Multi-Level Threshold: Why Multi-Signature Always Has Higher Security Limits
Original published date unchained.com.
Unchained is Bitcoin Magazine’s Official US Co-Managing Partner and an essential sponsor of related content published through Bitcoin Magazine. Please visit our website to learn more about the services we offer, our storage products, and the relationship between Unchained and Bitcoin Magazine.
There are many different ways to store Bitcoin, and no perfect method is right for everyone in all situations. Depending on the amount of Bitcoin you have, how often you need to access it, and other factors, you can decide which approach is best for you.
The resource and security requirements of individual Bitcoin holders are different from those of institutions. In this article, we’ll look at how these two groups of archiving strategies compare and uncover important truths about multi-signature applications.
custody of an individual
There are many tools available for the average individual looking to self-storage their Bitcoin. Depending on your situation, a simple single-signature wallet may be sufficient, or you can add modifications such as copying the seed phrase or the BIP 39 passphrase. We’ve written an article detailing the different configurations and comparing their strengths and weaknesses.
Individuals who are less interested in frequent withdrawals and want to set aside more money for long-term savings should consider a multi-signature wallet. Multi-signature proposal Threshold SecurityProtects you from single points of failure, ensuring your funds are not lost if one component of your setup is destroyed, misplaced, or stolen. Achieving threshold security is important for anyone looking to protect a significant amount of funds.
Besides multisig, there are several other methods for threshold security, but they are not suitable for the average person. Shamir’s Secret Sharing (SSS) is one such method that leads to a temporary single point of failure during the initial setup and retraction procedures. Multi-party computation (MPC) is another method that is very complex to use safely. You can learn more about this in our article about the Threshold Security Model.
Multisig can be created in combination with SSS or MPC. Multi-level threshold. Multi-level threshold refers to the threshold at the blockchain level (multi-signature) and the threshold at the key level (SSS or MPC). By combining these concepts, the default threshold of a key acts as the primary security for holding Bitcoin, and each key can be protected from compromise using its own threshold. Despite the more complex structure, the two-level threshold offers clear advantages in keeping Bitcoin as secure as possible.
For individuals seeking to secure their Bitcoin, this approach is widely viewed as unnecessarily complex. However, if an individual enters into a co-management partnership with one or more agency key agents who can deploy SSS or MPC, this enhanced layer of security can be more easily accessed.
Storage for institutions
For businesses, governments, and other organizations seeking to secure a Bitcoin vault, it is not appropriate to use some of the storage strategies used by ordinary individuals. If several people are responsible for large sums, stricter controls are required. Institutional-grade Bitcoin storage requires minimal security.
Multisig, SSS, and MPC are available options to meet your requirements. MPC is the most complex to use safely and is not recommended for individuals, but institutions with expert teams may consider it. However, the extra effort to set up MPC does not mean it is a better option than basic multisig. As we compared in our previous article, all three models have their pros and cons.
If your organization wants the highest level of security possible, you should consider using multilevel thresholds. The foundation in this arrangement is multi-signature, which allows the thresholding of multiple individual private keys to access funds. Multiple different enterprise key agents can be responsible for each key, minimizing counterparty risk from a single custodian. Additionally, each key agent You can apply your own threshold security. Use SSS or MPC to determine which key is responsible. This protects your keys from a single point of contact within your key agent company.
Multi-signature has a higher security ceiling
As you can see from the chart above, there is a distinct difference in the security upper limits of single-signature and multi-signature. Singlesig allows you to create single-level thresholds by having only a single key to which you can apply the threshold. Multi-signatures can work as single-level thresholds, but they can also go one step further and become the basis for multi-level thresholds.
Therefore, there is an opportunity for a security upgrade in large Bitcoin holdings that utilize a single signature base rather than a multi-signature base, which can often be observed by examining address types. Multi-level thresholds can unlock powerful multi-agency governance structures that spread risk across key agents. Unchained private wealth and corporate clients have a number of high-end core agents they can choose from to set up this structure. Learn more and schedule a consultation!
Original published date unchained.com.
Unchained is Bitcoin Magazine’s Official US Co-Managing Partner and an essential sponsor of related content published through Bitcoin Magazine. Please visit our website to learn more about the services we offer, our storage products, and the relationship between Unchained and Bitcoin Magazine.
