Building Investor Trust? Using Multisig Wallets Won’t Cut It.

Many project owners rely on multi-signature (commonly known as ‘multi-sig’) wallets for LP (liquidity provider) token storage. Vitalik promotes them on a regular basis too! But this is not the most secure option for liquidity provider tokens and investors are catching on.

One could even argue that even VB could be wrong when it comes to promoting multi-sig wallets for LP token storage.

The challenge with relying solely on storing them in a multi-sig is that it does not solve the problem of project owners owning all their project’s LP tokens. Multisig wallets are not necessarily a decentralized form of storage. Someone (or several individuals, depending on the setup) still has access to the key of the lock. Multisig wallets can be abused if not used ethically, and investors are catching onto this.

We are not here to tell you to abandon multi-sig wallets altogether though. Vitalik, obviously, is not wrong either. In fact, these wallets can be very helpful and used in conjunction with our in-house decentralized liquidity lockers and token vesting products.

➡️ By transferring funds to a multi-sig wallet and then locking them directly from the multi-sig using a reputable locker service such as UNCX, investors can create two layers of security that ensure critical funds are stored for a pre-determined period of time, in a decentralized way.

Combining multi-sig wallets with liquidity lockers not only provides an additional layer of security but also makes your project potentially shinier to investors and utility token users.

When investors see that LP tokens (or any token) are vested or locked using a reputable non-custodial locker service, it signals projects are taking security seriously, and can therefore not really be interpreted in a negative way. In fact, token team members & communities appreciate security measures with enthusiasm according to our experience and received feedback.

Additional Benefits

Locking LP tokens in a reputable locker service has a positive impact on a project’s visibility. Charting websites, such as DEXTools, display the percentage of liquidity locked in a project, making it easier for their users to assess how much of a given liquidity pool share is locked over time.

When LP tokens are ‘simply stored’ in a multi-sig wallet, this information is not visible to charting and analytics websites, and users may be questioning themselves further in regard to the reliability of the liquidity pools/depth.

However, by using a reputable liquidity locker service, the percentage of locked liquidity is clearly displayed, providing users with some additional level of confidence, according to their expectations.

Digital asset security can never be ‘overkill’

We hope you appreciated the above-shared thoughts. As a B2B decentralized services provider currently serving tens of thousands of customers across 6 different chains, we felt like sharing our take related to the usage of multi-signature wallets would benefit both end users and token owners.

Let’s conclude with the best practice we would recommend below!

➡️🔒 Lock with the most reputable & leading lockers in the space 👉 UNCX Network, and use multi-sig wallets to own these locks on top.

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