First, some bitcoin basics

A private key is a secret code that you should keep secure at all times. Private keys show the bitcoin network that bitcoin is actually yours and that you have permission to send it somewhere else.

Trying to spend bitcoin without your private keys is like trying to open a safe without the right key—it’s not possible!

In some contexts, private keys can be stored on a phone or a computer, but to help keep private keys protected for storing large sums of bitcoin, most people use dedicated devices called hardware wallets.

Singlesignature—singlesig, for short—is the simplest and most widely used form of self-custody bitcoin wallet. It involves just one master private key that you secure and use to authorize sending bitcoin.

Singlesignature wallets are convenient and simple to set up, but they can make your bitcoin vulnerable to loss or theft. People often lose information such as passwords, or physical items like sunglasses and car keys.

With singlesig, your one and only bitcoin key could be lost or stolen, causing you to lose bitcoin forever!

A multisignature wallet is a better approach for securing a substantial amounts of bitcoin savings. Multisig requires signatures from multiple private keys in order to spend bitcoin, which can protect you from loss and theft.

The most popular approach to multisig security is 2-of-3, meaning two out of three unique keys are required to sign a transaction and spend bitcoin. In the next section, we’ll look specifically at how multisig works in the context of the vault you’re building here at Unchained.

Multisig wallets are flexible and can be used in many ways. Unchained offers one of the most proven setups, where you hold two keys and Unchained holds one key as your custody partner.

With our Lead model, you stay in full control of your bitcoin because you can always move your bitcoin independently with your own two keys. With this time-tested approach, Unchained cannot access the bitcoin alone, and serves as a backup and a partner in signing transactions.

However, there are other models you may wish to build depending on your circumstances. For example, you may wish to hold only one key and trust a family member and Unchained to secure the other two. Each configuration offers different trade-offs between convenience and security, allowing you to choose what works best for your needs.