Multisig Wallets – What they are and how they work

Simply put, a multisig is a smart contract that locks funds and requires multiple owners to approve transactions with their own individual private keys. These types of wallets offer us a series of advantages to be able to separate our company from traditional banks and migrate to innovative solutions with the help of blockchain technology. Let's see what multisig wallets are, how we can create one and what benefits it provides us.

What is a multisig wallet?

Let's talk about the best for storing cryptocurrencies as a business: multisig wallets. Simply put, a multisig is a smart contract that locks funds and requires multiple owners to approve transactions with their own individual private keys. They are the perfect compromise between security and flexibility. These wallets are self-custody (does not depend on a third party to store funds), are insurance against external risks Since you need multiple private keys (making them difficult to compromise), they are protected against internal fraud (no one can move company funds individually without others knowing), they allow the key recovery (you can lose a private key without losing your funds), they are software based (transactions can be made anywhere, anytime) and are based on Smart contracts (they can interact with other smart contracts to take advantage of the benefits of DeFi). All these benefits allow us to separate ourselves from banks and be able to make profitable the funds in our company's treasury.

How do we disassociate ourselves from banks with a multisig wallet?

It is very easy to answer this question, simply using the Multis tool, a wallet designed on Gnosis which allows us to have total control over the financial management of our company. The use of this tool allows us to have more visibility on everything that happens regarding the movements of our company with total transparency, having more control over transactions to avoid future problems that may arise when making payments and in turn streamline accounting processes through blockchain technology.

We're going to learn how we can open a multi-signature wallet for our company, invite teammates to collectively secure funds, and access the financial services we would expect from our bank, but without custody.

How to open a multisig wallet for your company with Multis?

Let's open an account at Multis.co , the multisig wallet that we have previously mentioned in just 6 simple steps.

1. Log in to Multis.

Let app.multis.co and we enter an email address and click on the link that we will receive. Then, we validate the email address and log in. Next, we enter the name of our company and select “account without fees” (network fees are covered by Multis).

2. We connect to the network.

We press "connect with Portis" to continue. Portis is a non-custodial browser wallet that allows us to store our private keys and connect to the Ethereum network with our email address. Multis never saves our keys, so we must perform this step to manage our account every time we start it.

3. We open our account.

Multis is in waitlist mode for now. We can fill out the 30-second form and use the code “bankless” to skip the line. We log in again app.multis.co once we have received an email confirmation. We press "request access": Portis will appear and ask us to connect and sign the transaction. This transaction will create our smart contract wallet. We press "confirm":

4. Invite the owners.

Once we have everything configured, the best thing we can do now is invite our teammates to secure the deposits of the company's funds. Go to the company settings, then the “user” section where you can send them email invitations to join. They will need to open a Portis account as well, join the company and ask you to name them as owners (ideally it would be best to invite 2 additional owners to maximize security).

5. Set up permissions and spending limits.

In the company settings, you can go to the "policies" sections and choose how many owners have to confirm a payment before it is executed. For example, 3 owners should require 2 confirmations to secure funds correctly. Each delicate operation (add owners, change policies, send funds...) will also require confirmations from the owners. You can also set a daily threshold for ETH transactions.

6. Earn interest with your treasury.

If you have already managed to carry out all the previous steps, you already have your company on the blockchain. With this example you can see how we can put part of our treasury to work through Compound. From the company desktop: make a deposit in DAI, then press “Lend”. The next thing you have to do is select an amount and proceed to the loan. Co-owners will have to confirm. And that's it, now you can earn interest and withdraw when you need it.

What benefits do multisig wallets have?

We all know firsthand that the experience we can have with banking entities is usually a bit disastrous. From not being able to use our funds with total freedom, at any time range, unfair commission charges, small print... Why remember these evils if we already have them in mind? Better let's go review the benefits that we can have If we disassociate ourselves from the banks and transfer our business activity to the blockchain:

1. 24/7 access to our funds.

For example, BNP Paribas (Europe's largest bank) suffered a major computer failure two years ago, and most banks experience the same thing regularly. At those times all accounts are frozen for 48 hours, no bank transfers, no debit cards, no ATM withdrawals, no access to your funds... 100% arbitrary, without prior notice. All payments delayed by one week, including payrolls, for one week. Not to mention that, to obtain short-term financing, applications for small business loans take days to be approved, although the transfer can take much longer. These situations can destroy your business and you are not to blame. That is the radical innovation behind permissionless networks: an Internet connection provides unrestricted access to your funds 24 hours a day, 7 days a week and you also have additional resources to grow your business, without going through the legacy banking system and its limitations, usually arbitrary.

2. Faster and cheaper international payments

The options for making international transfers are terribly expensive when it comes to international payments. Let's take as an example an online purchase of $1.000: PayPal will charge a transaction fee of 4.4% ($44) plus a fixed fee depending on the currency received. Payment will be processed and made within 4 to 9 days depending on geographic area. Now let's take the example with ETH or stablecoins. Same purchase, same geographies: The network charges a flat fee of 20 to 50 cents: sending $1,000 or $100,000 doesn't change anything. Payment will be processed and made in minutes. That's the innovation behind cryptocurrency payments for businesses: they're the way more efficient in time and cost of transferring funds to partners and people of the company, anywhere in the world.

3. Using DeFi to improve the health of our accounts.

The decentralized finance (DeFi) revolution already replicates most of the core legacy financial services that small businesses need, without permission, accessible instantly and for a few cents. For example, we can use stable currency to pay with USDC, have a checking account with IBAN using a wallet with an ETH address, have a savings account by lending assets on Compound, request a short-term loan using Vaults in Maker or convert currencies in Kyber Network. The permissionless nature of blockchain networks enables thousands of entrepreneurs to create additional innovative services to provide additional benefits to your companies and staff, such as payroll shipments with hourglass , invoice management with Centrifugal or performance-based equity compensation with Quidli . The possibilities are endless and provide better ways for businesses to grow.

4. Enter stablecoins

Bitcoin and Ethereum are known for their high short-term volatility, a nightmare for managing a company's treasury. That's where the stable coins like USDC are useful: They are cryptocurrencies whose value is linked to the value of the US dollar (USD). They are a revolutionary change for businesses: they continue to be payment methods without permission, in efficient time and cost, and at the same time they cover us from the usual volatility of the cryptocurrency market.