In the context that the decentralized finance (DeFi) and digital asset ecosystem is transforming strongly into maturity in 2025 and 2026, the issue of asset security is no longer just an individual concern but has become a top priority for financial institutions, investment funds and decentralized autonomous organizations (DAOs).
According to analysis from experts at Tan Phat Digital's reliance on traditional single-signature wallets (EOA) has exposed critical risks, especially the "Single Point of Failure" scenario, where the loss or compromise of a single private key can lead to the collapse of an entire financial empire. The Multisig Wallet (multi-signature wallet) solution has emerged as the gold standard, not only providing a fortified layer of defense but also establishing a transparent treasury governance framework that meets rigorous auditing and regulatory compliance standards.
The Nature and Evolution of Multi-Signature Technology
Conceptually, the Multisig Wallet is a type of cryptocurrency wallet that requires approval from two or more independent private keys to confirm and execute a transaction on the blockchain. Instead of one individual holding complete authority over assets, multisig establishes a collective consensus mechanism, similar to the dual control process in traditional financial systems or the mechanism of opening a safe at a bank that requires many different keys.
Operating Mechanism and M-of-N Model
At the core of the multisig architecture is the $M$-of-$N$ approval threshold model. Where, $N$ represents the total number of private keys (or signing participants) authorized to the wallet, and $M$ is the minimum number of signatures required for a transaction to be considered valid.
The choice of parameters $M$ and $N$ reflects the strategic balance between security, availability, and operational efficiency of the organization. Below are popular configurations compiled by Tan Phat Digital:
1-of-2 configuration: Low security level but very high availability. Often used as a joint account for a couple or very small business partners, where anyone has spending rights.
2-of-2 configuration: Medium level of security but low availability (if one key is lost, the asset is lost). Popular application for personal two-factor authentication (2FA), which requires both devices to be secure.
2-of-3 configuration: Both security and availability are high. This is the optimal choice for small-scale venture capital funds or asset management of high net worth individuals (HNWI).
3-of-5 configuration: Very high level of security. Often chosen by corporate boards and treasury management of major DeFi protocols to ensure no individual can act arbitrarily.
5-of-7 configuration: Maximum security. For blockchain infrastructure organizations, large-scale DAO projects or cold storage of large financial institutions.
The $M$-of-$N$ mechanism helps eliminate the risk when a member loses a key or when a key is appropriated by a hacker. As long as the number of compromised keys remains below the $M$ threshold, assets are still guaranteed to be safe.
Transaction execution process in a multi-signature environment
Unlike instant single-signature transactions, multisig wallet's transaction execution process is sequential and requires close coordination:
Initiation: One member has the right to sign propose a transaction through the user interface (UI). The transaction contains information about the receiving address, the amount of assets and function call data if interacting with a smart contract.
Signing: The proposal is sent to other members. Each person uses their private key (usually stored in a hardware wallet such as Ledger or Trezor) to create a digital signature.
Accumulation: Signatures are collected on-chain or through a gateway service. The transaction is in a "pending" state until the required number of signatures meets the specified threshold.
Execution: Once the $M$ threshold is met, anyone can trigger the submission of the final transaction to the blockchain for validation and execution by the network.
See more: What is a cold wallet? The Ultimate Digital Asset Security Solution in 2026
Technical Analysis: Multisig on Key Blockchain Ecosystems
Each network has a different technical approach, depending on whether they support multisig at the protocol level or through smart contracts.
Bitcoin: The Shift from P2SH to Taproot and MuSig2
Bitcoin is the Network pioneer grid. Recent updates have advanced this technology:
P2SH (Pay-to-Script-Hash): Introduced in 2012, allows users to send coins to the hash of a script. Addresses begin with the number "3".
P2WSH (Pay-to-Witness-Script-Hash): Part of the SegWit upgrade, which reduces costs by separating signature data into the "Witness" section, saving significant gas fees.
Taproot and MuSig2: Uses Schnorr signatures instead of ECDSA. MuSig2 allows multiple parties to create a single synthetic signature. On the blockchain, multisig transactions look exactly like single-signature transactions, increasing privacy and saving block space.
Ethereum and EVM: The Era of Safe and Smart Contract Wallets
On Ethereum and EVM-compatible chains, multisig is implemented as smart contracts. Safe (formerly Gnosis Safe) has become the global standard infrastructure. According to a report from Tan Phat Digital's system, the Safe protocol has processed trillions of USD in transaction volume by 2026.
Safe is extremely modular:
Spending Limit Module: Set up spending rules for small amounts without needing enough signatures, increasing day-to-day flexibility.
Safe Apps: Direct integration with DeFi, allowing swaps or staking directly from the multisig secure environment.
ERC-4337 Compatible: Account Abstraction integration, allowing gas fees to be paid in stablecoins like USDC.
Solana: Squads and Optimized for SVM
Squads Protocol is a multisig solution dominates Solana. It not only manages the currency but also manages program upgrade rights, allowing a board to transparently approve software updates on-chain, eliminating the developer's single-keyword risk.
Counterweight Comparison: Multisig, MPC and EOA
To make the right decision, Tan Phat Digital analyzes in detail the differences between three popular custody models variables:
1. Externally Owned Account (EOA - Regular Wallet)
Security: Low due to single point of failure risk.
Transparency: Poor, only shows a single address.
Gas Cost: Lowest due to simple transactions.
