Definition
The term multisignature, or multisig, refers to a specific type of digital signature that is created through the combination of multiple unique signatures. The technology makes it possible for two or more users to collectively sign cryptocurrency transactions and digital documents.
Understanding the term
While multisig has been used within the world of cryptocurrencies, the concept has existed long before the introduction of Bitcoin. Funds that are stored on a multi-signature address can only be accessed when two or more signatures are provided simultaneously. Multisig wallets provide an additional layer of security. It prevents all of the problems that often occur when using single-key wallets.
Single-key wallets are susceptible to new phishing techniques as they are protected only by a single point of failure. On the other hand, multisig wallets require more than one signature to transfer funds. This makes them suitable for businesses and corporations that intend to store funds on a shared wallet. As a result, the risks that arise by keeping funds in the hands of a single person or by handling a single private key are totally mitigated.
Takeaway
Multisignature wallets offer a potential solution to the security concerns that come with a single private key mechanism. It makes it difficult for cyber attackers to increase potential failure points that hackers need to address.