Summary
TLDR: For anyone with substantial bitcoin holdings, having a custody structure with a single point of failure is dangerous. Multisig wallets, Shamir’s secret sharing (SSS), and multi-party computation (MPC) are methods that remove single points of failure. Multisig is simple and robust, SSS offers privacy advantages, and MPC is complex but avoids temporary points of failure. Combining models for collaborative custody can enhance security. Taproot’s new capabilities like Schnorr signatures and script type privacy provide additional tools for institutional-grade custody. The best way to secure a bitcoin treasury is by leveraging a multisig structure with keys distributed among enterprise key agents, using SSS or MPC for extra protection. Unchained offers an enterprise custody network for institutions looking to secure bitcoin.
Key Points
1. For anyone with substantial bitcoin holdings, a custody structure that includes a single point of failure should be seen as unacceptable. Single components that can lead to a permanent loss of funds when lost or stolen are too dangerous to consider.
2. Individual bitcoin holders have tools available to reduce the risk of loss or theft, but these tools fall short of removing single points of failure entirely. Businesses, governments, and institutions must eliminate single points of failure when securing a bitcoin treasury by using threshold requirements that involve multiple, separately secured components.
3. Script multisig, Shamir’s secret sharing (SSS), and multi-party computation (MPC) are three methods for applying threshold security. Each method has its own trade-offs, and the best setup for an institution depends on their specific needs and preferences. Combining multiple models for collaborative custody can further enhance security by minimizing single points of failure.