How do multisig wallets work?
A multisig wallet is the digital equivalent of a secure deposit box that has multiple locks and keys. We can better understand this type of wallet by having a closer look at how such boxes work. First and foremost, the only way to open a secure deposit box is to provide all the available keys at the same time. If only one key is available, the box cannot be opened. This security mechanism allows the co-owners of the box to ensure that its contents are only accessible when every owner agrees to open the box. At the same time, no single individual or group of people can open the box if other owners do not provide their keys.
A multisig wallet functions similarly but it also introduces more flexibility than a traditional deposit box. Similar to a deposit box, the funds stored on a multisig address can only be accessed when its owners agree on signing a transaction. This means that co-owners of such an address are not able to individually decide how the wallet’s funds are handled. In contrast to a secure deposit box, the creators of the multisig wallet can decide how many co-owners will be required to sign a transaction. This could mean that there are five co-owners of a wallet and transactions are executed once at least three co-owners have signed a transaction.