What is the recovery process of multi-sig wallet?

[Crypto Library]

As far as I know that, if we have a multi-signature wallet like two or three then in case 3-sig wallet if 1-sig lost then it could be possible to make transaction with the other 2-sig, but if we lose the 2-sig then it couldn't be possible to make transaction, And in case of 2-sig if we lose one we will not able to make transaction ever.

But I also heard that if there is a proper setup for backup, then it could be possible to recover that wallet and also make transaction, I want to know more about this like if any details information or tutorial, kindly share.

And if this can be done, will functionality of the multi-sig wallet be intact?

[Zaguru12]

But I also heard that if there is a proper setup for backup, then it could be possible to recover that wallet and also make transaction, I want to know more about this like if any details information or tutorial, kindly share.

Seriously I don’t understand what you mean by proper set up for back up. But one thing I know is that for a standard M -of- N multisig wallet like a 2-of-3 wallet which I think it’s what you mean you must have access to the M number of keys to able to sign transaction from that wallet and if there is no access to that required number of co-signers you will be permanently locked out of that wallet.

The recovery works like this:

To recover the wallet first wallet: you need its seed phrase plus the master public keys (xpubs) for both the second seed phrase and the third seed phrase

Then to recover the second wallet: you need its seed phrase plus the xpubs of the other two seed phrases (first and third in this cases)  

Third wallet recovery: you need its seed phrase and then the xpubs of the other two seed phrase (first and second in this case)

And then you the script type, derivation Path and address scripts too; in this case 2-of-3 multi sig with the correct
 address scripts type.

That’s why you need to have each other XPUBs backed up with the seed phrases you’re backing up.

If you cannot recover the minimum number of signers for that wallet like In this set up 2 seed phrase recovered then you cannot sign and broadcast transactions from that wallet

  So you definitely need two seed phrase and the three master public key to recover this set up

[hosemary]

It all depends on how the multi-signature wallet has been set up.

In a M of N multi-signature wallet, you need to have M out of the N seed phrases, and the master public keys of N cosigners.
Note that your wallet will probably ask you for N-M master public keys, because the other M master public keys can be derived from the M available seed phrases.


For example, in a 2 of 3 mult-signature wallet, you must have one of the following combinations to recover the wallet.

Seed phrase A, Seed phrase B, Master public key C
Seed phrase A, Seed phrase C, Master public key B
Seed phrase B, Seed phrase C, Master public key A

To recover the wallet first seed phrase: you need its seed phrase plus the master public keys (xpubs) for both the second seed phrase and the third seed phrase

Then to recover the second seed phrase: you need its seed phrase plus the xpubs of the other two seed phrases (first and third in this cases)  

Their seed phrase recovery: you need its seed phrase and then the xpubs of the other two seed phrase (first and second in this case)

What do you mean by recovering the first seed phrase and recovering the second seed phrase?
You use the seed phrase(s) to recover the wallet. You don't recover the seed phrase itself.

[Zaguru12]

To recover the wallet first seed phrase: you need its seed phrase plus the master public keys (xpubs) for both the second seed phrase and the third seed phrase

Then to recover the second seed phrase: you need its seed phrase plus the xpubs of the other two seed phrases (first and third in this cases)  

Their seed phrase recovery: you need its seed phrase and then the xpubs of the other two seed phrase (first and second in this case)

What do you mean by recovering the first seed phrase and recovering the second seed phrase?
You use the seed phrase(s) to recover the wallet. You don't recover the seed phrase itself.

My mistake, it should be while recovering first wallet, second wallet and third wallet each with there respective seed phrases

[nc50lc]

But I also heard that if there is a proper setup for backup, then it could be possible to recover that wallet and also make transaction, I want to know more about this like if any details information or tutorial, kindly share.

You meant this backup method?:

Back up your three seed phrases along with one xpub, so the recovery of any two back ups provides two seed phrases plus the third xpub, as follows:

Back up 1: Seed A, xpub B
Back up 2: Seed B, xpub C
Back up 3: Seed C, xpub A

That is to ensure that even if the owner lost one backup, any of the two can still recover the wallet since those contain two different Seed Phrases and the third cosigner's xpub.
In case of theft, even one backup is compromised, the hacker still can't spend from the wallet.

[satscraper]

But I also heard that if there is a proper setup for backup, then it could be possible to recover that wallet and also make transaction, I want to know more about this like if any details information or tutorial, kindly share.

You meant this backup method?:

Back up your three seed phrases along with one xpub, so the recovery of any two back ups provides two seed phrases plus the third xpub, as follows:

Back up 1: Seed A, xpub B
Back up 2: Seed B, xpub C
Back up 3: Seed C, xpub A

That is to ensure that even if the owner lost one backup, any of the two can still recover the wallet since those contain two different Seed Phrases and the third cosigner's xpub.
In case of theft, even one backup is compromised, the hacker still can't spend from the wallet.

The relevant workflow may be even easier if the given multisig wallet is coordinated by  descriptor-based wallet, ^{for example by Sparrow}. In this case

Back up 1: Seed A (+seed^sorry,typo passphrase for A if any), multisig descriptor,
Back up 2: Seed B (+seed^sorry,typo passphrase for B if any), multisig descriptor.
Back up 3: Seed C (+seed^sorry,typo passphrase for C if any), multisig descriptor.

[hosemary]

My mistake, it should be while recovering first wallet, second wallet and third wallet each with there respective seed phrases

If you have a 2 of 3 multi-signature wallet, all you need to do to spend the funds is create a single wallet using two of the seed phrases and the master public keys of the other seed phrase. You don't have to create three different wallets.

