For those new to the setup, Multi-signature wallet is a wallet setup that requires a number of cosigners(M of N) to validate a transaction for spending. In other words you need to provide the number of required private key signatures called the threshold to broadcast your transaction to the mempool. If you cannot provide the required number of signatures, you cannot proceed with spending the coins.

In recent times, we've observed lots of wallets hacked and one notable thing is that those who use multi-signature setups were not immediately affected and had the chance to move away their funds to safety.

Let's look at the 2 popular non-custodial wallet compromises as an instance:

ColdCard incident: Hackers were were able to reconstruct the generated seed phrases which was done with a flawed pseudo-random number generator (PRNG) instead of the hardware-based random number generator(RNG), which resulted in the loss of more than 1,800 BTC.

Those affected immediately: those who used single signature setups and those that used single signature and weak passphrase. I followed an X account that saw his two and three word passphrase-protected experimental wallet setup wiped in days.

Those not immediately affected: Those who added a strong passphrase and those with multi-signature setup.

Ledger reseller supply-chain implants: Hardware implant were discovered in wallets sold from an approved reseller cryptobilis of which the implants were able to steal credentials and transmit to the scammer over embedded e-sims which led to the loss of over $90 million worth of coins.

Those affected immediately: Those who used seed phrases and those that used seed phrases + passphrases.

Those not immediately affected: Those with multi-signature wallet setups as they were able to migrate their funds when single signature wallets were being actively drained.

Multi-signature wallets makes it more difficult for scammers and hackers to provide appropriate combinations (M of N) that can authorize funds to be spent from a wallet with such setup, making it a lot immune to immediate drain from a wallet hack or scam activity, provided the victim didn't personally hand over the applicable seed phrases to spend the coins. It is very important to have this setup for your major holding.

The downside people often cite is that multi-signature setup requires more fees to spend your coins, but I believe paying more fees is cheaper than loosing everything.