Quorum schemes distribute signing authority
A multisig address requires M of N signers to authorize a transaction (M-of-N, e.g., 2-of-3). This distribution of signing authority creates redundancy: one key can be lost or compromised without losing funds. Quorum schemes balance security and availability: a 3-of-5 setup requires collusion of three parties (high security) but tolerates loss of two keys (high availability). The tradeoff is operational complexity: coordinating multiple signers for every transaction.
Practical applications in custody and governance
Large cryptocurrency holders use multisig for security: keys are split among geographic locations, institutions, or trusted individuals. Protocol treasuries often use multisig to prevent single-point compromise of community funds. Cross-chain bridges use multisig validators to secure token locks. Multisig is fundamentally a tool for organizations and custodians; individual users rarely use it due to complexity, relying instead on single-key wallets with strong passphrases.