Crypto glossary
Threshold signature scheme (TSS)
A threshold signature scheme (TSS) lets any t of n parties jointly produce one ordinary signature, without the full private key ever existing in one place.
In a threshold scheme, a private key is generated in distributed form: each participant holds a share, and no single device ever sees the whole key. To sign, at least a threshold of participants, say two of three, run a cryptographic protocol that combines their shares into a signature. The result looks exactly like a normal single-key signature to the blockchain.
TSS is the technology behind most MPC wallets used by custodians, exchanges and institutions, and increasingly by consumer wallets that split a key between the user's phone, a cloud backup and the provider. Unlike on-chain multisig, it works on chains without native multisig support, costs the same fees as a single signature and keeps the policy private. Schemes such as FROST bring efficient threshold signing to Schnorr signatures.
Threshold protocols are complex, and implementation bugs have been found: in 2023 researchers disclosed BitForge, a set of flaws in widely used threshold ECDSA libraries that could leak keys. Because the policy is invisible on-chain, users must trust the software and the parties holding shares. Changing participants requires a key refresh protocol rather than a simple on-chain update.
Example
A company's treasury uses 3-of-5 TSS: five executives hold key shares on separate devices, any three approve a payment, and the blockchain sees a single standard signature from one address.