The custody spectrum
There’s no single “right” way to hold bitcoin, only trade-offs between convenience, control and resilience. Most people move along this spectrum as their savings grow.
| Model | Who holds keys | Main risk | Best for |
|---|---|---|---|
| Exchange / custodian | A company | Company failure, freezes | Buying, small balances |
| Single-key wallet | You (one key) | One mistake = total loss | Small–medium savings |
| Self-managed multisig | You (several keys) | Setup complexity | Larger savings, technical users |
| Collaborative custody | You (most keys) + a partner | Some reliance on a provider | Large savings, inheritance |
| Multi-institution | Several institutions | Trusting third parties | Those who don’t want to hold devices |
What multisig means
Multisig (multi-signature) means a wallet needs more than one key to spend. It’s written as M-of-N: “2-of-3” means there are three keys, and any two can approve a transaction.
Choosing a quorum
- 2-of-3: the sweet spot for most people. Lose any one key and you’re fine; a thief needs two.
- 3-of-5: more redundancy and more locations, often used by businesses or families. More to manage.
- Avoid 2-of-2 for savings, because losing either key locks you out permanently.
Setting up your own multisig
A self-managed 2-of-3 is very achievable with free software. You’ll need three hardware wallets (ideally from three different makers) and a coordinator app such as Sparrow or Nunchuk.
- Set up each hardware walletCreate a fresh seed on each device and back each one up separately.
- Create the multisig walletIn Sparrow, choose “New wallet → Multi Signature”, set 2-of-3, and import each device’s public key (xpub).
- Back up the wallet configurationThis step is critical and often skipped. The wallet descriptor (or config file) lists all three public keys. Without it, recovery is much harder. Store a copy with each seed backup.
- Verify an address on every deviceCheck that each hardware wallet shows the same receive address.
- Test spendingSend a small amount in, then sign a spend with two devices.
- Distribute the keysStore each device and seed backup in a different location.
Remember: in a 2-of-3, two seed phrases are not enough to recover on their own; you also need the third key’s public key, which is inside the descriptor. Keep that descriptor safe and with each backup. It can’t be used to steal funds, though it does reveal your balance.
Collaborative custody
Don’t want to do it alone? Collaborative custody providers set up a multisig vault where you hold the majority of keys and they hold a backup key. They can help you recover if you lose a key, but they can never move your bitcoin on their own.
A long-established US collaborative custody firm. You hold two keys, Unchained holds one. Offers inheritance planning and trust vaults.
Visit Unchained →Beautifully designed multisig with guided setup, key health checks and inheritance features. Available outside the US.
Visit Casa →A free, flexible multisig app supporting most hardware wallets, with optional paid plans for key assistance and inheritance.
Visit Nunchuk →Pairs collaborative multisig with insurance coverage for the bitcoin in your vault. Aimed at larger holders.
Visit AnchorWatch →Keys are split across three independent institutions, so you don’t manage any devices, but you do rely on third parties.
Visit Onramp →A simple “starter multisig”: your phone, a hardware device and Block’s server. Great for people who find seed phrases daunting.
Visit Bitkey →Some links above are affiliate links. BeSovereign may earn a small commission at no extra cost to you.
Services, prices and where they operate change regularly, so check each provider directly.
Planning for inheritance
Bitcoin with no plan can vanish forever when its owner does. Researchers estimate several million coins are already lost for good. A simple plan:
- Write a letter of instructionPlain-language steps: what you own, which wallet software, where each key and backup is, and who to contact. Never put seed words in it.
- Make it findable, but not usable aloneKeep the letter with your will or a lawyer. Multisig is ideal: your heir can reach two keys only by following your instructions.
- Name a trusted, technical helperSomeone your family can call, or a collaborative custody provider with an inheritance service.
- Update it yearlyDevices change, people move. Review your plan every year.
Which setup suits you?
BeSovereign guides are for education only and are not financial, legal or tax advice. Products and prices change, so always check the official source before buying or moving funds.