Multisig Wallets

What is a multisig wallet?
A multi-signature, or more commonly known as multisig, wallet is a cryptocurrency wallet with additional security settings, that utilizes multiple private keys and requires two or more signatures to confirm and send a transaction.

The process of a multisig wallet works by requiring multiple signatures from a set of predetermined addresses, and if any one of these signatures is missing, the transaction will not be able to go through.

While there are many different types of multisig wallets, there are two top-level types: the first type requires all multisig to sign to a transaction, and the second type requires a certain number out of the total pool to participate for a transaction to process.

The process of signing transactions on a multisig wallet differs from traditional wallets due to a key difference. Traditional wallets are known as externally owned accounts (EOA), meaning they are generated by users and controlled by private keys. EOAs are created for members of the public to interact with blockchains.

Multisig wallets, on the other hand, are smart contract-based wallets. Rather than being endpoints controlled by a user, these smart wallets are controlled by code and governed on-chain by their owners. Because of this setup, multisig wallets are considered a "seedless" form of self-custody.

PAW Treasury operates a Gnosis safe multisig wallet and of the 8 core team signatories, a minimum of 6 signatures are required for the movement of funds.

Benefits of using a multisig wallet:

   
• Greater transparency. Multisig wallets provide increased transparency compared with other types of wallets. Transaction policies, signers and actual transactions are all made publicly available on chain or in the code. This allows for a clearer picture of the rules for transactions and accountability of those who participate in directing funds.
   
• No 'key person' risk. The design structures of the multisig wallet eliminates traditional "key person" risk. Key person risk refers to when a project relies almost entirely on a single individual to succeed. This risk is all too common in crypto, particularly in instances where one individual is in control of a wallet's seed phrase.
   
• Upgradeable. Due to a multisig's position as a smart wallet, it can be easily adjusted or upgraded to meet the requirements of an institution or DAO. Building on top of the wallet, developers can create protocols and models that can allow for more complex actions including DAO voting or asset management services.