When exploring cryptocurrency, you may encounter terms like "multi-signature" or "multisig." Multisignature refers to the cryptographic technology used in what we commonly call a shared wallet. Before diving deeper, if you're unfamiliar with what a Bitcoin wallet is, what a non-custodial wallet entails, or how to create one, we recommend first getting acquainted with those basics.
Many people find this confusing or overlook it: in a crypto wallet, your funds aren't actually stored inside the wallet—just as your debit card doesn't physically contain your cash. Similar to a debit card, you gain access to your funds through a password known as a private key—an extremely long, 78-digit passphrase. This private key is stored in your crypto wallet, and without it, the associated cryptocurrency remains inaccessible.
A basic crypto wallet uses a single private key to access and authorize transactions. In contrast, a shared wallet requires two or more private keys to access and manage the funds linked to the wallet. These private keys are typically distributed among different individuals, known as participants. For instance, if you have three private keys, you might keep one yourself and give the other two to family members. While using a shared wallet with multiple participants might seem unnecessary at first, it offers several significant advantages.
Why Use a Shared Wallet?
The primary reason to use a shared wallet is to mitigate the risk of single points of failure in managing your crypto assets. Imagine a scenario where your apartment building catches fire, destroying both your computer and the paper backup of your crypto keys. Without those keys, you lose access to your assets. However, if your wallet is shared with others (who don’t live in your building!), you can still recover your funds.
Another key benefit is the practicality of having multiple decision-makers. For example, you might introduce your children to saving by giving them access to some funds in a crypto wallet. With a shared wallet, you retain the ability to review and approve or reject any transaction before it’s finalized.
👉 Explore advanced security strategies for managing digital assets
How Does a Shared Wallet Work?
Recall that a crypto wallet doesn’t actually hold cryptocurrency—it holds the private keys that grant access to it. In a basic wallet, a single private key is linked to the wallet and stored on the user’s device. This key is essential for using the cryptocurrency, as it mathematically signs transactions to prove ownership.
In a shared wallet, multiple private keys are associated with the wallet. You decide how many keys will be connected and how many are required to approve a transaction. For instance, if you create a shared wallet with your parents, the total number of participants is three. You might decide that any two of the three participants must sign off on a transaction for it to be approved and broadcast to the blockchain. This setup is called a “2-of-3 wallet.” Although there are three private keys, only two (in any combination) are needed to approve a transaction.
You can customize the number of participants (up to six) and the approval threshold—for example, 1-of-2, 3-of-4, or even 6-of-6.
How does this work in practice? Let’s revisit the “2-of-3” example. Suppose you and your parents have successfully set up a shared wallet. Any key holder can initiate a transaction request. In this case, you, your mother, or your father could propose moving funds. Since it’s a 2-of-3 wallet, the request needs only one additional approval (because the initiator implicitly approves it). If it were a 4-of-6 wallet, the request would need three approvals.
Imagine you decide to use some Bitcoin from the shared wallet to buy a new car. You call your father on his day off, explain your plan, and ask him to approve the upcoming transaction request. You then submit the request. Your father quickly approves it, meeting the 2-of-3 condition. The Bitcoin is transferred from the shared wallet to the car dealer.
What Are the Drawbacks of Shared Wallets?
Using shared wallets does come with potential drawbacks. The first is easily avoidable with proper setup. While a 6-of-6 shared wallet might seem ultra-secure, it actually introduces additional risk compared to a normal (single-signature) wallet. Because every one of the six participants must approve any transaction, if even one loses their private key, all funds in the wallet become permanently locked.
To avoid this, opt for configurations like 2-of-3 or 3-of-4. That way, if one participant loses their key, the funds remain accessible as long as the others retain theirs.
Another potential downside is that transactions can only be completed when all required participants are online and using their devices. To address this, you can use a read-only wallet. Read-only wallets allow you to preview transactions but not sign them. Many wallets, including the Bitcoin.com Wallet, offer this functionality.
What Are the Advantages of Shared Wallets?
Despite the drawbacks, shared wallets offer numerous benefits. First, they allow multiple people to use the same wallet, simplifying transfers and payments in Bitcoin or other supported cryptocurrencies.
Second, shared wallets use multisignature technology to effectively prevent unauthorized transactions. Requiring multiple signatures means that even if one person’s private key is compromised, it alone cannot authorize a transaction.
