Multisig wallets are wallets that require multiple private keys in order to sign each single transaction. Rewinding a bit, remember that creating a cryptocurrency wallet sees a user getting two kinds of keys, the public key and private key. The public key and the private key are stored in the wallet's data file. With normal wallet types, you get only one private key which provides you access to your funds. The private key is what is used to sign a transaction, which means that it can authorize any sort of spending from your wallet.
In addition to this, the private key for a given wallet, once created, cannot be changed later because it is related to the public address created and issued alongside it. To recap, your public address is where your coins are kept and so, all of your coins are also lost if your private key is lost.
Cryptography is usually grouped into three fields, which are: symmetric cryptography, asymmetric cryptography and hashing. In symmetric or "private key" cryptography, only one key, called a secret key is generated. This is then used to encrypt and decrypt your transaction data, which includes sharing it with another party to decrypt said data and allow the transaction. So in that case, just one key is used called the private key. In asymmetric (or public key encryption), two keys are employed, one for encryption and the second one for decryption. This means that the sender uses the public key to encrypt a transaction while the recipient uses the private key which is different from the public key, to decrypt the same transaction. Generally, private key cryptography happens to be faster than public key cryptography.
Overall, multisig wallets allow you to create a secondary layer of security for your crypto. That's in addition to other methods of securing crypto such as using cold wallets and 2F authentication. Compared to single-key address, multiple signature addresses have multiple private keys ensuring that the first person who has the key can only spend crypto after authorization or confirmation or verification from a second person with a second private key created during creation of the same multisig wallet address.
Furthermore, multi-sig wallets are ideal for creating group, as well as co-owned and company wallets, but they can also be employed for securing individual wallets against events such as losing the private keys to an authenticator app or cases of hacking or phishing. Additionally, they can be used as a form of second layer of security for crypto in these settings, which is comparable to using 2F authentication.
How exactly does a crypto private key look like and how does it work? When do I get to use it?
Sometimes, a private key can be as misunderstood and misused.
What it is: In the blockchain world, the private key is the equivalent of a password that you use to log into an email address or a pin code that you use to access your debit card. The public key/address, on the other hand, is equivalent to the bank account issuing the debit card in the previous example. In most cases, when generating a wallet with a dedicated piece of crypto wallet software, you get a wallet address and also a private key.
Storage: Most decentralized crypto wallet apps and exchanges or software will now store your private keys offline on your devices which include-- phones, computer, and USB-based hardware wallets, among others. Typically, this means that your private keys end up being stored as keystore files in a database on your device. Others allow you to export, or store a copy on your device, and to still print it on a paper wallet easily. On the flip side of things, centralized crypto wallets will store your private keys on their centralized servers, but still allow their apps and websites to access them to finalize crypto transactions.
How the private key works during transacting is; when a transaction is initiated, the crypto wallet's software searches and fetches the private key from wherever it is stored, and creates a valid digital signature by processing a transaction with the wallet's respective private key. This signature is then used to confirm that the transaction has come from a particular user and ensures that the transaction cannot be changed once broadcasted. Here, it's important to note that this signature would change if a transaction is changed.
Example: MyEtherWallet wallet, for instance, allows you to create a wallet for ERC and ERC20 tokens, and even exchange them in-wallet. During the creation of the wallet, you're allowed to save the private key on your device by downloading its keystore files, and you're permitted to write and print your private wallet as a paper wallet both as a QR code or in another readable format.
Recovery of wallets using private keys and seed phrases: The keystore file and actual private keys, which present themselves in the form of readable letters and numbers, can be used later to restore the wallet via importing and typing their values into the relevant fields in the wallet's app. With MyEtherWallet, this means you also get to create a password to encrypt and decrypt your public key as needed. Decryption is needed to unlock your wallet for the purposes of sending Ether and tokens, for example. Again, for such an application, you are able to restore your wallet by simply importing or entering your private key!
Remember that some wallets (called deterministic wallets or hierarchical deterministic wallets) use mnemonic phrases or seed phrases, which can be copied or written down as you're creating the wallet. Later, they can be used to access and restore/recover the wallet fully if needed. Ideally, the seed phrase is used to encrypt and decrypt the wallet's private key. Therefore, with a deterministic wallet, which is the type of wallet that uses a seed key, you can restore it using the seed phrase when the app asks you for it, because the seed phrase will ideally generate new copies of both your public and private key pairs. These can then be used with your old, owned wallet address. In summary, with a non-deterministic wallet, you are required to save your private key (by writing it down or by saving the keystore file on your device.