Multi-Signature (Multi-Sig)
In simple terms
A multi-signature wallet is like a bank safety deposit box that requires multiple keys to open instead of just one. You need approval from several trusted people before any money can be sent out.
Definition
A wallet that requires multiple approvals to complete a transaction.
In depth
A multi-signature wallet implements an M-of-N signing scheme where M out of N authorized private keys must sign a transaction for it to be valid and broadcast to the blockchain. When a transaction is initiated, it enters a pending state until the required number of signatures are collected and verified against their corresponding public keys. This consensus mechanism is enforced at the protocol level, preventing any single key holder from unilaterally moving funds and effectively distributing control across multiple parties or devices.
How does Multi-Signature (Multi-Sig) work?
At setup you choose the rule, such as two of three keys or three of five, and register every participating public key. Funds go to an address derived from that whole set, so the spending condition is built into the address itself. To send, one participant builds an unsigned transaction and passes it around; each co-signer reviews the details and adds a signature on their own device. Once the required number of signatures is attached, the transaction is broadcast and the network validates it against the rule. Restoring the wallet later needs both the keys and the original configuration.
An example
A three-person group treasury uses a 2-of-3 wallet, with each member holding one key. To pay an illustrative $2,000 invoice, one member drafts the transaction and two of the three sign it, so it settles without the third. When a member later loses their key, the other two still control the funds and can move the balance to a new 2-of-3 wallet with a replacement key.
Figures are illustrative only.
What beginners get wrong
- Storing two of three keys in the same house defeats the design, since one fire or one burglary reaches the signing threshold.
- Losing the wallet configuration can be as damaging as losing a key, because some setups cannot be rebuilt from the seed phrases alone.
- Setting the threshold equal to the number of keys, such as 3-of-3, removes any tolerance for a single lost or damaged key.
- Signing takes coordination between people and devices, so multi-sig suits balances that rarely move rather than day-to-day spending.
Related terms
Part of
How do crypto wallets and self-custody work? — the subject page for wallets and self-custody, with all 13 of its definitions in one place.
Educational only — not financial advice.