Why does Multi-Institution Custody drive widescale corporate Bitcoin adoption?

Multi-Institution Custody (MIC) represents a step-function improvement over traditional custodial models in the Bitcoin space, and a logical evolution of custodial standards as Bitcoin scales to the masses. MIC leverages the native properties of the Bitcoin protocol, namely multi-sig, to distribute counterparty risk and eliminate single points of failure.

As Bitcoin adoption gradually spreads to every company, institutions will still need to play a critical role in safely storing the asset. There is now a way to do so in a trust-minimized fashion that honors the distributed ethos of the protocol and upholds the interests of end users. The power of this model is two-fold — mitigate single-third-party points of failure and reduce personal attack surface/technical burden — both of which have historically plagued the industry.

MIC solves this by leveraging a 2-of-3 multisig (multi-signature) quorum to secure Bitcoin. In this arrangement, three separate institutional entities — Onramp, BitGo, and Coincover — each hold one private key, and any two of these three keys are required to effect the movement of funds. The game theory underpinning the 2-of-3 multisig quorum further strengthens the system against potential threats, resulting in a robust solution built on redundancy. Three institutions work together to manage private keys and facilitate transactions, all while avoiding unilateral control. End users can always audit their funds onchain and withdraw assets in-kind if they choose.