Collaborative Custody
Collaborative custody is a multisig setup in which the user holds most keys and a company holds one, to help with recovery but not to spend alone.
What Is a Collaborative Custody?
In collaborative custody, funds sit in a multisig wallet, typically 2-of-3, where the user holds two keys on hardware wallets and a specialist company holds the third. The user can spend with their own two keys; the company's key alone cannot move anything.
The company's key helps when one of the user's keys is lost, and many services add inheritance support and help with setup. Services of this kind include Unchained, Casa and Nunchuk.
The trade-offs are a subscription fee, identity verification with most providers, and the need to keep the wallet configuration (the descriptor or xpubs of all keys) backed up, since the seed phrases alone are not enough to rebuild a multisig wallet.
Multisig (multi-signature) is a security feature that requires multiple private keys to authorize a transaction, enhancing protection against unauthorized access in blockchain networks.
Read full definitionA hardware wallet is a dedicated device that keeps private keys offline and signs transactions internally, so the keys never reach an internet-connected computer or phone.
Read full definitionKYC (Know Your Customer) is the regulatory process where cryptocurrency exchanges verify users' identities using documents like ID or proof of address to prevent fraud and money laundering.
Read full definitionXPUB is an extended public key (xpub) in hierarchical deterministic (HD) wallets. It derives child public keys and addresses from a master public key without exposing private keys.
Read full definitionA mnemonic phrase is a set of words that stores a cryptocurrency wallet's private keys, allowing users to recover access if lost.
Read full definitionReal-World Examples
Example 1: A user loses one hardware wallet; the provider co-signs with the remaining user key to move the funds to a new multisig.
Example 2: An attacker phishes the provider's support staff, but the provider's key alone cannot sign a withdrawal.
Multisig (multi-signature) is a security feature that requires multiple private keys to authorize a transaction, enhancing protection against unauthorized access in blockchain networks.
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