Taking a look at single-signature and multi-signature wallets

Introduction

In the crypto space, wallets play a very key role in facilitating all transactions. This is why the very first step for new users getting into crypto is - to download a wallet. Crypto wallets help users to store their digital assets as well as carry out transactions. There are many different projects out there offering different wallets to users. Most are free to download and own. Just a few are paid.

Crypto wallets often have keys with which the owner accesses the funds inside. At least there is one private key which is used to sign transactions. A wallet with just one key for signing transactions is known as a single-signature wallet. There is also another kind of wallet where at least 2 keys are needed to sign a transaction. This kind of wallet is known as a multi-signature wallet.

Single-signature and multi-signature wallets are popular. Each of them serve a unique purpose. In this article, we will compare both of them and see the pros and cons.

Single Vs Multi-signatures: Understanding the differences

First of all, we need to understand that private keys are used to access a wallet. The private key gives the owner exclusive right and ownership of the assets in the wallet. In order to perform any transaction, the private key would be needed.

For single signature wallets, only one key is needed to unlock the wallet or sign transactions. In order words, whoever is in charge of that one private key could access the wallet. This could be thought of as a key that unlocks a house. The owner has the key and no other person can gain access to the house unless the owner authorizes them to do so. For multi-signature wallets, it works a little differently.

Multi-signature wallets require at least two keys to unlock the wallet and sign transactions. In this case, one person might own the two keys. But generally, multi-signature wallets are owned by a group. As such, no single person has exclusive access to the wallet. Instead, the two persons or more holding the private keys are needed in order to complete a transaction.

While a single signature wallet could be thought of as a house owned by one person who has the key, multi-signature wallet looks like a house with two or more locks on the door. In order to open it, the two keys are needed at the same time. One key alone cannot open the door.

Single Vs Multi-signatures: Control of funds

When it comes to who owns or controls funds in a wallet, single-signature and multi-signature wallets handle it differently. And depending on the purpose of a wallet, either of the two might prove more useful. Now consider funds owned by just one person.

If the funds in a wallet is owned by just one user, then there would probably be no need to have 2 keys to unlock them. A single signature wallet is far easier to manage in terms of completing transactions. Only one key is needed. That makes everything easy and simple. But if for any reason, the funds in a wallet are owned or should be controlled by a group, then a multi-signature wallet would be so idea here.

Many enterprises and businesses are joining the crypto space. In this case, the crypto they buy, invest or hold should not be managed by a single person. It would not be safe at all to have all the funds of an organization in the hands of one person. In this case, a multi-signature wallet would prove super useful.

So in terms of purpose of wallet use, a single signature wallet is great for individual users that are not sharing or contributing the funds. If the funds in the wallet is owned by one person, then a single signature wallet is great. But for funds owned by a group or an enterprise, then a multi-signature wallet would be the most ideal.

Single Vs Multi-signatures: Security

When considering the security of funds in a wallet, then a multi-signature wallet has an edge over a single-signature wallet. With the rise in the number of hacking and theft of keys incidences, it is far much easier to compromise a single signature wallet. All the hacker or other intruders need to do is find a way to steal the key.

Thieves continue to explore more ways of stealing keys and identities from owners. Phishing is a popular method through which hackers try to steal keys. It is far too easier to steal a single key since that is all that is needed to login to a single-signature wallet. Once the key is lost, the assets are exposed to intruders. But for a multi-signature wallet, there is an added security with that second key.

Hackers would find it very difficult to steal both keys or more of the multi-signature wallet. Even if one of the keys is compromised, the intruder wont still be able to steal the funds since the second key is required to access them.

For a multi-signature key, the other keys act like a two-factor authentication. Those keys add extra layers of security. This is important because an intruder would somehow find a way to steal all the keys in order to access the funds. In most cases, that is absolutely difficult to pull off.

Single Vs Multi-signatures: other considerations

When choosing between single keys and multi-signature wallets, other considerations might come into play. For example, if a new user coming into the space requires something that is easier to learn and use, single key wallets would be ideal. However, a seasoned user with lots of funds to manage might prioritize security. In this case, they might go for a multi-signature wallet.

The issue of control is also important here as decentralization is where the crypto world is tilting towards. A single key wallet is centralized. Only one person has the keys and is thus able to control the wallets. In a setting where the funds are owned by a group, such a wallet might pose risks.

Multi-signature wallets are decentralized in nature. This is because no single person can claim full use or control of the funds in a wallet. Instead, the power of control is spread across the persons holding the keys. So even if one of the actors become corrupt, they would not have the power to harm funds in a multi-signature wallet.

Multi-signature wallet configurations

Multi-signature wallets often come in various configurations. Each setup determines how many keys there are for the wallet and a minimum number of keys required to sign transactions. Some of the popular ones are listed below:

• 2-of-2: In this type of multi-sig wallet, there are a maximum of 2 private keys. In order to sign or complete transactions, the two keys are required. This is a popular configuration that many groups go for.

• 2-of-3: In this configuration, there are a total of 3 private keys. But out of the 3, 2 keys are required at any point in time to confirm transactions.

• 3-of-5: In this configuration, a total of 5 keys are available. But two of those keys are required to access the wallet of perform any transactions.

There are many of configurations each of which has their number of keys and number needed to confirm any transactions.

Sample Multi-signature wallets

There are many different multi-signature wallets that anyone could use. I will list some of them by blockchain type. Consider the following 3 popular blockchains.

Bitcoin multi-sig wallets

• Cobo
• Liminal

Ethereum multi-sig wallets

• Unipass
• Castle

Polygon multi-sig wallets

• Mpcvault
• Wallet3

Note: Most of the wallets support more than 1 type of blockchain. The listing above was done for easy categorization.

Conclusion

Both single key and multi-signature wallets serve their purposes. The user would decide the type to use based on the nature of funds to be stored and type of project that is involved.