SALT Lending: Should Lenders Use Multi-Sig for Key and Custody Management? - Milk Road

Not Your Keys, Not Your Coins

If you’ve been in the world of Bitcoin long enough, you’ll be familiar with the saying: “Not your keys, not your coins.”

Security and control over your Bitcoin is becoming more important than ever, especially as a growing number of people come to view Bitcoin as a long-term wealth-preservation asset.

But what’s the most foolproof way to securely store your Bitcoin, for the long-haul?

Up until now, Multi-signature (multi-sig) wallets have been a go-to security measure for Bitcoin holders and businesses, helping protect assets by requiring multiple approvals before transactions can happen.

Your 5 Second Multi-Sig Refresher:

If you need a refresher of what multi-sig is, here’s a quick breakdown:

Imagine having a lock on your Bitcoin that requires multiple keys (signatures) to open. Instead of one person having full control, you give multiple people a key and set a rule: for example, you could require at least two keys at the same time to unlock it.

That’s multi-sig. This means:

• If one key is lost or stolen, your Bitcoin is still safe.
• No single person can take the Bitcoin alone.
• It adds an extra layer of security.

Essentially, it’s a shared lock that makes your Bitcoin harder to steal or lose.

However, in a fast-moving space—where team members change, blockchain tech evolves, and market shifts demand quick action—is multi-sig really always the best option?

How does SALT do It?

SALT, for those of you who don’t know, was the very first Bitcoin-backed lender and still operates today.

They’ve spent over eight years figuring out the best way to keep customer assets safe—so you know they’re doing something right.

So, how does SALT do their Bitcoin security?

To strengthen security, SALT recently teamed up with Fireblocks, a trusted, institutional-grade wallet provider, to protect Bitcoin deposits on its platform.

Instead of using traditional multi-sig wallets, SALT takes a more flexible and secure approach with Multi-Party Computation (MPC).

Like multi-sig, MPC removes single points of failure, but it takes things a step further:

Instead of juggling multiple full keys like multi-sig, MPC splits one private key into encrypted pieces and spreads them out, so no one ever holds the full key at once.

This makes it safer, easier to manage, and way more flexible as security needs change.

Since both security and speed are crucial in lending, SALT uses MPC to keep Bitcoin safe while ensuring borrowers can access their funds quickly and without hassle.

Multi-Sig vs. MPC: Which One Wins?

To put it simply, traditional multi-sig wallets can be pretty rigid. Once you set up a fixed group of signers, it can be a headache to make any changes.

These changes could be something as simple as rotating key holders, adjusting approval requirements, or moving key material. Worst of all, they usually require setting up the entire thing again, from scratch.

For companies managing thousands of wallets, this complexity can quickly spiral out of control.

In some cases, it’s even led to huge losses, as seen with WazirX and its customers in 2024. In this case, hackers manipulated multi-sig transaction data so that signers approved a malicious transfer without realizing it. This gave the attackers control of the wallet, allowing them to steal $230 million in crypto.

That’s where Multi-Party Computation (MPC) comes in.

Unlike multi-sig, MPC allows for easy updates to key shares without having to create an entirely new wallet. That means less handling and distributing private keys, which means less opportunities for errors and compromised accounts.

Not only that, but MPC also works across multiple blockchains—a game-changer for lenders handling stablecoin payouts and repayments.

All in all, MPC gives you more flexibility, stronger security, and fewer operational headaches—making it the smarter choice for modern custody management.

Multi-Sig vs. Single-Sig For Self Custody

While multi-sig wallets have their struggles, they’re not all bad—in fact, they’re still great for self custody.

If you’re someone who prioritizes self-custody, multi-sig wallets are still one of the most trusted security options.

Here’s why:

1. Better Security & Theft Protection – Since multiple signatures are required to approve a transaction, a single compromised key isn’t enough for someone to steal your funds.
2. Built-in Redundancy & Key Recovery – If you lose one key, you’re not locked out forever. Common setups like 2-of-3 ensure both security and recoverability.
3. Decentralized Control – No single person has full control over the funds, which is great for business treasuries and shared accounts.
4. Peace of Mind – The extra security layers and fail-safes make Bitcoin storage much safer, giving users more confidence in long-term holding.

Single-sig wallets might be simple and convenient, but multi-sig remains the gold standard if you’re serious about protecting your assets.

Why Multi-Sig Can Be a Hassle for Lending

Multi-sig is great for keeping your own Bitcoin safe, but when it comes to lending, it can cause some real headaches—especially when things need to move fast.

• Too Slow for Margin Calls – When the market swings and lenders need to act fast, waiting for multiple people to approve a transaction can slow things down. That’s why lenders using multi-sig often offer lower loan-to-value (LTV) ratios and charge higher interest rates—they have to make up for the extra risk.
• Complicated to Manage – Lending involves multiple parties like borrowers, lenders, and custodians. Trying to coordinate approvals between them all can be a logistical nightmare, especially in emergencies.
• No Automation – Unlike DeFi smart contracts, multi-sig doesn’t have built-in triggers for things like margin calls. That means lenders have to manually step in, which can make reacting to market changes a lot harder.

The bottom line? Multi-sig is solid for security, but in lending, it can slow things down and create extra hassle.

Why SALT Uses MPC Over Multi-Sig

SALT makes sure its borrowers get top-tier security without the usual headaches of multi-sig.

Instead of dealing with rigid, complicated setups, SALT uses Fireblocks’ MPC wallets, which offer:

1. Rock-Solid Security – Bitcoin is locked up in a vault-level system built for institutions.
2. Insurance-Backed Protection – If something goes wrong, assets are covered against loss or theft for extra peace of mind.
3. Instant Market Protection – If the market takes a dive, the system reacts automatically to help prevent liquidations.

With smart security practices, an expert team, and a laser focus on protecting borrower collateral, SALT gives Bitcoin holders a safe, stress-free way to borrow.

Unlike platforms that have fumbled security, SALT makes sure your Bitcoin stays protected.

Conclusion: Choosing the Right Custody Solution

If you're holding your own Bitcoin, multi-sig is a solid way to keep it safe.

But for lending? It can slow things down and make life harder for both borrowers and lenders. That’s why MPC is the better choice—it keeps Bitcoin secure, flexible, and easy to manage without the usual hassles.

SALT is all about keeping Bitcoin safe and making borrowing simple.With smarter security and borrower-friendly lending, they’re making Bitcoin-backed loans safer, faster, and easier for everyone.

Happy stacking!