Multisig Wallets: The what, the why and the Angel Giving how!

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It isn’t just the crypto world that needs financial security. Every charity will have heard of examples of financial mismanagement that go way back in time, and scammers try it on all the time. Fortunately, no charity in the Angel Giving world has lost funds in this way. But thieves will always keep trying.

So, as the world of cryptocurrencies continues to grow and evolve, the need for secure methods to store and manage digital assets becomes increasingly vital. One such innovation that has gained prominence in recent years is the multisig wallet. Here, we give you an in-depth understanding of why multisig wallets are needed, what a multisig wallet is, and how Angel Giving makes it all work for the benefit of charities.

NOTE: NO-ONE FROM ANGEL GIVING WILL EVER ASK FOR YOUR SEEDPHRASE OR PRIVATE KEY.

***NEVER GIVE YOUR SEEDPHRASE OR PRIVATE KEY OUT TO ANYONE FROM OUTSIDE YOUR ORGANIZATION.***

What is a Multisig Wallet?

In the crypto world, a multisig wallet, short for “multi-signature wallet,” refers to a digital wallet that requires multiple signatures or approvals to authorize a transaction. This feature is designed to enhance security and reduce the risk of unauthorized access to the wallet’s funds. They work by employing a unique smart contract that dictates the number of required signatures, enabling users to customize the wallet’s security based on their needs.

How to Do Multisig Wallets Work?

To understand how these wallets work, let’s first consider a standard wallet or bank account. In a typical wallet or account, only one private key or signature is required to access the wallet and authorize transactions.
In contrast, multisig wallets employ multiple private keys, with each key assigned to a different party involved in the transaction. The wallet’s smart contract mandates a minimum number of signatures or approvals before the transaction can proceed.

For example, imagine a multisig wallet that requires 2-of-3 signatures. In this case, three private keys exist, but only two are needed to authorize a transaction. This setup allows for greater flexibility, as the transaction can proceed even if one key is lost or compromised, while still maintaining an enhanced level of security.

Why do we need Multisig Access? What are the benefits?

 

  • Enhanced Security: The primary benefit of multisig wallets is the heightened security they offer. By requiring multiple approvals to authorize a transaction, they significantly reduce the risk of unauthorized access and theft. Even if one private key is compromised, the attacker would still need access to the additional required keys to gain control of the wallet’s funds.
  • Transparency: Multisig wallets ensure greater transparency in transactions, as each party involved can verify the transaction details before providing their signature. This feature prevents unauthorized transactions and ensures all parties are aware of the funds’ movement, leading to a more transparent and secure financial management system.
  • Reduced Risk of Loss: In the event that a single private key is lost or damaged, a multisig wallet can still function with the remaining keys. This redundancy provides a safety net, ensuring that your digital assets remain accessible even in the face of human error or technical issues.
  • Effective Team Management: Multisig wallets are particularly useful for businesses or organizations that need to manage their digital assets collaboratively. By assigning each team member a unique private key, they can serve as a transparent and secure way to manage funds while still maintaining oversight and preventing unauthorized transactions. When team members join or leave, it is a simple and immediate task to either give or revoke access.
  • Customizable Security: Unlike standard bank accounts, multisig wallets allow users to customize their security settings based on their needs. Users can choose the number of required signatures and assign private keys to specific parties, creating a tailored solution that balances security and accessibility.
  • Dispute Resolution: In situations where multiple parties are involved in a transaction, a multisig wallet can help prevent disputes and build trust. With each party required to provide a signature, the wallet ensures that no single person can unilaterally control the funds, leading to a fair and transparent process.
  • Regulatory Compliance: As regulations surrounding cryptocurrencies continue to evolve, multisig wallets can help users comply with any relevant rules and guidelines. In some jurisdictions, nonprofits dealing with any financial or digital assets are already required to implement specific security measures to minimize the risk of fraud and theft.

Multisig wallets are a powerful tool, offering enhanced security, reduced risk of loss, and numerous other benefits. By requiring multiple signatures to authorize transactions, these wallets provide nonprofits with greater control over their assets, while still ensuring ease of access and flexibility.

At Angel Giving, the structure of the current and endowment accounts means that any scammers – I mean thieves! – who do manage to get access to one seedphrase, key or account would still not be able to remove any endowment account funds. That’s an extra layer of security already built in. 

So we strongly recommend that you set up and use the multisig wallet capability built into the service.  Here’s how, with help videos from our FAQ/help pages

  1. The new account holder creates the new wallet – In this case, the Torus wallet as used in the Web3auth setup process –  VIDEO
  2. The existing wallet holder adds the new wallet address to the account – VIDEO (This video also shows how to remove wallet access from the account) 

You’re all done, you have a multisig account set up. . You can now change the voting parameters if you wish, or leave it as just 1 person out of however many wallets can access the account. The details on ow to do this are shown here – VIDEO 

If you have any other questions, just ‘Ask Gabriel’ in the chat on the bottom right of this screen.