Bitcoin Collaborative Custody

Collaborative multisig custody ai image
Collaborative Multisig Custody

Collaborative custody in Bitcoin refers to the distribution of custody over your bitcoin between multiple parties through sharing custody of your wallet's private keys. The concept of Bitcoin custody is inherently tied to the private keys—whoever manages the private keys of a wallet controls the bitcoin. Typically, Bitcoin wallets provide you with a single private key for managing your funds, referred to as a singlesignature (singlesig) wallet. In this setup, only one signature from the private key is needed to move or spend the bitcoin in a wallet. However, singlesig wallets have the drawback of a single point of failure—if you lose your private key (whether by theft, damage, or loss) you lose access to your bitcoin. 

To mitigate this, multisignature (multisig) wallets have been developed. Instead of relying on a single private key, multisig wallets have multiple private keys and at any point, a subset of these private keys is required to access the bitcoin and authorize transactions. Typically defined as an m-of-n quorum, the most popular multisig setup is a 2-of-3 multisig. This multisig wallet setup has three private keys associated with it and at any point two of three keys are needed to sign a transaction and move or spend the bitcoin.

🔒 Enhance your self-custody with Theya, a collaborative multisig vault.

Given the complexities of managing multiple keys, collaborative custody solutions have become increasingly popular. These involve sharing the custody of keys between multiple parties, either individuals or entities, to balance wallet security with convenience. For instance, here at Theya, a typical arrangement might involve three private keys: two are held by the user, and one is securely held by Theya, hence the name collaborative custody. This setup ensures that the user retains control over their Bitcoin, needing only two out of three keys to access their Bitcoin and execute transactions. In the event one key is lost or stolen, Theya provides the critical backup, facilitating recovery of the funds without compromising the independence of the user.

Collaborative Multisig vs DIY Multisig

While collaborative custody has gained popularity among Bitcoin users seeking to balance heightened security with ease of use, it is also possible to independently open a multisig wallet and retain all the keys yourself, rather than entrusting a subset of them to another party. As such, collaborative multisig and DIY multisig have emerged as two key strategies available for Bitcoin users to enhance security while retaining full control over their digital assets. 

As we showcased above, collaborative multisig involves partnering with another individual or entity, enabling shared management of a wallet's private keys. This method is favored for its blend of autonomy and security; the users hold the majority of the keys (e.g., two out of three), ensuring complete control, while the third key is held by a trusted entity that can serve as a safeguard against key loss and provide technical support. This setup diminishes the risk of complete asset loss due to key mismanagement or unforeseen circumstances such as theft, but also simplifies complex processes and technical challenges associated with multisig wallets.

On the other hand, DIY multisig appeals to those who prioritize absolute control and privacy in managing their bitcoin holdings. In this setup, an individual uses multiple private keys, all personally managed and stored, without the involvement of external parties. While this approach maximizes self-sovereignty and enhances privacy, it demands a higher degree of technical expertise from the user. Individuals must be capable of configuring and maintaining the wallet, understanding details such as xpubs and BIP 32 derivation paths, and ensuring secure yet accessible storage of all keys and configuration files. The absence of external support in DIY multisig means users must navigate technical challenges independently, increasing the risk of errors.

The choice between collaborative and DIY multisig comes down to a user's preference for security coupled with support versus complete control and privacy. Collaborative multisig offers a safety net through shared custody but comes at the cost of sharing some control and information, making it suitable for users who are less technically inclined, and value ease of use and recovery options. DIY multisig offers full control and privacy, but requires more technical knowledge and meticulous management. Therefore, it caters to more experienced users who are confident in their ability to manage Bitcoin independently and value full control and privacy over their funds.

Types Of Collaborative Custody

As forementioned, collaborative custody involves entrusting a key to an outside third party, typically either another individual or a private company. At Theya, we offer the service of holding that third key for you, catering to a range of custody options for you or your family.

Individual Multisig Vault

This type of vault is designed for solo Bitcoin holders who seek enhanced security without sacrificing autonomy over their assets. In an Individual Multisig Vault, the user retains the majority of the keys — typically two out of three — allowing them to execute transactions independently. The third key, held by Theya, serves as a backup to prevent total loss of access due to key mismanagement or accidental loss. This setup provides a robust security layer while ensuring that the user maintains primary control over their Bitcoin.

Shared Custody Vault

A shared custody vault is ideal for families or small groups who wish to jointly manage and secure their Bitcoin holdings. In this arrangement, multiple parties each hold one of the keys, and Theya retains the final key as a neutral third party. This setup not only enhances security by distributing key custody among several trusted individuals but also facilitates collaborative decision-making and transaction approval. It's particularly useful in scenarios where the Bitcoin holdings represent shared investments or family assets, requiring consensus before any transaction can be executed.

Why Use Theya’s Collaborative Multisig Vault 

While many companies are offering collaborative multisig vaults, Theya stands out as one of the most accessible and user-friendly ways to get started in the world of multisig. For starters, Theya multisig is available directly through our application that you can download on your phone — no extra devices are required to complete the setup.

Additionally, Theya offers modular multisig, meaning you can use your favorite hardware wallet, or even your phone as the keys to your multisig vault. This flexibility means you can set up cold vaults for offline key storage, shared vaults for joint holdings, mobile vaults where a phone acts as a key, or any combination of these setups. If you’re ready to take your Bitcoin security to the next level, check out Theya’s multisig vault today.