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Multi-Party Computation (MPC) Wallets in Crypto

adminFebruary 17, 2024

27 5 minutes read

Multi-Party Computation (MPC) Wallets in Crypto. Multi-Party Computation (MPC) wallets represent a revolutionary approach to digital asset security, offering a way to decentralize cryptographic key management. By distributing the responsibility of essential generation, storage, and transaction signing across multiple parties, MPC wallets significantly enhance security against theft and unauthorized access. This innovative method eliminates single points of failure, making it increasingly difficult for attackers to compromise digital assets. Embracing privacy and efficiency, MPC wallets set new standards for secure, collaborative cryptocurrency management and operations.

What Are Multi-Party Computation (MPC) Wallets?

Multi-party computation wallets use MPC technology to manage and store user assets safely. Many-party computation (MPC) is a cryptographic technique that safeguards data by enabling many parties to execute computations independently of each other and any third party. Case in point: three people can create an average wage without revealing anyone’s actual salary. Although multi-party consensus (MPC) has been in theory since the 1980s, it has only just entered the cryptocurrency industry, enabling wallet providers and custodians to hold crypto assets safely.

“Shares” comprise a user’s private key in an MPC wallet, allowing them to access and control their cryptocurrency assets. After that, everyone participating in the MPC process gets their fair share. Consequently, the wallet is secure and cannot be controlled by any entity. It is unnecessary to have all or none of the shares to authorize a transaction; a minimum number of shares is sufficient. This improves the wallet’s availability and security by removing a potential weak point.

How MPC Wallets Differ From Regular Wallets

Unlike traditional wallets, MPC wallets do not rely on hardware, multiple signatures, or single keys. Because they only use a single private key, single-key wallets are vulnerable to theft or loss. Because of this, MPC wallets offer better security. When time is of the essence, having a multi-signature wallet that requires numerous signatures from different devices or people might be a hassle. In addition to protecting the anonymity of signers, MPC wallets are protocol-independent.

The fact that only one signature is required for the entire transaction makes them more affordable. Because they rely on physical devices, hardware wallets are vulnerable to physical damage. Also, they won’t work well if multiple people need to sign off on a transaction.

Benefits of MPC Wallets

MPC wallets offer several benefits, such as:

Decentralization

Due to the distributed nature of the private keys in the MPC protocol, no central authority is needed to hold or access them by any of the many participants in an MPC wallet. There will be less opportunity for corruption, centralized control, or collaboration to jeopardize the availability or security of the assets kept.

Data Privacy

Because they do not share or disclose users’ private or secret information with one another or outside parties, MPC wallets further safeguard users’ data privacy. This protects the users’ data by preventing unauthorized access or manipulation.

High Accuracy

Regarding certain cryptographic computations, MPC wallets also deliver excellent accuracy. This ensures that they can reliably carry out complicated tasks like address generation, transaction signing, and signature verification.

Removes Single Points of Failure

Unlike previous wallet types—including hardware, multi-signature, and single-key—MPC wallets do not rely on a single point of failure. Theft or loss of private keys, device failure, critical party unavailability, hacking, or phishing assaults are all potential problems with these wallets. To get around these problems, MPC wallets divide the private keys and distribute them to all the MPC protocol participants.

Scalability

Through the usage of MPC wallets, scalability is achieved, as the protocol’s functionality remains unaffected as users add or remove parties. Everyone can personalize their security and performance settings. Adding additional participants to the protocol is one-way users can make it more secure.

Flexibility

With MPC wallets, you can manage your digital assets more freely, thanks to dynamic policies and workflows. Users can establish varying thresholds for transaction authorization Based on several criteria, including amount, frequency, destination address, and more. Make backup plans if necessary parties are absent; users can change these thresholds without impacting current transactions.

Compliance

Regarding the safekeeping of digital assets, MPC wallets help you stay in line with international rules and industry norms. Before beginning a transaction, users can verify their identities and the sources of the funds to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) standards. Additionally, by maintaining open and accessible records and logs of transactions, they can meet their reporting and auditing responsibilities. Further, they can ensure compliance by implementing industry-standard security and governance policies and procedures.

Risks of MPC Wallets

MPC Wallets also have some risks you should be aware of, such as:

High Communication Costs

The MPC protocol and its participants must communicate extensively for MPC wallets to function. This may cause the devices participating in the process to experience higher network latency and bandwidth utilization. Threats, including denial-of-service (DoS) and man-in-the-middle (MITM) attacks, can also affect their network security.

Technical Complexity

Complex cryptographic algorithms and distributed computing are the backbone of MPC wallets, making them difficult to comprehend and properly execute. This poses a risk to the wallet’s security and operation due to potential flaws in the code or protocol.

Not Open-Source or Interoperable

You can’t use an MPC wallet with most traditional ones, such as Trezor or Ledger. Retail clients have difficulty using MPC algorithms since they aren’t standardized and the solutions aren’t open-source.

Popular MPC Wallets

Some of the popular MPC wallets include:

ZenGo

When it comes to MPC wallets for solo users or small groups, ZenGo is among the best and most well-known options. It supports more than 70 different cryptocurrencies, facilitates the buying and selling of crypto with fiat, provides backup and recovery capabilities, has 24/7 live customer care, and lets users utilize their favorite decentralized apps (DApps) with Wallet Connect.

Fireblocks

Among institutional investors, Fireblocks ranks high as a reliable and safe MPC wallet. It connects to the most popular exchanges and protocols and supports more than 1,100 coins and 40 different blockchain protocols. Additionally, it provides enterprise-grade security features, including audit logs, role-based permissions, multi-factor authentication, and insurance coverage up to $150 million per wallet.

Coinbase

An MPC wallet solution is available to institutional clients of Coinbase, a prominent and massive cryptocurrency-controlled exchange (CEX) platform. It gives you access to the Coinbase Pro trading platform and supports more than 90 different cryptocurrencies.

Qredo

Qredo is a cutting-edge MPC wallet platform that facilitates cross-chain liquidity for institutional investors. Without intermediaries or fees, it enables users to move assets between blockchains and supports more than 20 protocols. Decentralized governance and atomic settlement are two of its sophisticated security features.

How To Choose an MPC Wallet

The majority of consumers probably won’t want an MPC wallet. However, here are two things to bear in mind if you do decide to acquire one:

Know your use case

Various MPC wallets are available to meet the needs of different user groups, including individuals, small teams, and institutions. Security, performance, functionality, and cost requirements could vary from one use case to another.

Compare features and services.

You may improve your cryptocurrency experience by using the features and services offered by several MPC wallets. You can purchase and trade cryptocurrency with money, biometric authentication, or finer-grained access controls with several MPC wallets. Evaluate many MPC wallets side by side to get the one that best suits your needs.

Multi-Party Computation (MPC) Wallets in Crypto

What Are Multi-Party Computation (MPC) Wallets?

How MPC Wallets Differ From Regular Wallets