Multi signature's meaning stands for more than one signature. Yes, a multi signature wallet simply means that multiple users need a digital signature to access the wallet. Although the use of this digital multi signature is already there, its actual use can be seen in the world of cryptocurrency.
In the world of cryptocurrency, multi signature was first used in 2012 to protect Bitcoin wallets. Although multi signature is used in various ways, its main use is more in security issues. So let's see how multi signature is used in cryptocurrency...
How does multisignature work?
Let's try to find out what multi signature is with a small example. Many of us may have seen bank lockers. Bank lockers have multiple keys. Excludes bank locker. Suppose you have a locker with two keys. That means you will need two keys when you open this locker. You cannot open this locker if a key is lost..Basically multi signature work like this too .. if you set up two signature in your wallet and get one lose then you can not withdraw any of the amount from the wallet ..
Single Vs. Multisignature Wallet
Usually Bitcoin is stored with a single key. This means that the person who has this private key will be able to control that wallet fund alone. Now if any way your private key falls into the hands of someone, you will surely lose your funds. But more than one signature is required to make any type of transaction in a multi signature wallet. This means that funds cannot be transferred from a multi signature wallet to a single person or a single key. Let us discuss the matter with an example.
Suppose a bitcoin wallet is bound with two "keys". One of the "keys" is with Trumps and the other "key" is with Biden. Now if Trumps doesn't tell Biden if he tries to transfer any beacon from that wallet, he will not be able to transfer. Although he can enter the wallet, he will ask for a second signature in the wallet when he goes to transfer a bitcoin. This means that if he does not get a second signature from Biden , he will not be able to do any bitcoin transaction.
Similarly, Biden will not be able to do any bitcoin transaction unless he gets his signature from Trump . All in all, the consent of both will be required to make any type of transaction from this multi signature wallet.
Increases security
Multi signature wallets are more secure than single key wallets. Because, if somehow someone gets your "single key" wallet "key", you will lose your funds.But this is will not happen in the case of multi signature wallets. Because somehow even if someone gets a “key” in your multi signature wallet, they won’t be able to steal your funds. Because, when he goes to transfer your funds, he will ask for a second "what" which he does not have.
Caution in using multi signature wallet
You can create more than two signatures in a multi signature wallet. So if you want to use a multi signature wallet, have four, more than two signatures. Because, if you create a wallet with 2 "signature keys", if for some reason you lose a "signature key", you will lose your funds. Because if you want to make any kind of transaction from a wallet with two signature wallets, both signatures will be required.So if you want to use a multi signature wallet, use more than two signatures. So even if you lose one key for some reason, you can use another key to trade your funds.Suppose you create a wallet with 3 multi signature keys. Where you set it as settings, you can use your funds with any 2 multi signature keys. Now even if one of these 3 "keys" is lost, you can use your fund with the other two keys.This way you can set multi signature keys like 4, 5, 6 etc. You can create the option to use 3 out of 4 keys, 3 out of 5 keys, 4 out of 6 keys.If you set 5 multi signature keys to create a wallet with any 3 keys. However, you can use your fund by using any 3 keys of 5 multi signature.
But a thing is that multi signature wallet is not for day trader who always love to make transaction .. as like the advantage there has dis advantage of a multi signature wallet .
SO BE CAREFUL ABOUT IT !!