UNDERSTANDING MULTI-PARTY COMPUTATION CRYPTO WALLETS
Wallet security and usability are the most important steppingstone for the mass adoption of cryptocurrency and self-custody. While multi-signature wallets have become the standard for organizations managing cryptocurrency as they strengthen the security of assets over single-key wallets, multi-party computation has been discovered to be the new cryptographic breakthrough to herald in a new generation of private key security.
According to Michael J. Casey, a senior advisor for blockchain research at MIT’s Digital Currency Initiative, Multi-Party Computation can be described as the “holy grail for both usability and private key security”. But how then can we understand Multi-party Computation?
Multi-Party computation at its core can be defined as a cryptographic technique that enables multiple parties to have access to computation without releasing any private information or related secret data. In simple terms, multi-party computation can be understood as a mechanism being explored in the wallet space to ensure that the concept of a single point private key to perform cryptocurrency transactions could be eliminated, ensuring more security and accessibility for the users.
One of the key features of multi-party computation is its ability to protect a single piece of sensitive data owned by one entity such as private keys which are normally stored in a hot or cold crypto wallet thus protecting the private key from being compromised by both cyber criminals and from internal fraud and conspiracy and preventing any employee or group of employees, from stealing digital assets.
Multi-Party computation has its complexities and is therefore understood through its implementations. One such is Threshold Signature Scheme (TSS) which is relevant to perform transactions for any blockchain. With the Threshold Signature Scheme (TSS), it is possible to create and distribute independently held secret shares of a private key such that no single person can control the private key privately. These shares in the private key material are distributed between nodes running on a multi-party computation protocol. As such, we can say no whole individual private key ever exists, only the distributed shares controlled by different people, spread across multiple nodes. To illustrate, imagine a group of people in a choir, they would have to sing in harmony to produce a special musical note which cannot be achieved by one voice alone. Similarly, when a transaction needs to be signed, rather than invoking a single key, like that choir, the multi-computation party is triggered, and each independent node cooperates to sign the transaction in a distributed way.
One wise proverb is written: “it takes nothing to break a single broomstick, but it takes a whole lot to break a bunch of broomsticks”. The truthfulness of these wise words cannot be overemphasized as multiple threats of hacking and losing access to huge amounts of funds have always been prevalent due to having all of these solely on one private key. But then with the multi-party computation technique, this is sure to be curbed.
Another intriguing feature of multi-party computation is that it is blockchain agnostic. Blockchain agnosticism is an important concept in blockchain technology and the use of cryptocurrencies in general because it allows different systems and tools to work together, regardless of the underlying protocols they are built on. Because the multi-computation party operates on the standardized cryptographic signature algorithm being used across most blockchains, implementing multi-party computation is possible in a scalable way. devices where each de bv vice processes each part of the private data using a share of a single
Multi-signature vs MPC
There is a high need to understand the differences between Multi-sig and MPC. We want to at this time focus on their differences.
Multi-party computation has 1 key being split up into multiple shares but for multi-sig, each party has its own definite private key, and for the transaction to succeed a minimum threshold of signers needs to approve it. With MPC, the signing process is distributed across multiple private keys. Together the shared parts cooperate to sign transactions in a distributed manner.
For multi-sig to become scalable, the blockchain needs to support it. But realistically, not all chains support multi-signature wallets, which usually come in the form of a smart contract.
As mentioned earlier, MPC is protocol agnostic, as it uses a standardized cryptographic signature. One such is ECDSA which is implemented by the vast majority of blockchains.
Another hurdle is in the support of dApps or most DeFi services. Multi-signatures might struggle to support decentralized services since multiple signatures are required for a transaction to be approved, unlike the common flow of a single click on MetaMask.
In describing MPC, this is what Coinbase’s Pete Kim has to say:
“An MPC-powered wallet (we call them dApp wallet)), can support anything and everything a normal self-custody wallet can. Not just sending, receiving, and trading NFTS, voting in governance, yield farming, web3 games, etc.”
Admittedly, MPC has a way more complex approval structure even though it would just output a single signature. Also, multi-party computation wallets may lack the ability to determine which key part was used to sign the transaction because all the shared keys contribute to the same signature. With MPC wallets, there is also a lack of support from hardware security modules also known as hardware wallets.
Realistically, we are still in the early days of multi-party computation, but it is becoming a compelling choice for wallet security and safety of digital assets as its preserves user experience while avoiding the storage of an entire private key online, offline, or even in a device.
Though MPC is yet to be widely adopted and used for seamless on-chain interactions such as MetaMask. However, it is very exciting to witness efforts around solutions such as Fireblocks, ZenGo, and Coinbase, as they work hard to enhance the security of users and organizations.
Smart contract/ Multi-sig wallet vs MPC wallet will always be a debate, and each will have its place in the ecosystem but when it comes to mass adoption one is certainly going to take an upper hand. Only time and the evolution of space will answer this.