An account that requires more than one signature to control the assets is referred to as a multi-sig wallet.
Introduction
An account that requires more than one signature to control the assets is referred to as a multi-sig wallet. This can increase security by lowering the possibility of a lost signature and by making it more difficult for an attacker to take control of several signatures.
A multi-sig, what is it?
Cryptography is far more recent than the idea of utilizing many keyholders to increase security. You may have seen war movies, for instance, when many keyholders are needed to activate a defensive mechanism. The concept is straightforward: distribute control to avoid having a single point of failure.
The same reasoning holds true for crypto.
Multi-signature documents are sometimes referred to as having "x-of-y," meaning that any x signatures out of a possible y are necessary to move the money. For instance, the Ethereum Foundation stores its cash in a 4-of-7 multisig wallet. This means that in order to complete a transaction, a majority of any 4 of the total 7 keyholders is needed.
Why is multi-sig so popular?
Multi-signature setups are common for significant smart contracts and huge crypto money (such as the wallets used by exchanges). In this manner, trust may be shared across several key-holding parties.
Some common combinations and their applications are outlined here.
But just because several signatures are required does not entail that several individuals are also required. You may be in charge of several addresses, and a contract may stipulate that you must have the consent of a majority of those addresses in order to carry out transactions.
If redundancy is used, this might imply that you have control over the related contract as long as you have access to some (but not necessarily all) of the controlling addresses.
The "developing better alternative" and limitations
Multi-sigs have a few restrictions. First off, setting one up and maintaining the privacy of the related private keys both demand a significant amount of technical expertise. Who is the legal custodian of monies stored in a multi-sig is also a question that is still up for legal debate in many jurisdictions. You could have problems obtaining the other keys back if you ended up fighting with any of the other people involved.
The inventor of Ethereum, Vitalik Buterin, has discussed his reasons for thinking that smart contract wallets using social recovery techniques are a "emerging better option" to conventional multi-sigs. Usability is a significant problem with multi-sigs, especially for the person. First of all, transactions now need confirmation from several devices, greatly complicating the procedure. Security issues also need to be taken into account since if one of your gadgets is stolen, it's possible that the other is also at risk.
Multisig is good!
The best-in-class technology for solving these problems back in 2013 was multisig. You could have a wallet that has three keys, where any two of them are needed to send a transaction.
This technology was originally developed within the Bitcoin ecosystem, but excellent multisig wallets (eg. see Gnosis Safe) now exist for Ethereum too.
Argent is a smart contract wallet, with it you can assign guardians who can approve transactions, and help you to recover your wallet should you ever need to. Unlike with a multi-sig, with Argent you can revoke or add guardians at-will, with a short security period where you can confirm or cancel the action.
These guardians can include friends, family, and/or other hardware wallets or addresses you control. A majority of guardians is required to approve transfers to non-trusted contacts. Giving you both freedom and best-in-class security.
credit: Argent
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