A new midyear report by blockchain security analytics firm ChainArgus reveals a sobering figure: Web3 protocols have lost $3.1 billion to hacks and exploits in the first six months of 2025. The main culprit? Poor multisig implementation.
Multisignature wallets — long hailed as a security improvement over single-key setups — have become a popular standard in DAO treasuries, DeFi protocols, and Layer-2 bridges. But despite their promise, misconfigurations and human error are proving just as dangerous as code-level bugs.
When Multisig Goes Wrong
The premise of multisig wallets is simple: instead of one person holding all the keys to a wallet, multiple people or entities must approve a transaction. It’s a common setup for managing shared crypto funds, particularly in DAOs and treasury operations.
But that extra layer of protection also introduces complexity. The ChainArgus report points to a trend: many of the most damaging hacks involved multisig wallets that were poorly configured, had compromised key holders, or relied too heavily on centralized infrastructure to manage decentralized funds.
One example from April 2025 involved a prominent DAO managing $190 million in assets. A miscommunication between signers led to a critical delay in signing off on a bug fix. By the time consensus was reached, an attacker had already exploited the vulnerability.
$3.1 Billion Lost — and Counting
According to the report, over 60% of funds lost in 2025 were due to operational failures rather than smart contract exploits. That includes compromised keys, admin panel leaks, lost access to signing devices, and failures to rotate signers after offboarding.
DeFi protocols on Ethereum, Arbitrum, and BNB Chain were among the hardest hit. Cross-chain bridges — already a magnet for exploits — became even more vulnerable when their multisig setups were exposed. Hackers who once had to comb through code are now finding success targeting humans instead.
What’s more alarming is how predictable many of these attacks are. In several cases, attacker wallets sat idle for weeks with small test transactions before executing the full exploit. This suggests many teams failed to monitor warning signs in real time.
UI and UX Are Security Issues Too
Security researchers are now pointing to the user experience of multisig wallet interfaces as a growing problem. A number of signers involved in recent breaches admitted they didn’t fully understand what they were approving or believed they had signed off on something else entirely.
These issues are compounded by the lack of standardization across multisig tools. One wallet might alert users to risky transactions, while another might gloss over critical information in a bland confirmation screen. When the tools don’t make the danger obvious, mistakes get made.
In this sense, user interface design is no longer just about convenience — it’s a core part of protocol security.
The Battle Between Convenience and Security
DAOs and DeFi teams are caught between two opposing pressures: streamline treasury operations for rapid growth or invest in multi-layered security frameworks that slow them down. In a bull market, the tendency is to move fast. But as recent losses show, that tradeoff has become too costly.
Projects like Safe (formerly Gnosis Safe) and Squads have attempted to bring structure to multisig management, offering recovery flows, audit logs, and signer rotation tools. Yet adoption of these advanced tools has been inconsistent, especially among newer DAOs who prioritize quick setup over longevity.
Some security firms are now offering “multisig-as-a-service”, including external co-signing and off-chain risk analysis. But these still depend on trust, and in a decentralized space, that trust is increasingly hard to earn.
Regulatory Spotlight and Insurance Impact
The wave of losses is beginning to catch the attention of regulators. While decentralized finance remains largely unregulated, major losses are triggering calls for accountability — especially when retail users are impacted.
In response, some projects are turning to decentralized insurance options. Nexus Mutual and InsurAce have seen a spike in coverage applications, though many policies exclude multisig-related failures unless explicit standards are met.
Institutional players, meanwhile, are demanding stricter standards. Some have paused DAO treasury allocations entirely, citing unacceptable operational risk.
Moving Toward Smarter Coordination
The takeaway is not that multisigs are inherently flawed — quite the opposite. When used correctly, they remain one of the best ways to distribute control and reduce single points of failure.
But the implementation matters.
Projects now face pressure to enforce operational audits, introduce signer training, and treat governance security as seriously as they do code audits. Multisig is not a set-it-and-forget-it feature — it’s an evolving process that demands constant oversight.
Looking Ahead
The $3.1 billion lost in 2025 so far should serve as a wake-up call. For all the innovation Web3 has achieved, operational security still lags behind.
If protocols want to avoid being tomorrow’s headline, they’ll need to take a hard look at their multisig setups today — not just the smart contracts, but the people, processes, and tools managing them.
