When presenting the advantages of MPC and threshold signatures over multi-signature wallets, we usually discuss the main advantage of being coin and asset agnostic. By using MPC protocols Curv can support any digital asset regardless of its specific implementation.
Since some tokens do not have a built-in support for multi-sig capabilities, workarounds have been developed to allow to so by using protocol-specific methods such as smart contracts which require multiple parties to sign transactions. This has been the only approach available until recently for blockchains such as Ethereum.
Below is a short summary of the disadvantages of using smart contracts to implement multi-signatures:
- Extra fees — Activating smart contracts costs network fees or gas. For example, on Ethereum, creating new wallets, adding a new deposit address, and activating a smart contract for sending funds cost significantly more gas compared to using a simple single-sig address.
- Security — As we mentioned in prior blogs, although smart contracts may increase governance over the assets by increasing the number of approvers and signers, smart contracts introduce security issues such as potential bugs due to bad implementations such as the parity wallet incident.
- Exchanges and wallet support — when creating transactions that originate from a multi-sig smart contract, the address placed as the recipient value is not the final address to which the funds are being sent. Instead, the smart contract encodes the information within the smart contract itself as an internal transfer. The receiving wallet must support parsing internal transactions in order to show updated balances.
- IT hygiene — Once a smart contract is created, it is impossible to change or rotate the underlying keys behind it. Meaning, you cannot add/remove keys or change the threshold (M of N) without moving the assets to a different wallet.
By using Curv’s institutional MPC wallet, all of the above-mentioned problems are eliminated and no extra security risks or costs are added to your single signature secure wallet.
