Multisignature is a security mechanism that requires two or more private keys to authorize a single cryptocurrency transaction.
Funds stored at a multisignature address can only be moved when a preset number of signatures are provided at the same time. The most common arrangements are 2-of-3 (two signatures required out of three possible keys) and 3-of-5, though other configurations are possible.
A useful analogy is a safe deposit box with two locks and two keys. If Alice holds one key and Bob holds the other, neither can open the box alone. Both must provide their keys simultaneously, meaning no single person can access the contents without the other party approving.
In practice, a multisig setup might involve a user keeping two keys in separate secure locations and sharing a third with a trusted backup service. This way, losing one key does not lock the user out permanently, and no single compromise gives an attacker full access to the funds.
While multisig can provide additional security, it also introduces complexity. Setting up and managing multiple keys requires careful planning, and losing access to enough keys can make funds permanently unrecoverable. Users should weigh the tradeoff between security and operational convenience based on their specific needs.