Third, shared wallets can serve as secure backups for important documents (such as IDs, passports, or insurance policies). Thanks to multisignature security, even if someone loses their key, the documents in the shared wallet remain protected.
How to Set Up a Shared Wallet
To create a shared wallet in the Bitcoin.com Wallet app:
- Open the app and tap the "Wallets" icon at the top of the screen.
- Select "Create Shared Wallet."
- Choose your multisignature scheme (e.g., 2-of-3).
- Enter a name for the wallet (e.g., "Family Shared Wallet").
- Input your name or alias (as other participants will see it).
- Tap "Continue."
You’ll then be prompted to invite participants. There are two methods:
- Invite via Link: Generate and share an invitation link.
- Manual Entry: Have participants scan a QR code or enter details manually.
How to Join a Shared Wallet
To join an existing shared wallet:
- Open the invitation link or scan the QR code.
- Enter your name or alias (as other participants will see you).
- Tap "Join" to complete the process.
Participant and Approval Limits
A shared wallet must have at least 2 participants and can have up to 6. The approval threshold can range from 1 to 6. This means you can create anything from a 2-of-3 wallet to a 6-of-6 wallet, or any combination in between.
Supported Cryptocurrencies
The Bitcoin.com Wallet’s shared wallet feature supports Bitcoin (BTC) and Bitcoin Cash (BCH).
What Is a Transaction Request?
Before a transaction is broadcast to the public network, it must receive a certain number of approvals based on your shared wallet’s configuration. For example, a 2-of-3 wallet requires 2 approvals.
The creator of a transaction request can cancel it using the "Delete Request" option, which unlocks any locked funds. While funds are locked, the balance may appear as zero. Once the request is approved or rejected, the balance updates accordingly.
When you create a transaction request, notifications are automatically sent to all wallet participants, who must then approve or reject it.
How to Create a Transaction Request
To create a transaction request:
- Select your shared wallet.
- Tap "Send."
- Follow the on-screen instructions.
Transaction Request vs. Blockchain Transaction
A transaction request is the initial stage of a blockchain transaction. It must gather the required approvals before being broadcast to the blockchain. Once approved, it is automatically transmitted.
Can I Delete a Transaction Request?
Yes, if you are the request creator and it is still pending, you can delete it. All locked funds will be released back to the wallet.
To delete a transaction request:
- Navigate to the pending request.
- Select "Delete Request."
Do Participants Share Private and Public Keys?
In short, the public key (or address) is the same for all participants, but each participant has their own unique private key (seed/recovery phrase).
Technically, when a shared wallet is created, each participant generates their own public-private key pair. Once all participants join, a single public address is generated and displayed to all. This is the address participants can share when requesting payments.
How to Back Up a Shared Wallet
Unlike standard Bitcoin wallets, shared wallets must be backed up manually. For most users, the best method is to write down the wallet’s recovery phrase (seed phrase) on paper and store it securely.
To find the recovery phrase for a shared wallet in the Bitcoin.com Wallet:
Method 1:
- Open the shared wallet.
- Go to "Settings" or "Backup."
- Select "Show Recovery Phrase."
Method 2:
- Navigate to the wallet list.
- Tap on the shared wallet’s options.
- Choose "Backup" and follow the prompts.
Frequently Asked Questions
What is the main purpose of a shared wallet?
A shared wallet is designed to enhance security and enable collaborative management of crypto assets by requiring multiple signatures to authorize transactions. It reduces the risk of loss due to a single point of failure.
Can I change the number of participants after creating a shared wallet?
No, the participant count and approval threshold are set during creation and cannot be altered later. You would need to create a new wallet if you wish to change these parameters.
Is a shared wallet more secure than a standard wallet?
Yes, when configured properly (e.g., 2-of-3 instead of 6-of-6), a shared wallet offers superior security by distributing control among multiple parties, making it harder for unauthorized access or loss to occur.
What happens if a participant loses their private key?
In configurations like 2-of-3 or 3-of-4, the remaining participants can still approve transactions. However, in a 6-of-6 setup, loss of any key permanently locks the funds.
Can I use a shared wallet for daily transactions?
While possible, shared wallets are better suited for high-security storage or collaborative funds rather than frequent everyday use due to the need for multiple approvals.
Are there fees for using shared wallets?
Transaction fees may apply when sending funds, but these are network fees, not specific to shared wallets. The wallet app itself does not charge extra for shared wallet functionality.
👉 Discover practical tools for managing multi-signature setups