The term 3-of-5 refers to a multi-signature requirement for transactions. It indicates that a total of five keys are created, but only three of them are needed to authorize a transaction. This setup enhances security because it reduces the risk of unauthorized access. Even if two keys are compromised, the transaction cannot proceed without a third key. 3-of-5 is often used in wallets for organizations or collaborations where multiple people manage assets. It balances accessibility and security, allowing for shared control while minimizing the likelihood of losing funds if one or two keys are lost or stolen. By requiring multiple approvals, this approach also adds a layer of governance, ensuring that no single individual has absolute control over the funds.