What Is MPC Multi-Party Computation? MPC 101

However, institutional https://www.xcritical.com/ digital asset security has emerged as the leading use case for MPC cryptography, thanks to its many benefits over alternative types of wallets. They have become a core component of the digital asset security stack used by leading custodians, including BitGo, ZenGo, Fireblocks, Liminal Custody, and others. Multi-signature (MultiSig) wallets, which require more than one private key to approve transactions, emerged as an early solution. One is that all activity is visible on-chain, meaning it’s easy for malicious entities to trace and target responsible individuals.

Do all MPC Wallets have the Same Level of Risk and Security?

• It basically splits a wallet’s private key among multiple parties to increase privacy and reduce the risks of hacking, breaches, and losses.
• Historically, there have been a few primary options for securely storing private keys.
• Unlike multi-signature (MultiSig) approaches, which may not support every blockchain, MPC can be applied to all EVM-compatible chains.
• Hardware wallets are external devices where you store your private keys, such as a USB stick.
• MPC technology is actually dozens of years old – initial development began in the 1980s – but applied MPC technology to crypto wallets is a relatively recent technological innovation in the last decade.

The wallet is compatible with various blockchain networks and offers granular access controls. A Threshold Signature Scheme (TSS) is a type of digital signature protocol used by MPC Wallets to enable distributed parties to jointly sign transactions. In the MPC-TSS setup, a flexible threshold signature scheme (”m out of n” key shares) can be implemented. For instance, in a 2-2 signature scheme, two private key shares will be generated independently mpc crypto wallets and both key shares will be required to sign each transaction. Past solutions have held similarities to MPC wallets, but with a few important distinctions. For instance, multi-signature wallets need several signatures to initiate transactions.

History of Multi-party Computation

To achieve widespread usage, Web3 wallets must provide enhanced security and improved usability. Multi-party Exchange (organized market) computation (MPC) now enables self-custody of your wallet without worrying about losing access. Multi-sig wallets send transactions through a process that requires two or more unique keys.

MPC is the Gold Standard in Private Key Security

It is no wonder that the MPC wallet is highly popular because it offers robust security, on-chain self-custody, and recoverability at the same time. Unlike Multi-signature wallets that do not work on particular blockchains, MPC wallets support different blockchains. In today’s world where data and content are stolen in no time, it is more important to secure your seed phrase and keys with a wallet like MPC.

The private keys are not divided in this case; instead, each participant has their own distinct private key. Throughout the process, the private key shares are never exposed, and the parties cannot access each other’s shares. This ensures that even if an attacker compromises one party, they cannot gain full control over the wallet or the assets. They’re not the first institutional-grade wallets that let multiple cryptocurrency owners control digital assets together. But before discussing the pros and cons of using an MPC wallet, let’s understand what differentiates them from Multisig technology. The public crypto exchange’s MPC wallet enables a large and growing number of users to access the Web3 ecosystem in a safe, reliable, and secure manner.

By piecing each signature together, a usable copy of the private key signature can be computed. Even then, each person wouldn’t be able to compute the actual private key since each part is held by different users. In traditional cryptography, an individual holds onto a private key while publishing their public key for the whole world. Given the public key, anyone can encrypt a message and send it back such that the individual can decrypt and read the message. The goal of traditional cryptography is to ensure the security and integrity of encrypted messages from eavesdroppers or man-in-the-middle attacks.

The private keys are split into parts and given to different wallet owners or servers. Fireblocks is an institutional digital asset custodian that offers an MPC wallet with support for over 30 blockchain protocols and 1,100 tokens. With the combination of MPC technology with hardware isolation, Fireblocks’ institutional MPC wallet maximizes security and service level agreements (SLAs) while minimizing transaction costs. With its non-custodial nature, multi-chain support, and a range of advanced features, OKX Wallet is a compelling choice for experienced users looking to manage and trade a diverse range of digital assets.

A single key represents a point of weakness for hackers to target, so it’s a cybersecurity risk that should be mitigated. While online wallets provide an ideal balance of  both security and accessibility, regulatory compliance and other governance criteria may warrant the need for offline or air-gapped key storage and usage. MPC wallets can and in some cases have been developed where some or all key shares can be generated, stored, and used without ever connecting the hosting node to the internet. Recent innovations in MPC cold wallets enable some MPC wallets to support hybrid models.

For example, a wallet may be developed by junior or even senior level cryptographers following published academic research papers on MPC and threshold cryptography. However, security experts will advise you that MPC is extremely complex and can easily be implemented in a manner that yields unanticipated security vulnerabilities, even when implemented by cryptography experts. MPC is a technology and it can be applied to solve a wide range of security and privacy challenges. As a result, any vendor using some form of multi-party computation may claim to offer an MPC wallet, but the security efficacy and trustworthiness of those wallets can vary widely. After years of due diligence, many of the world’s largest custodians and traditional financial institutions have embraced MPC wallets specifically due to this combination of security and accessibility. Hosting one or multiple MPC nodes in secure cloud enclaves, such as AWS Nitro, with remote attestation and secret injection, yield some of the highest security frameworks available.

One of the biggest selling points of MPC (Multi-Party Computation) wallets is their distributed trust model. Traditional wallets can be a single point of failure; lose that private key or have it stolen, and your assets are gone. In the event of a lost or compromised key share, the remaining key shares can be used for key recovery. MPC key shards can be stored online since there is little benefit for a hacker in stealing a single shard. Therefore, MPC wallets can be more efficient and enable faster deployment of capital than cold wallets, with comparable security.

Bob then adds his salary of $96,300 to this amount and shares the final total of $1,196,800 with Sue. Pam shares that total with Bob, who again, has no concept of what values Sue or Pam have used to gain this figure. This number is meaningless to Pam, as she doesn’t know what positive or negative random value Sue used to arrive at it.

Multi-party computation does away with this problem, as the private key is now no longer held by any one party at any point in time. Instead, it is decentralized and held across multiple parties (i.e. devices), each blind to the other. Whenever the key is required, MPC is set in motion to confirm that all parties, or a predetermined number of parties out of the full set, approve of the request. Today, MPC is utilized for a number of practical applications, such as electronic voting, digital auctions, and privacy-centric data mining.

There is nothing preventing anyone from using multiple wallets once they have started using crypto. In fact, it is encouraged to use more than 1 wallet when storing cryptoassets. Another aspect of MPC that enhances wallet security above and beyond multi-sig is the fact that each key fragment is used off-chain and only the complete signature appears on-chain. This means that it’s indistinguishable as to whether it is signed by one or multiple people. Cryptocurrency wallets are a necessity for any individual or business wishing to buy, sell or trade on the blockchain.

Implementing familiar solutions for recovery will allow more people to feel comfortable using crypto. An estimated $100 billion dollars of Bitcoin (just Bitcoin) has been lost forever, because of private key mismanagement. We hope this blog post has helped you better understand what a MPC wallet is, how it compares to other smart contract wallet solutions such as Multisig wallets, and how to get started with MPC wallets. Unlike multi-signature (MultiSig) approaches, which may not support every blockchain, MPC can be applied to all EVM-compatible chains.