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Decaying Multisig
Use Decaying Multisig To Extra Protect Against Loss Of Keys Or To Setup Inheritance
Decaying multisig is one of the most interesting features coming out of Miniscript (?). It enables the user of a multisig wallet to let the threshold (?) decline over time, which means that less private keys (?) are needed after a certain time has passed.
When setup properly the user will be able to recover his coins after a certain time, even if more keys are lost than needed to sign for the quorum (?). It is also a great tool for inheritance planning.
What Is Decaying Multisig?
The technique known as decaying multisig refers to a custody strategy wherein the quantity of keys needed to access funds gradually reduces over a given time frame. For instance, a 3-of-3 multisig might lower its requirement to only 2 keys after a year, and further reduce it to just a sole key after a period of 5 years.
This approach is prominently utilised as a safeguard against the potential loss of funds due to the misplacement of keys. If a key is inadvertently lost, the holder simply needs to bide their time until the subsequent decay phase to regain control over their funds. Next we will describe how it can be used.
Protect Against Key Loss
If you setup a 3 of 5 multisig, your bitcoins will be secure as long as you don’t lose more than 2 of your signers. However, with decaying multisig you can make this setup even more secure: If you let one key decay every 5 years, loss of private keys will become even less catastrophic. If you lose three keys you have to wait 5 years until you can recover your bitcoin with the remaining two keys. In a more crazy scenario that even four keys get lost, you still won’t loose your bitcoins, but you will have to wait 10 years before you can recover. In this example it would be optimal to update the setup every 4 years, so your keys won’t ever decay as long as nothing bad happens.
Obviously, losing four of the five keys is very unlikely. You might not want to optimise your setup for this scenario, it’s probably overkill. It is more optimal to start with a quorum like 4-of-5 or even 5-of-5 that protects better against theft and hacks. If you still choose your multisig to decay with a 5-year interval, your setup will be respectively 2-of-5 and 3-of-5 after 10 years. For long term cold storage that you don’t plan to touch it is better to use a higher threshold in your quorum.
Setup Trustless Multisignature Inheritance
Regular Bitcoin inheritance works by spreading private keys of a multisig between the owner and the legatees and give one key to a trusted third party like a lawyer. The amount of private keys given to the legatees should be just below the threshold, so that they can’t access the bitcoins as long as the owner is alive. If the owner dies the trusted third party will hand over his key to the legatees, which enables them to reach the threshold and access the bitcoins.
Decaying multisig can help to setup inheritance without the need for a trusted third party. The owner can give the legatees the threshold minus one key and set that one key will decay after five years. If he upgrades his setup every four years, his legatees will never be able to touch his bitcoins as long as he is alive, because the decay will never happen. If he dies, the threshold will decay with one keys after five years and the legatees can access the bitcoins.
