The ownership of a multisignature wallet is distributed among multiple addresses associated with the wallet. Each address is known as an owner, and each owner controls a portion of the multisig. To execute a pending transaction or action, a specified number of owners must confirm it.

The combination of these two parameters is often specified as M/N or m-of-n, where M defines the required number of confirmations (the threshold), and N represents the total number of owners of the multisignature wallet. The threshold can range from 1 to the total number of owners - for example, configurations such as 1/6, 4/6, and 6/6 are all valid.

Every use case for multisig wallets is unique, and therefore, there is no universally recommended value for these parameters. Several factors influence the configuration: value of managed assets and controlled contracts, size of the group or community, desired level of decentralization, frequency and urgency of action executions, and more.

The vast majority of multisig wallets focus on one of two main objectives:

• Backup - utilizing multiple owners to prevent losing access to an important wallet

• Security - utilizing multiple owners to prevent unauthorized control over shared assets

Setting up a multisig as a backup solution emphasizes the total number of owners. By adding more personal wallets as owners to the multisig wallet, users can still access the multisig through other wallets if they lose access to one. However, this can increase the risk of a hostile takeover - for instance, in a 1/X multisig, taking over a single wallet grants control over the entire multisig.

To counter the risk of a hostile takeover, multisignature wallets can be configured with security as the main objective. In this setup, a higher threshold is required, meaning multiple owner confirmations are needed for any transaction or action. This approach is useful for individuals seeking to protect their important wallets from a single point of failure and for groups or communities managing shared funds or contracts, requiring broad consensus. On the other hand, this can reduce operational efficiency, as it may take longer to reach the required threshold for action.

Since the configuration can be updated over time, you can take inspiration from publicly available setups and experiment to find the configuration that fits your use case best.

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