What Is Threshold Signature?

In threshold signature schemes, the private key never exists in a single place. Key shares are usually created through distributed key generation (DKG). When a signature is needed, a sufficient number of participants run a multi-party computation protocol without revealing their shares, and a single signature emerges. For example, in a corporate wallet configured as 2-of-3, even if one of the three devices is lost or compromised, the remaining two devices can sign a transaction, while a single device is not enough.

Threshold signatures and multisig are often confused. In multisig, each participant signs separately and the rule is enforced visibly on the blockchain, for example in a smart contract. With a threshold signature, the transaction on-chain is indistinguishable from an ordinary single-signature transaction; this provides lower fees and more privacy, and it can also be used on networks that do not support smart contracts. Threshold protocols for ECDSA, FROST for Schnorr signatures, and threshold schemes for BLS signatures are common examples.

Threshold signatures are used in MPC wallets, bridges, distributed validator technology, and randomness beacons. Because the protocols are complex, implementation mistakes can have serious consequences; in the past, some threshold ECDSA libraries have had vulnerabilities that could lead to key leakage.