This has been and will continue to be, debated over and over within the bitcoin community because the type you use for cold storage depends on your circumstances.
At this point you have only experienced single signature transactions. Single signature is where you have one set of words for your private keys. In single signature wallets, you only provide one set of words to spend your bitcoin. These are the words you have stored securely right now.
Multi-signature wallets allow, for example, 2 of 3 private keys to spend your bitcoin. In this example, sparrow wallet will create 3 private keys, 3 sets of words, that you will need to store. If you want to spend your bitcoin, you will need to provide 2 of those keys. You can lose one set of words in a 2 of 3 multi-signature wallet.
Multi-signature allows you to separate your private keys geographically; forcing you to travel or make special arrangements to access those private keys. This makes home invasion theft of your bitcoin difficult. However, not everyone has 2 or 3 locations that are trustworthy for their private keys.
Preparing for a home invasion is not something most think about, however since we are discussing it, there is one thing that can be done to help. If you have opted to use multi-signature, you can treat each set of words as a separate single signature private key and place a small amount of bitcoin there. If someone were to stumble across that private key accidentally or was forcefully requested, you can indicate that’s all the bitcoin you have. If they do not know about the other private keys, there is no way for them to know about the full amount.
When using single signature, if your words are discovered then all your bitcoin can be spent. You can use an additional layer of security by adding a passphrase. A passphrase is similar to a password but can be as short as one letter and as long as 256 characters of your choice. Your private key (12 words) plus a passphrase creates another wallet where you can store bitcoin. Now, you can store a small amount on the original wallet and the rest with a passphrase enabled. With this setup, if you are pressured to provide your private key, giving the 12 words, protects the remainder behind the passphrase.
With a passphrase, if you forget it or lose it, then you will have lost that bitcoin forever. You must treat it and store it just as you would the private key.
Your decision should also take into account how you will store the private keys you create. Review the cold storage post for different options.
