Why Multisig Exists
Single-signature self-custody (Module 7) solves counterparty risk but introduces a new problem: a single seed phrase is a single point of failure. If it is stolen, compromised, or lost, the Bitcoin is gone. Multisig solves this by requiring multiple keys to authorize any transaction.
How Multisig Works
A multisignature wallet requires M of N keys to sign a transaction. The most common configuration is 2-of-3: three keys exist, and any two must sign to move funds.
- No single key can spend: A thief who steals one key cannot move the Bitcoin
- One key can be lost: The remaining two keys can still access the funds
- Geographic distribution: Keys stored in different locations, different devices, different jurisdictions
- No single point of trust: No individual — including the advisor — has unilateral control
Common Configurations
- 2-of-3: Most popular. Balances security with recovery. One key can be lost without losing access. Ideal for most HNW clients.
- 3-of-5: Higher security threshold. Used for institutional treasuries or very large holdings. More complex to manage.
- 2-of-2: Both keys required. Maximum security but no redundancy — if one key is lost, funds are permanently inaccessible. Rarely recommended.
Key Holder Selection
Who holds each key in a multisig setup is the most important design decision. The distribution determines the security model, the recovery options, and the inheritance path.
2-of-3 Key Distribution Models
Model A: Client + Advisor + Custody Provider
- Key 1: Client holds (hardware wallet at home)
- Key 2: Collaborative custody provider holds (e.g., Unchained, Casa)
- Key 3: Client holds in separate location (bank safety deposit box)
Advantage: Client controls 2 of 3 keys. Full sovereignty. Provider assists with transaction coordination and inheritance.
Model B: Client + Trusted Person + Custody Provider
- Key 1: Client holds (hardware wallet)
- Key 2: Trusted family member or attorney holds
- Key 3: Collaborative custody provider holds
Advantage: Built-in inheritance path. If client is incapacitated, trusted person + provider can access funds.
Model C: Fully Self-Managed
- Key 1: Client hardware wallet A (home)
- Key 2: Client hardware wallet B (office or second property)
- Key 3: Client hardware wallet C (bank safety deposit box)
Advantage: Zero third-party involvement. Maximum privacy. Disadvantage: No external help if client loses access to two locations.
Collaborative Custody Providers
Several companies specialize in helping individuals and advisors set up and manage multisig wallets. They typically hold one key in the multisig setup and provide software, support, and inheritance coordination.
Unchained
Model: 2-of-3 (client holds 2 keys)
Advisor program: Yes — dedicated advisor onboarding and co-branded experience
Inheritance: Built-in key transfer protocol
Pricing: Annual subscription ($250+/year)
Best for: Advisors who want a structured, supported multisig platform with client-facing tools
Casa
Model: 2-of-3 or 3-of-5
Advisor program: Limited
Inheritance: Casa Covenant (dedicated inheritance product)
Pricing: Tiered ($130–$250+/year)
Best for: Clients who want a polished mobile-first experience with premium support
Nunchuk
Model: Flexible M-of-N
Advisor program: No (self-serve)
Inheritance: Manual (no managed service)
Pricing: Free tier available; premium from $15/month
Best for: Technically comfortable clients who want full control and flexibility at lower cost
Recovery and Inheritance Planning
What Happens When a Key Is Lost?
In a 2-of-3 setup, losing one key does not mean losing funds. But it does mean the setup is temporarily degraded to a single point of failure until the lost key is replaced.
- Detect the loss. Discover that one key is inaccessible (device failure, forgotten location, etc.).
- Use remaining two keys to move funds. Sign a transaction with the two available keys to send Bitcoin to a new multisig wallet.
- Generate a new third key. Set up a replacement key on a new hardware wallet.
- Create the new multisig wallet. Register the new 2-of-3 configuration with the replacement key.
- Transfer funds to the new wallet. Complete the migration from old to new multisig.
Critical: This recovery process must be documented and tested before it is needed. Module 10 covers the inheritance-specific aspects of this planning.
The Multisig Wallet Configuration File
Unlike single-sig wallets, multisig wallets require a wallet descriptor (or configuration file) that identifies all participating keys. This file does not contain private keys — it contains the public keys and the M-of-N policy.
- Without this file, even possessing all private keys is not sufficient to reconstruct the wallet
- The configuration file should be backed up alongside (but separate from) the seed phrases
- Collaborative custody providers typically store this file on behalf of the client
Advisor Exercise: Design a Multisig Setup for a High-Net-Worth Client
Time: 60 minutes
Scenario: Your client is a 58-year-old business owner with $2.4M in Bitcoin, currently all on Coinbase. She is married, has two adult children, and wants maximum security with a clear inheritance path. She is not technically savvy but is willing to learn.
Design the Following:
- Configuration: What M-of-N setup? Which key distribution model from above? Why?
- Key holders: Who holds each key? What hardware wallet for each key? Where is each key stored?
- Collaborative provider: Would you use Unchained, Casa, Nunchuk, or none? Why?
- Migration plan: How do you move $2.4M from Coinbase to the new multisig? Timeline and batch sizes?
- Inheritance plan: If the client dies unexpectedly tomorrow, how do the children access the Bitcoin? Who do they contact? What documents do they need?
- Testing: How do you verify the setup works before the full migration? What does the test look like?
- Ongoing management: What is the annual review process? When would you recommend changing the setup?
Discussion: Tradeoffs in Multisig Complexity
Multisig is more secure than single-sig, but it also introduces operational complexity that can itself become a risk.
- Complexity risk: If the client doesn't understand their own setup, they may panic and make errors during a recovery scenario
- Provider dependency: Using a collaborative provider means trusting that company will still exist in 10-20 years
- Coordination overhead: Every transaction requires coordinating multiple devices, which slows down the process
- Cost: Provider fees, multiple hardware wallets, and storage costs add up
Group question: At what allocation size does the security benefit of multisig clearly outweigh the operational complexity? Is there a case where single-sig is actually safer for a specific client?
Key Takeaways
- Multisig eliminates single points of failure by requiring multiple keys to authorize transactions
- 2-of-3 is the standard configuration for most high-net-worth clients — secure yet recoverable
- Key holder selection and geographic distribution are the most important design decisions
- Collaborative custody providers (Unchained, Casa, Nunchuk) simplify multisig management but introduce provider dependency
- The wallet configuration file is as important to back up as the seed phrases themselves
- Every multisig setup must include a documented, tested recovery procedure and inheritance plan (Module 10)