Multisig or multi-signature is a term that is often used in cryptocurrencies. You can use it to increase security of your wallet. Multisig means two or more signatures are required before allowing user to do an operation (such as coin/token transfer) on their wallet. Stellar fully supports multisig function.
Why is Multisig important?
Whenever one sends funds from their wallet, you create a transaction and sign it. By signing, you are basically telling the wallet that you are the owner of the funds and you hold the key to manage it. You are also telling it to approve the transaction.
In case of single signature, which is used by most basic cryptocurrency wallets, you need only one signature to create and sign the transaction.
In case of multisig wallet, you need two or more signature to sign a transaction. When you manage a single signature address, it is faster and easier to manage than a multisig one, but you are losing on the security front.
When you have a single key, your funds are protected by one single signature, so if someone, let’s say, a hacker or cyber-criminal gets access to this key, your funds are gone.
Multisig wallets can be configured to require different key combinations. For example, 2-of-3, 2-of-2, 3-of-4 and so on. 2-of-3 means two signatures are sufficient to access funds of a 3-signature address.
Benefits of MultiSig
Higher security — In case of Multisig wallets, the funds can only be moved if multiple signatures are provided. This increases security of the funds stored. If one key is compromised, then depending on the configuration of the wallet, hacker must need the other key(s) to move the funds.
Great for businesses — Multisig wallets are great for businesses, especially where group decision making is involved. For instance, in case of 3-of-4 wallet, misuse of funds can be avoided as funds can only be moved if majority agrees.
Stellar’s popular cryptocurrency wallet, Lobstr, fully supports Multisig
Available for both Android and iOS, Lobstr Vault lets you setup and enable multisig functionality quickly.
Lobstr Vault lets you use multi-signature tech already available for Stellar tech. The best part about Lobstr Vault, a free service, is that secret key is stored locally and never touches servers of Lobstr. This secret key is used to sign the transaction.
Vault also encrypts the secret key so that other applications cannot access the Lobstr Vault.
When you use the Lobstr Vault, you make the last decision to “confirm” or “deny” the transaction.
Lobstr Vault also requires you to set-up 6-digit PIN and bio-metric authentication like iris scan, fingerprint authentication for further enhancing the security.
Another way to implement multisig functionality on Stellar wallets is by using StellarGuard. Like Lobstr, StellarGuard is also free of charge. It aims to provide 3Ps — protection, prevention and privacy.
If StellarGuard is used on a wallet, then hacker would not be able to steal funds even if the private key is compromised. A transaction must be signed by you and StellarGuard before it is sent to the Stellar network.
StellarGuard is totally open source and anyone can have a quick glance at its source code.
MultiSig wallets are appealing and important not only for businesses but also for individuals. It is amazing to see how by requiring more than single signature, your funds become so much more secure. I’m pretty sure that its usage will increase in future.