How Does the Use of Multi-Signature Wallets Enhance Custodian Security?

A multi-signature (multi-sig) wallet requires a transaction to be approved by a predefined number of private keys (signatures) out of a total set (e.g. 3 out of 5) before the funds can be moved.

This enhances security by eliminating a single point of failure. A malicious actor would need to compromise multiple, separate keys to steal the funds, making it a standard security practice for institutional custodians.