Even if the two seed phrases are owned by two different people or a single person wants to sign the transaction on two different devices for security reason, it's not needed to create three wallets. Two are enough.

[Zaguru12]

If you have a 2 of 3 multi-signature wallet, all you need to do to spend the funds is create a single wallet using two of the seed phrases and the master public keys of the other seed phrase. You don't have to create three different wallets.

Even if the two seed phrases are owned by two different people or a single person wants to sign the transaction on two different devices for security reason, it's not needed to create three wallets. Two are enough.

Yeah i actually did made the last statement that the OP needs two seed phrases and the master public keys to able to recover the wallet which will be enough to spend from the 2 -of - 3 multi sig wallet.

So you definitely need two seed phrase and the three master public key to recover this set up

The reason why I actually did go round for the three wallet is just to tell the OP how to recover all the three wallet if there need be but it’s not a necessity while trying to spend from this multi sig type of wallet.

While I added that he need three public keys was because we don’t know which seed phrase was lost. But you have corrected that mistake that it’s not all necessary having all three available. Since the master public key can be generated from the seed phrase, although I do think it’s best to actually back up everyone still along side the seed phrases.

[nc50lc]

-snip-

The relevant workflow may be even easier if the given multisig wallet is coordinated by  descriptor-based wallet, ^{for example by Sparrow}. In this case

That's good too, there's the advantage of knowing the exact steps on how to derive the addresses from the master private keys.
Specially necessary if the multiSig script isn't a standard p2sh or p2wsh.

Although it comes with the disadvantage of longer backups that need to be written
since the descriptor contains as much extended public key as the number of cosigners.
And compromised privacy on 1 leaked backup since the descriptor alone can be used to restore a watch-only copy.

Those can be prevented by copying the same pattern as the original backup scheme by keeping the correct xpub and substituting the other two xpubs with placehodlers.

[satscraper]

-snip-

The relevant workflow may be even easier if the given multisig wallet is coordinated by  descriptor-based wallet, ^{for example by Sparrow}. In this case

That's good too, there's the advantage of knowing the exact steps on how to derive the addresses from the master private keys.
Specially necessary if the multiSig script isn't a standard p2sh or p2wsh.

Although it comes with the disadvantage of longer backups that need to be written

Written form is not as good as it seems at first glance because  it concedes human errors,it doesn't allow to openly keep and respectively distribute sensitive info ^{also openly} to ensure redundancy and so on.

May I remind you of my own method of storing this kind of stuff, which is free from those snags? I am using it for a few years for my backup info ^{descriptors included}.

[BlackHatCoiner]

This is how it works, considering you're using Sparrow or some similar modern wallet software.

- If your multi-sig is N-of-N (e.g., 2-of-2), then you just need all the seed phrases. That's it.
- If your multi-sig is N-of-M (e.g., 3-of-5), then you need N seed phrases AND THE DESCRIPTOR.

It is extremely important to understand that if you lose the descriptor, unless you have ALL THE SEED PHRASES, you cannot recover the funds. The descriptor is a piece of text that contains all master public keys for each seed phrase. As the name suggests, it DESCRIBES your setup to the coordinator wallet (Sparrow).

However, because it is a long piece of text, it is strongly recommended you print it in QR code, because writing it down with a pencil is probably the recipe for disaster; it is not human readable text, and you're most likely going to make a mistake.

[nc50lc]

May I remind you of my own method of storing this kind of stuff, which is free from those snags?

Yes obviously; because it's digital, long strings wont be an issue and inside an encrypted volume so the descriptor alongside others can't be accessed directly if it's stolen.

Written form is not as good as it seems at first glance because  it concedes human errors,it doesn't allow to openly keep and respectively distribute sensitive info ^{also openly} to ensure redundancy and so on.

Okay, so this clarifies that the suggested alternative isn't meant for written backups.

BTW, I just noticed but I think there's a typo here:

Back up 1: Seed A (+seed phrase for A if any), multisig descriptor,
-snip-

Could it be "Seed A (+passphrase for A if any)" instead?

[satscraper]

May I remind you of my own method of storing this kind of stuff, which is free from those snags?

Yes obviously; because it's digital, long strings wont be an issue and inside an encrypted volume so the descriptor alongside others can't be accessed directly if it's stolen.

Written form is not as good as it seems at first glance because  it concedes human errors,it doesn't allow to openly keep and respectively distribute sensitive info ^{also openly} to ensure redundancy and so on.

Okay, so this clarifies that the suggested alternative isn't meant for written backups.

BTW, I just noticed but I think there's a typo here:

Back up 1: Seed A (+seed phrase for A if any), multisig descriptor,
-snip-

Could it be "Seed A (+passphrase for A if any)" instead?

Yeah, just  typo on my part, definitely it should be passphrase. Fixed, thanks. ^{You know when you type fast while thinking about other things, typos are bound to happen more than often.} It would be even better to just type "extended SEED" instead of "Seed (+passphrase), but I'm afraid some people won't understand this phrasing.

[internetional]

I'd also like to address this question:

And if this can be done, will functionality of the multi-sig wallet be intact?

Essentially, all these recovery methods involve the person restoring access obtaining the minimum number of keys needed to sign a transaction. For example, with a 2-of-3 wallet, recovery means getting hold of two keys.

The wallet itself continues to work exactly as before. But since only two keys remain available, it loses its most important feature: the ability to function without one of them.