Written By
Tyler Campbell & Stephen Porter
The phrase hardware wallet might make it seem like your bitcoin live inside the wallet itself, but that’s not the case—bitcoin is never in your device at all.
Your wallet generates and stores your keys only, not your bitcoin.
Swipe up to sign up for a free webinar where you can learn how to set up cold storage for your bitcoin.
The nice thing about BIP39 seed phrases is that they are interoperable among hardware wallets that support the standard.
That means if a hardware wallet is ever lost or broken, you can simply recover your bitcoin wallet backup to a replacement device from the same or a different brand.
If you create a multisig wallet and store your hardware wallets or seed phrases in secure locations, you don’t need to have physical access to them to deposit funds.
Multisig involves constructing a multisig wallet using the public keys of multiple devices, each of which could also serve as a standalone singlesig wallet without any issues.
You can store smaller amounts of bitcoin on a singlesig wallet—all while keeping your primary wealth in a multisig wallet constructed using that device as one of the keys.
You should use hardware wallets, like the Trezor shown above, to check your multisig bitcoin address on the device before sending funds.
With multisig, you don’t need to have all your keys in the same place at the same time to spend bitcoin.
You can sign a transaction in Austin with one key and sign a day later in Dallas with the other. The transaction can only be broadcast after all the necessary signatures have been collected (two in a 2-of-3 multisig scheme, for example).
There are scenarios in 2-of-3 multisig (with a collaborative custody partner like Unchained holding the third key), where as many as three items could be compromised before it becomes impossible to recover your funds.
Even though fault-tolerance in multisig provides peace of mind, all of these scenarios should still be protected against at all costs by following seed phrase and hardware wallet storage best practices.
When using bitcoin multisig, if you ever lose a wallet or misplace a seed phrase, it’s important to replace this key in your multisig m-of-n scheme. You can do this with any of the popular multisig wallets.
Just like you can use the same wallets for both multisig and singlesig, using your hardware wallets/seed phrases for more than one multisig wallet doesn’t cause issues if you do it right!
Here, you can see two hardware wallets, two seed phrase backups, a third key held by a custody partner, and three separate multisig vaults constructed from the same keys.
Our multisig platform is designed to eliminate all single points of failure, and that includes ourselves. You can always recover access to your vault outside the Unchained platform with compatible software like our open-source multisig coordinator, Caravan.
Swipe up to go deeper on all the tips we covered in this story, and learn more about bitcoin multisig.