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Proof of Research ("PoR") is your go-to resource for everything Web3. We provide cutting edge crypto and financial analysis so you can thrive in the wild world of Web3!
The current problem with single-key wallets
Currently, most Web3 users use single-key wallets, meaning the wallet's private key corresponds to a 12-word seed phrase. This has substantial security implications. If the 12 words are compromised or lost, then the user loses access to their funds forever. Loss of seed phrase applies equally to both cold storage wallets and hot wallets. The result is a total loss of funds for good.
Web3 startups and business owners want to empower their employees and managers to use crypto funds for working capital purposes. These business owners prefer not to share the corporate treasury wallet’s seed phrase with the firm for many obvious security reasons. This is a major source of friction in the day-to-day operations of a business transacting with crypto.
Another example is a family that manages a crypto portfolio together. The parents want to allow any family member to make transactions without the need for family consent. The problem, however, arises when parents withhold the passphrase to keep the family portfolio safe from theft or a naive child.
A MultiSig solution
The limitations of single key wallets are holding back greater crypto adoption, however there is a solution. The Multisig.
Implementing a multisig safe is a smart contract wallet requiring M-of-N people to approve a transaction. For example, a group of 11 people could create a vault controlled by five. Each of the 11 members have their own single key wallet and seed phrase. Of the 11 only five are needed to approve a transaction involving the vault assets. This is called a 5-of-11 multisig.
The multisig solves the issue described above as there is no longer a need to share a single passphrase. Multiple people can now manage crypto assets together by choosing a M-of-N threshold of owner confirmations.
This is where MultiSafe comes into play. MultiSafe.xyz is a shared crypto vault for Stacks and Bitcoin, which currently support STX, SIP-009 tokens (NFTs), and SIP-010 tokens (ALEX, DIKO, xBTC, etc.), while the platform expects to support native BTC soon.
MultiSafe is not the first shared safe address. If you are actively involved in the Ethereum ecosystem, you are likely aware of Gnosis Safe, the most trusted platform to manage digital assets on Ethereum. Nevertheless, MultiSafe is the first kind of multisig vault to be available to users on Stacks.
An interesting use case for a multisig safe (“Multisafe”) is a joint treasury that distributes funds, pays company employees, and pays bounties. Basically, a multisig safe can operate as a business working capital account. A more native use to the Web3 ecosystem would be a MultiSafe for protocol treasury or DAO to share in the ownership of the crypto assets.
A specific use case that is being worked on is a Bitcoin Funding model that uses native BTC to fund campaigns, DAOs, and Kickstarters while the governance is performed with STX tokens.
In particular, DLC technology (covered in a previous Proof of Research article) can be used as a core tool for Bitcoin DAOs. For example, users could send funds to a Multisig like MultiSafe, but if a certain threshold of crypto is not raised, the crypto is sent back to the contributors thanks to the DLC oracle system.
Chris Castig presents the Kickstarter Bitcoin DAO case below.
Multiple entities organize themselves to purchase a company, then create a DLC with a funding goal set for 3 BTC. If the threshold is reached, the funds automatically transfer to a Multisig wallet. The owners manage the money together as they finalize the company acquisition. If instead the 3 BTC threshold is not reached, the DLC will send the money back to the funding entities.
Step by Step tutorial to setup your vault with MultiSafe
1) Visit the MultiSafe website at: https://app.multisafe.xyz/create and click "Create New Safe."
2) Then, you will need to:
-Choose a name for your safe
-Select the co-owners of the safe by inserting their Stacks addresses. You can even add other owners after creating the safe
-Decide the number of signatures necessary to approve withdrawal (5-of-8); Also, the owner can modify the threshold later on.
-Review and submit the transaction to create the safe.
Once the transaction has been confirmed, you can access the safe. Remember to save the safe address as it's needed to load an existing safe, although the website will keep the one you’ve recently used.
3) How to send and receive coins and NFTs.
In the coins & NFT section, there are preselected tokens and collections you can deposit and withdraw in your vault. If you want to add tokens that are not yet shown, you can click on the "Add Asset" button and paste the coin Clarity contract address.
While for NFT collection, the process is the same, but you can find the collection contract address by visiting Stacks NFT marketplaces like Gamma, find the collection and the "contract" button, then visit the contract page on Stacks Explorer and copy the address.
When a Safe owner initiates a withdrawal transaction, it will be visible to the others in the Transaction section, and they will need to confirm it until the threshold of people is reached.
4) Add owners and change policy settings
Go to the owner section, click the "Add Owner" button, and insert the Stacks address of the person you want to add. Based on the Safe policy, which is the threshold for approving transactions, additional owners may need to approve transactions to edit the owner list.
While changing the number of owners to approve a transaction, it can be done in the Policy section.
If you prefer watching a video on the process, here is a YT video describing it: