What applications support multisig wallets?

Sparrow and Electrum work well for desktop. Nunchuk and Bluewallet are good for mobile. Paid services like Casa or Unchained Capital offer guided assistance.

What does a 2 of 3 key configuration mean?

It means you have 3 total keys but only need 2 of them to authorize a transaction and access the wallet.

Why do i need to save extended public keys with my seed phrases?

Seed phrases alone are not enough to recover a multisig wallet. You need the extended public keys and derivation paths to reconstruct the wallet if a key is lost.

Setting Up a Multisig Wallet Step by Step

To set up a multisig wallet, choose a compatible application and determine how many keys are required to authorize transactions, like a 2 of 3 configuration.

You generate individual keys across separate devices, such as hardware wallets or phones, keeping in mind that each key has a seed phrase and an extended public key.

Securing your backups is essential. You must store all seed phrases offline and include the master public keys with each backup so the wallet can be rebuilt if something goes wrong.

setup steps

choose a wallet app use sparrow or electrum for desktop, or bluewallet and nunchuk for mobile
configure your keys set a threshold like 2 of 3 and generate keys across separate devices
secure all backups store seed phrases offline and include the xpubs with each mnemonic backup
run test transactions send a small amount, delete the wallet, and practice full recovery

Setting Up a Multisig Wallet Step by Step — infographic

Setting up a multisig wallet involves selecting a wallet application, determining your key configuration (e.g., 2-of-3), and meticulously managing the individual keys and their backups.

Choose a Wallet Application

Select a compatible wallet: Use a wallet application that supports multisig functionality, such as Sparrow, Electrum, Nunchuk, or Bluewallet. "Nunchuk and Bluewallet work well for mobile, and Sparrow is great for desktop/laptop."

Consider specialized services: For simpler setup or if you prefer guided assistance, explore paid multisig services like Casa or Unchained Capital. "There are paid multisig services like Unchained capital, Casa, Nunchuk and maybe Swan bitcoin."

Configure Your Keys

Determine your security threshold: Decide how many keys are needed to authorize a transaction (e.g., 2-of-3, meaning 2 out of 3 total keys are required). "One of the most common configuration is to require a combination of 2/3 keys where you only need 2 of the 3 keys to access the wallet but you can have whatever variations you want."

Generate individual keys: Create each key, which can be stored on separate hardware devices, phones, or computers. "You'll need three keys; could be three hardware devices, three keys on phones or computers, or some combination thereof (ie one phone and two hardware devices)."

Understand key components: Each key has a seed phrase and an extended public key (xpub), which are crucial for recovery and wallet reconstruction. "Just having the seed phrases isn't enough since in a multi-sig setup you also need the xpubs, derivation paths, etc."

Manage Backups and Recovery

Securely store all seed phrases: Ensure each individual seed phrase is backed up in a secure, offline location. "Decide how you will securely store ALL your seeds."

Back up wallet descriptors: Store the master public keys (xpubs) for all keys with each physical mnemonic seed backup to facilitate recovery if any key is lost. "Each key should also have a backup of the Master Public Keys or xpubs for all keys so the wallet can be rebuilt if anything goes wrong."

Perform test transactions: After setting up, fund the wallet with a small amount and practice sending and receiving transactions, then try recovering the wallet to confirm your setup works. "Once a wallet is set up, do a test transaction back and forth, delete all wallets and try recovering it again to complete cycle."

Is the increased security of a multisig wallet worth the added complexity for your specific needs?