Collaborative custody and multisig setups have long faced a tradeoff between safety and privacy. Sharing a key with a third party—whether for recovery, policy enforcement, or convenience—has traditionally meant giving that party visibility into a user’s wallet balance and transaction history.
A new proposal called Chain Code Delegation aims to remove that tradeoff.
Background
The idea behind Chain Code Delegation is simple: users should be able to benefit from collaborative multisig without revealing their wallet balance or transaction history.
Today, when a third party holds one key in a multisig arrangement, they also hold a BIP-32 chain code, which allows them to derive all addresses in a user’s wallet. This lets them scan the blockchain to see the user’s full transaction history—and, by extension, their wallet balances. This is problematic because it exposes users to third-party surveillance and creates the risk that this information could be leaked, hacked, or subpoenaed.
The proposal
Chain Code Delegation modifies how multisig arrangements share information. Instead of giving cosigners access to full chain codes, it withholds them entirely. When a transaction requires a signature, the user shares only the minimal information necessary to sign that transaction.
This means cosigners can still participate in actions like recovery and enabling spending limits—without learning anything about unrelated transactions or overall balances.
Implications
Now, any multi-party wallet—corporate treasuries or family wallets, for example—can have cosigners that cannot access the balance or transaction history. That means collaborative custody providers can offer the same safety and usability benefits as before, but with stronger privacy guarantees—a privacy improvement for the entire Bitcoin ecosystem.
Chain Code Delegation was authored by current and former members of the Bitkey engineering team and has been proposed as a Bitcoin Improvement Proposal (BIP) for review and discussion. The goal is for it to be an open, community-vetted standard that any wallet or custody provider can adopt.
Implementation
Bitkey plans to be the first to implement Chain Code Delegation in production. This will allow Bitkey users to hold bitcoin in a private collaborative wallet—something that hasn’t been possible until now.
We invest in projects like this because we believe in making bitcoin everyday money, and to do that we need to close the gap between usability, privacy, and security that exists in current self-custody solutions.
Read the full BIP for details.