Flexibility: Very high, instant execution then.
Optimal application: Small individual users.
2. Multisig Wallet (On-chain Multi-Signature)
Security: High thanks to the decentralized mechanism.
Transparency: Absolute, everyone sees who signed.
Gas Cost: High due to having to process many on-chain signatures.
Flexibility: Low because the wallet configuration and address are fixed determination.
Optimal application: DAOs and organizations need transparent governance.
3. Multi-Party Computation (MPC - Multi-Party Computation)
Security: Very high, the full private key never exists in one place.
Transparency: Low, on-chain transactions look like normal private wallets.
Gas Cost: Low, only costs a single on-chain signature.
Flexibility: Very high, easy to change signer without changing wallet address.
Optimal application: Exchanges and high-frequency trading funds.
Many modern organizations are applying the "Hybrid" model: Using MPC for daily trading activities (Hot Wallets) and using Multisig for long-term treasury storage (Cold Storage).
See more: What is Smart Contract Audit? Why do Blockchain projects need security audits
Account Abstraction: The Future of Multisig User Experience
The ERC-4337 standard has addressed many of the weaknesses of traditional multisig:
Transaction Batching:Allow multi-step approvals (e.g. Approve + Swap) in a single signing.
Pay Gas fees with Token: Eliminates the need to always keep ETH in the wallet, allowing USDC to be used to pay gas fees.
Social Recovery: Allows appointing a "guardian" to restore the account if the master key is lost, no longer relying on the easily lost 24-word seed phrase.
Treasury Management: Strategy for Investment Funds and DAOs
For organizations Professional organization, Tan Phat Digital recommends the following steps:
Limit approval: Small transactions (under $50,000) may only require 2-of-3 operational level signatures. Large transactions (over $1 million) require 5-of-7 signatures including leadership.
Geographic dispersion: Private keys should be stored on different hardware wallets, kept in different geographical locations to avoid local enforcement or disaster risks.
Automated auditing: Use Safe to integrate with accounting tools, create automatic audit reports that meet international financial standards such as SOC.
Analysis of Real-life Attacks and Lessons
Despite high security, multisig can still be broken if operating procedures are lax.
Bybit Attack (2024): "Blind Signing" Disaster
Hackers infiltrated the developer's computer to change the Safe wallet interface. Signer sees the correct address on the web but in reality the calldata has been changed to a malicious contract. The lesson is that the signer "blindly signed" without checking the data on the Ledger hardware wallet screen - the final comparison step is extremely important.
Parity hack (2017): Smart contract error
Hacker took advantage of the unprotected initialization function to take ownership of the wallet. Then, a library error left hundreds of millions of dollars permanently locked. This shows the importance of using rigorously audited solutions like Safe instead of building your own.
Trends and Forecasts for 2026
The world of multi-signature wallets is moving towards a future where security and user experience become one:
Seed Phraseless Wallets: FaceID or fingerprint approval with Passkeys.
AI integration: AI agents will scan transactions and warn if the destination address is blacklisted before the signer puts pen to paper.
Quantum Resistant: Upgrade to post-quantum encryption algorithms without changing wallet addresses.
FAQ (FAQ)
What is the biggest difference between a regular wallet (EOA) and a Multisig wallet? A regular wallet only requires 1 signature to transfer funds, while Multisig requires consensus from many different private keys, eliminating the risk of an individual being hacked.
Can I recover assets if I lose one of the private keys? Yes, if Your configuration has redundancy (for example, 2-of-3), you only need to use the remaining 2 keys to transfer assets to a new wallet.
Why are Multisig wallet transaction fees higher than regular wallets? Because Multisig wallet performs many signature verification operations directly on the blockchain (on-chain), resulting in more network resource consumption.
Can Multisig wallets be hacked? Yes, Multisig is more secure but can still be hacked if hackers obtain enough keys to reach the approval threshold or attack via interface vulnerabilities (phishing).
Can I use different hardware wallets (like Ledger and Trezor) to co-sign a Multisig wallet? Absolutely. Solutions like Safe or Sparrow support a variety of combinations of different signing devices to increase security.
Which M-of-N configuration is the most popular and secure for the organization? 2-of-3 configuration is often used for individuals/small groups, while 3-of-5 or 5-of-7 is the standard for large funds and DAOs to ensure maximum security.
If I am an individual user, should I use Multisig? Yes, if you hold a large amount of assets. However, you need basic technical knowledge because the setup and management process is more complicated than a regular wallet.
How to change the signer list after the wallet has been created? On smart wallets like Safe, you can add or remove signers through an approval transaction from a majority of current members.
Does Multisig help with company budget management? A lot. It helps segregation of duties, ensures no one can arbitrarily use funds, and creates transparent audit evidence.
What benefits does the combination of Multisig and Account Abstraction (ERC-4337) bring? It makes the user experience smoother such as allowing gas fees to be paid with stablecoins, bundling multiple transactions into one signing, and supporting social recovery (social) recovery).
Multisig Wallet has become an essential platform for any organization operating in the digital asset space. It thoroughly solves the risk of power concentration and provides a transparent governance framework.
Tan Phat Digital advises businesses to always use hardware wallets, implement geographical dispersion of signers, and regularly check disaster recovery processes. In the era of decentralized finance, security is a continuous process and Multisig Wallet is the most powerful tool to protect your wealth.
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