Why Shouldn’t You Have a Single Private Key for Your Wallet?
If you are planning to create your own Bitcoin wallet app, it is better to have more than one private key.
Why? Let us read through an interesting story to understand the importance of having multiple private keys.
It all began with an incident.
Matthew Mellon, the cryptocurrency millionaire, saw a potential in Ripple (XRP). He opined Ripple to be the future of American banking and became one of the early investors of Ripple. As the price of Ripple elevated, Matthew put his money into more number of Ripple.
As Matthew held more Ripple, he stored his assets in various cold wallets across the globe to safeguard them against any hacks or breaches.
Smart enough, right?
Being a millionaire, Matthew was well-versed efficient management of his crypto assets. He kept his wallets’ codes safe in his head, restricting access to wallets to himself only. No one, but only Matthew could access his wallets and crypto assets stored in them.
But, now even Matthew Mellon cannot access his assets.
Because he died of a heart attack on April 16, 2018; and as he died, so did his $500 million XRP. Although Ripple is still there in his wallets, unfortunately, no one knows the code to access those wallets as the code was stored only in Matthew’s brain.
Matthew’s incident may be the first instance of a rich family losing their cryptocurrencies but it is not the first time someone relied on a single private key to secure an account on the blockchain. A single private key is one of the biggest causes of lost or stolen crypto assets.
Last year, in 2018, cryptocurrency worth $1.7 billion was stolen or lost.
Let us gain an insight into some of the possible reasons for the same.
Lost private keys
People usually store their private keys in their brains, on a piece of paper, online, locally in their computer systems or a hardware wallet. In any of these scenarios, chances are that the private keys are forgotten, deleted, stolen or lost, which means that the funds stored in the wallets and can never be accessed again.
There have been various cases of security attacks wherein the hackers illegitimately acquired access to private keys, consequently stealing crypto assets from the wallets. This is why ensuring multi-layer security is of the utmost importance when you create your own Bitcoin wallet app.
Death of the holder
Like in the case of Matthew Mellon, if the only person knowing the private key dies, the assets are locked inside the wallet forever.
The Problem: Single Private Key
All of the issues aforementioned happen due to unfortunate events that occur because of only a single layer of security to protect a user’s assets.
Many people believe that they can safeguard their cryptocurrencies on their own, which is why they keep the private key to themselves only. Although it is a good practice to keep the private key secure, what about the incidents like Matthew Mellon? How can you ensure that there is some way to gain authenticated access to the funds if the only person knowing the private key dies?
The Solution: Multisig Technology
Multisig, also known as multi signature, requires two or more signatures for a transaction to be executed. It provides more security compared to a single-signature transaction.
With multisig technology, you can assign a co-signer who is required to sign a transaction using his public key to process the transaction. For example, if you have 2 co-signers for your wallet, you would require both of your co-signers’ signatures, including yours too, to process the transaction.
Multisig transactions are also referred to as M-of-N transactions. M depicts the number of signatures or private keys and N refers to the total number of signatures or private keys involved in a transaction. The common types of M-of-N transactions comprise:
1-of-2: You have a co-signer for your wallet; the signature of either of you would be sufficient to execute the transaction.
2-of-2: You have a co-signer; the signatures of both of you would be required to sign the transaction.
2-of-3: Used as Escrow service between a buyer and seller.
Multisig provides an additional layer of security to crypto transaction. If Matthew Mollen had used 1-of-2 transactions for his wallet, his $500 billion worth of funds wouldn’t have been locked inside the wallet forever. His co-signer would have used his private key to take the funds out of the wallet.
Antier Solutions for Multisig Wallet Development
Our Blockchain engineers harness the multisig technology to fortify the security of your wallets. Besides enhancing the security paradigm, multisig technology eliminates the problem of lost or locked funds in an event when the only holder of the private key dies. In addition to multisig technology, our Bitcoin wallet app development company leverages industry-leading security features like biometric authentication, 12-word mnemonic phrases, automatic session logout, and more, to reinforce the security of your wallets.
Our expertise lies in providing feature-rich, highly-secure white label Bitcoin and multi-currency wallets in just 3 weeks. We also specialize in building fully-customized crypto wallets from scratch. Regardless of your needs, we provide you with a secure and scalable wallet infrastructure that meets your goals and helps you gain an essential competitive edge.
Contact our experts to schedule a free demo of our white label wallet.