Multisig, short for multi-signature, is a setup where spending bitcoin requires signatures from several private keys instead of just one. It is often described as "M-of-N": for example, 2-of-3 means any two of three keys can approve a transaction.
Why use it?
No single point of failure. With a single key, losing it or having it stolen means losing your coins. With 2-of-3, you can lose one key and still spend, and a thief with one key gets nothing.
Shared control. Businesses, families or organizations can require several people to approve spending, much like requiring two signatures on a company check.
Inheritance and recovery. A trusted person or service can hold one key, ready to help if you lose access.
A typical 2-of-3 setup
Three hardware wallets from different manufacturers, each with its own seed phrase, stored in three locations: home, a safe deposit box, and a trusted relative. Spending requires bringing two of them together. It is also important to back up the wallet configuration, which lists all three public keys. Without it, recovering a multisig wallet is much harder.
How it works on-chain
Bitcoin's scripting language can lock coins so that a UTXO can only be spent if the required number of valid digital signatures is provided. Since Taproot (2021), Schnorr-based schemes such as MuSig2 can combine signatures, so a multisig spend can look like an ordinary single-signature payment on-chain.
Where else it appears
Every payment channel on the Lightning Network is a 2-of-2 multisig between its two parties. Many exchanges also use multisig for their cold storage.
The trade-off is complexity. Multisig is a powerful tool for self-custody, but practise with small amounts before trusting it with your savings.