A multisig, or multi-signature, wallet is a smart contract wallet controlled by multiple owners and requires a minimum number of signatures to confirm transactions. This lends an added layer of security, making it much more difficult for a wallet’s assets to be tampered with, stolen, or transferred elsewhere. Requiring multiple signatures also builds in a layer of group approval to every on-chain decision a DAO makes.

On top of the added security, a multisig wallet can add some much needed key redundancy. For instance, your multisig can have 5 owners but only require 3 of them to sign transactions. This way, if 2 of your owners leave the DAO or lose their keys, you can still access and utilize the wallet.

When setting up your multisig, this ratio of owners to signers is a vital factor. Requiring all of the owners to sign every transaction might sound like the most democratic setup, but you would be just 1 lost key away from completely losing access. On the flip side, requiring too few signers could negate the security and group decision making aspects that a proper multisig can provide.

When it comes to multisig wallets, Gnosis Safe is the gold standard and creating one is a simple process requiring just one on-chain transaction.