On-chain or Lightning
This article will focus on the method of creating a multisignature wallet using the Electrum Desktop Wallet. I am not planning to discuss the pros and cons of multisignature wallets here. The principles of multisignature wallet creation in this guide can be applied using other software wallets as well.
If you don’t know what you’re doing and read this only superficially, there is a chance you can lose funds. Be careful and make sure you understand everything. It is important to practice and become very comfortable before committing serious funds to the wallet. Practice with small amounts first.
I will be demonstrating the basics, without consideration for the safety of the seed phrases – we will be discarding the seeds anyway and they shall never hold money you don’t want to lose. This lets us focus on the mechanics of multisignature wallets, rather than being distracted with seed phrase safety. When the time comes that you want to apply this in a safe environment for your real funds, you will need multiple different hardware wallets or an air-gapped computer.
Even without these safer tools, if you understand multisignature wallets like an expert, then creating a wallet on multiple insecure devices is safer than a single signature wallet on one insecure device that you may be using now.
If you are not fairly advanced in understanding Bitcoin wallets, keys, and security, there is little point in embarking on learning multisignature wallets now. I recommend you take a step back and proceed through my ZeroTrust self-custody system, and work through it one level at a time. Doing things in a very wrong order will make your life harder for no reason.
In addition to learning multisignature using Electrum Desktop Wallet, you should be familiar with the software in general. Here is a thorough walkthrough of Electrum. A good alternative Bitcoin Wallet is Sparrow Bitcoin Wallet for which I have guides, and a multisignature edition may be developed in the future.
To understand the benefit of a multisignature wallet compared to a single signature wallet with or without a passphrase, or splitting the seed with Shamir’s Secret Sharing, see this Twitter thread:
If you find that learning this on your own using the guide is too daunting, you may choose to learn with personal guidance from me; Here are details of my mentorship program.
Multisignature Keys
Before ever proceeding with a multisignature wallet for your real funds, I INSIST you understand multisignature public and private keys thoroughly – you should be familiar with this guide – it is essential. If you choose to ignore this advice, I won’t be held responsible for any bitcoin you lose.
The Environment
- Download and install Electrum Desktop Wallet. Verifying the download and connecting to your own node is not necessary for this exercise. When the time is right to thoroughly learn to use this wallet here is my guide.
- Have ready a spreadsheet or document editor on the same computer as Electrum.
- Have a browser open and navigate to Ian Coleman’s BIP39 tool. Keep it open in the background.
Preparation – Make Dummy Mnemonic Seeds
This is for practicing only. I’ll show you how to make BIP39 mnemonic seeds quickly and easily so that you understand it, but note this is not the secure way to do it.
Go to Ian Coleman’s website that you opened earlier. Change the word number from 15 to 12. Click “generate” and copy the 12 words to the computer’s clipboard.
Eg: