead to a compromise of the entire wallet.
However, if there is only one private key necessary to sign a transaction, this presents a major risk to the assets in case of theft or loss.
This has been experienced in the past from big crypto platforms where the major company wallet is being managed by a single individual signature and as such when it was compromised, the wallet was completely emptied and the funds stolen to date.
Why do you need a Multisig wallet?
In order to successfully create a multisig wallet to validate a transaction, the participants involved in the initiation of the transaction would be able to verify info as follows:
- All the co-payers or signatories can see the funds and transactions of the wallet.
- The transaction would require one or more signatories to sign a transaction (initiate) to send funds from the wallet. This feature adds security to your funds.
- A unique recovery phrase for each of the signatories who share the wallet. However, if one of the signatories’ recovery phrases is lost, there may no longer be enough signatories to sign transactions. As a result of the deficiency in signatories to sign transactions, funds would not be able to be spent or removed from that wallet.
MultiSig wallet essentials
- A MultiSig wallet uses more than one private key to authorize crypto transactions.
- They can also be configured to allow each in the set of private keys to generate a signature.
- Holding private keys in different locations enhances security while allowing multiple keys to sign a transaction improves usability.
- Commonly used types of MultiSig wallets:
- n-of-n: Transactions require more than one key to be authorized. All keys need to be used to create the signature. (2-of-2, 3-of-3, etc.).
- n-of-m: Transactions require some of the keys, but not necessarily all of them, to be authorized (1-of-2, 2-of-3, 3-of-5, etc.).
Multisig on the KleverChain
KleverChain is creating the opportunity for all users to access the Multisig function, which is the ability for an address to require several entities to sign a transaction for that transaction to become valid on KleverChain.
This is possible in a way that users and project creators can increase their level of security by having multiple people or groups signing the transactions, making Multisig a powerful feature on KleverChain.
Subsequently, If any user creates a multi-signature address, they will need to pay a kApp fee in KLV. Then the users can create roles for their addresses to delegate responsibility and roles: signature of transaction and specify the actions of what that address can execute on the blockchain.
To explain this in simple terms, the team can decide to assign roles to each of the wallets which would be responsible for validating each transaction. These wallet addresses can be designated as chairman or president, Treasurer or financial secretary, and a final wallet which can be a member of the board of trustees (BOT).
In conclusion, all these are put in place by the Klever team to help secure the funds available to any organization that decides to use a multisig wallet on the KleverChain in a decentralized manner.