Why would SMSFs benefit from a multi-sig wallet?

Self-managed super funds have very particular needs when it comes to crypto. As a type of financial institution there are financial reports and other tax-related information that has to be provided to authorities. In the event of failing to comply with them there can be serious repercussions.

The chain of custody for assets is especially important. Even though a SMSF can only have five members or less, it can still be very difficult to track. Additionally, members can assign a trustee, so that number can multiply and make it even more complicated.

Asset management has a peculiarity in blockchain, and we’ll discuss it in this article.

How do blockchain transactions work?

In blockchain technology control of the assets is delegated to the private key. This private key is a long string of hexadecimal numbers that is used to authorize any transaction. To do that, the private key encrypts the hash of the information contained in the transaction to create a digital signature. This digital signature then is validated by the nodes of the blockchain network.

If the digital signature is absent, or someone changed the transaction’s information, then the token transfer is not processed. That makes the private key the most important aspect of ownership and custody of crypto assets.

If the private key is lost, compromised, stolen, or for some reason not accessible to the owner of the wallet then the funds can be locked forever. That can be a lot of pressure for a single individual, especially when the money of other people is involved.

To mitigate this problem, multi-signature crypto wallets were created. Let’s go over how they solve this problem.

Multi-sig wallets

In a multi-sig wallet, the private key is shared by a number of people. Each is able to use it to create transactions and move assets around. Furthermore, to approve each transaction a number of approvals can be configured. For example, if our organization has 5 members, we can say that for any transaction at least 3 people have to agree.

Additionally, different actions can have a different need for confirmations. For example, a regular transaction can be 3/5, but adding a new member to the organization may require unanimous approval. That way, there is more control over the assets which a single crypto wallet controls.

As we said at the start, an SMSF requires a clear chain of custody, not only to make sure the operation is profitable, but also for legal and tax reasons. If the assets are moved by a single individual the rest can be implicated if the transaction was illegal, or if the assets were stolen.

Additionally, if one of the members of the SMSF loses his/her private key the entire crypto wallet doesn’t have to be compromised. The rest of the members can still make transactions, and if the first one is unbale to recover the private key, a new one can be generated and given to him/her. With the due verification to corroborate the private key is gone, as to not give double the voting power to one person.

Even if an SMSF has only one member, it’s still a good idea to create a multi-sig wallet. It gives more security to that one person, and creates a level of excess layers of security that can help with any problems. Like losing one private key, but still having control of the others, so transactions can still be made.

The multi-sig wallet is able to solve most of the challenges SMSFs have to deal with when they enter into crypto. Unido EP is precisely this type of platform, and was created with the express mission of solving these problems.

Unido EP can do all the above mentioned via a graphical interface. There is no need to code anything, nor knowledge of a command line interface. That way users not very adept with computer systems can manage crypto assets funds with a high degree of security and redundancy.

About Unido

Unido offers enterprise-level crypto self-custody solutions for SMEs, sophisticated corporations and institutions that want to leap into crypto, invest in DeFi and provide crypto access to their customers.

Our technology is based on a state-of-the-art fragmented private key-signing engine that enables enterprises to distribute transaction signing at the blockchain level. That, combined with our user-friendly dashboard and point-and-click business tools, provides enterprises with the level of corporate governance workflow and security they require to confidently do business on the blockchain.

About Unido EP

Unido EP takes the complexity and expense out of digital asset management for organizations with sophisticated corporate governance needs. Our patented, end-to-end platform seamlessly automates corporate governance and self-custody of crypto assets so you can securely store, manage and invest in crypto without massive overheads.

Unido EP comes with a web-based dashboard and a decentralized application (dApp) featuring a robust set of DeFi tools, easy-to-set-up authority regimes and iron-clad security. All of this is inside a complete digital asset management platform, built with financial institutions in mind but tailor-made for any organization or individual’s needs.

Learn more:

https://www.unido.us/

https://www.linkedin.com/company/unidocore/

https://discord.com/invite/cs5HeDDmDY

https://twitter.com/UnidoEP

https://www.tiktok.com/@unidocore

Financial Information Disclaimer

The information presented in this content is general in nature and has been prepared without taking into account your individual objectives, needs or financial situation. You should consider whether the information is appropriate for you before making an investment decision

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Unido

Unido

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Built on Polkadot and powered by $UDO token, Unido is building enterprise-grade solutions to give institutions better access to DeFi Markets.