Cryptocurrency is growing in popularity. It’s no wonder, considering the many benefits of investing in digital currency. The number of people participating in this market continues to soar.
There will be 1 billion crypto owners worldwide by the end of 2022. In 2021, the number of crypto users climbed by +178%, from 106 million in January to 295 million in December.
But with this growing number of crypto owners, there is also a need for a secure way to store your cryptocurrency. And that’s where multisig wallets come into play.
A type of cryptocurrency wallet, known as a multi-signature wallet, needs more than one private key to approve a transaction. That means even if one private key is stolen, hackers cannot access the money in your wallet.
If you are wondering how to set up a multisig wallet for your cryptocurrency, then this guide is just for you.
Step 1: Find a Secure Space to Setup Your Multisig Wallet
Setting up a multisig wallet is essential, given the growing number of cryptocurrency breaches in the last few years.
For instance, cryptocurrencies worth $12.1 billion are thought to have been stolen between January 2011 and December 2021. The most popular strategy is taking advantage of vulnerabilities in the security systems of cryptocurrency exchanges. Security flaws cost $3.18 billion, DeFi hacks cost $1.76 billion, and frauds cost $7.12 billion.
Setting up a multisig wallet is the first step in making sure that your cryptos are safe. While it’s important to keep your private keys safe, it’s equally important to find a secure space to set up your multisig wallet.
Multisig wallets are becoming increasingly popular, with many people choosing to use them for their cryptocurrency holdings. The idea behind multisig wallets is that you can’t just have one person holding all of the keys. You need at least two people who can authorize transactions. This means that even if one person gets hacked, their attacker can’t steal all of the coins at once.
Step 2: Decide On The Participants
It’s important to decide who will be involved in managing the multisig wallet before you get started. You should choose people you trust who are committed to the process and have experience with managing cryptocurrency wallets. If you’re working with a group of people who don’t know each other well, it may be a good idea to use an escrow service to hold funds until they can agree on how they want to use them.
You’ll also need to decide how many signatures will be required for each transaction. This will depend on your level of security and how much money is being stored in your account. The most common number is two signatures out of three, but some services require more than two signatures.
The more signatures required for each transaction, the harder it becomes for someone who doesn’t have permission from all participants to access funds stored in that wallet. But this also means that if one person has their private key compromised, then an attacker would need two different keys from two different participants before they could make any changes to funds stored within a multisig wallet.
Step 3: Create A Backup and Rehearse Recovery
The next step is to create a backup and rehearse recovery. The reason for this is that you want to be able to access your wallet if something happens.
If you create a backup but don’t rehearse recovery, it’s like having a fire extinguisher in your house but never learning how to use it. You won’t be able to use it in an emergency.
Your wallet has been created, and now you need to make sure that if anything goes wrong with your computer or phone or if someone steals your device, then you can still access your wallet with no problems whatsoever.
This is where the backup comes in handy because it stores all of your private keys on external devices such as USB drives or SD cards. This way, even if someone steals your computer or phone, they won’t be able to access any of those private keys unless they have physical possession over one of those external storage devices (e.g., USB drive or SD card).
Summing Up
The cryptocurrency market is growing quickly. It’s estimated to reach $4.94 billion by 2030. With this massive growth and potential comes more security risks. Multisig wallets are a great way to protect your coins from potential hackers, especially if you’re holding large amounts of cryptocurrency.
We’ve outlined the steps you need to take so that you can set up a multisig wallet for your cryptos. A multisig wallet means that multiple people will have access to your funds, which makes it harder for hackers and thieves to get their hands on them.
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