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Reasons MPC Works Well For Online Wallets

Multi-signature wallets have become the norm for institutions that manage cryptocurrencies as they enhance your security when you use one key wallet. Recently, however cryptographic breakthroughs in Multi-Party Computation (MPC) are creating a new type of management for keys.

MPC is now being praised as ‘the holy grail of both security and usability according to Michael J. Casey, head of blockchain research at the MIT’s Digital Currency Initiative.

But as the case for most technological advancements there is confusion and misinformation frequent in the early stages. We are able to leverage the most advanced technologies in MPC and have spent lots of time educating customers and regulators as well as partners about its use and application instances.

In this article we’ll look at the various reasons we believe that threshold and MPC signatures have outperformed multi-sig technology , and finally provide the flexibility and security required to be an entirely new type of security for private keys.

1. MPC Has No Single Point of Failure

Similar to a Multi-Signature setup, the private key in an MPC-based system is not created or held in one singular location. MPC technology shields keys from getting compromised by cybercriminals as well as from internal corruption and fraud. It also prevents any employee, or group of employees from stealing the digital assets.

2. MPC Solutions Are Protocol Agnostic

Not all cryptocurrency protocols accept Multi-Sig and those that do, use very different implementations from one another. This makes it harder to Multi-Sig providers to integrate with new chains.

In addition, not all wallets support transactions from multi-sig smart contracts. This creates a range of problems and friction with some transactions when funds are transferred from an address associated with a Multi-Sig smart contract.

But, MPC is based on the standardized digital signature cryptography (ECDSA which is also known as EdDSA) which is used across most blockchains, making the application of MPC possible across multiple blockchains. That means that organizations who use MPC can swiftly and efficiently onboard new cryptocurrencies onto their platform.

3. MPC Technology Has Academic Validation and Practical Implementation

While MPC technology was only used to cryptocurrency wallets relatively recently It has been the area of academic study from the beginning of the 1980s onwards and has gone through numerous, public peer review.

In this regard, all vendors that use MPC have engaged and invested heavily in the cryptographic assessment and penetration testing providers, including NCC Group, to review their implementation.

As it is the case that MPC implementation is incompatible with blockchain protocols (see number 2 above) the threat surface is very small and each review fixes implementation for all the protocols. However, this isn’t the case with Multi-Sig solutions that are on-chain, as each protocol requires an MPC wallet service provider use the appropriate code.

Some well-known examples of instances where bad Multi-Sig implementations went wrong

The Multi-Sig Parity Wallet – Poor implementation allowed malicious actors to steal around $30m worth of Ethereum on one of the biggest hacks of a wallet to date.
Parity Wallet Hacked (Again) Hackers has gained access to the wallet , and then froze $300 million worth of Ethereum. Customers could lose up to $350,000 worth of their digital asset.
Security vulnerabilities in Bitcoin Multi-sig The team of researchers discovered A vulnerability in the Bitcoin Multi-Sig check implementation was deployed in development environments and, despite the popularity of this software, the flaw persists.

4. MPC Technology Offers Better Operational Flexibility

If your company expands, you will need to alter the way you access and transferring any digital resources. This could include deciding the amount of employees you need to sign a transaction or add new key shares once you have hired new employees or revoking shares after employees leave and modifying the required threshold to sign transactions (e.g. from 3 of 4 to “4 of 8′).

In this case Multi-Sig addresses can present a variety of challenges to your business since they are already set to the wallet.

So, once an account is set up, the ‘M of N structure is fixed. If a new employee is hired and you need to alter your signature on a Multi-Sig wallet ‘3 of 4’ to 3 of 5, as an example, you’d have to:

a. Create a new wallet with the new scheme

b. Transfer all of your assets to the new wallet

C. Notify all your counterparies that the address for your wallet has changed.

Step (c) can be extremely difficult and potentially risky since counterparties might accidently send funds to an old deposit address. If the funds were sent there, the funds would be lost forever.

However, MPC allows for ongoing modifications and maintaining for the Signature Scheme. For example, changing from a “3 of 4′ set-up to any other setup would require shareholders to agree on the new distributed computation , as well as the creation of a new user share. The cryptocurrency MPC wallet (deposit address) is maintained, so that:

You don’t need to create the wallet from scratch.
You don’t need to move any money
Your counterparties can continue to use the existing address

This makes the process of scaling operations or making changes to the way that your team works effortless and reduces the chance of losing funds due to critical operational changes.

5. MPC Allows for the Lowest Transaction Fees

Multi-Sig-based wallets whether they’re Bitcoin P2SH Multi-Sig or Ethereum smart contract-based Multi-Sig have higher costs than regular, single address transactions.

The MPC-based wallets are represented on the blockchain as one wallet address which has the real distributed signature computation on the blockchain. This results in having the lowest fees that can be incurred for transactions.

This can be crucial in the event of releasing hundreds of transactions every day, in particular in B2C applications.

6. MPC-based solutions provide for hidden Signatures and Off-Chain Accountability

Accountability is probably one of the aspects that is most often misunderstood of an MPC-based system.

While it may appear beneficial for an company to have transparency on the chain regarding the signing of signatures However, it creates many privacy issues. However it creates an issue with security since it immediately discloses the signing scheme and workflow for all.

Institutions might not want to divulge: who’s able to sign, how many users signedthe form, the number of users who are required to sign, among other information that is sensitive, because they could provide physical attack surfaces against the organization.

In addition, MPC gives off-chain responsibility for each co-signing partner so that they can verify which keys participated in signing without the information being made available to the public. Some, for instance, keep an audit log of the keys involved in every signature cycle, while customers are, if they wish, are also able to maintain an audit log on their end.

Additionally, due limitations regarding fees and mutability, certain Enterprise Wallet Providers who use Multi-Sig on-chains can only employ 3-signature schemes for their hot-wallets, regardless their customer’s organizational structure and rules (See #3 and #4).

In most cases, one share is with the wallet service provider, one share is shared with the client and one share is stored as backup. However, as the share of the customer is distributed across all the customer’s users When a transaction is completed, there is no guarantee of knowing exactly which of those users used the share. Therefore, any claim of ‘accountability’ unreliable.

Solutions built on MPC However, they eliminate these weaknesses and are able to give a complete and accurate record that allows the true auditability.

7. MPC Technology Reinforces Hardware Isolation

Hardware Isolation Modules (HSMs and Secure Enclaves) are a vital way to protect cryptographic information in the event of a system breach. But they’re not enough to provide the most secure option for secure your private keys.

As well, MPC alone is only part of the solution.

It is the reason why this has led to a perception in which both MPC and HSMs are substitute technologies.

Instead, the use of MPC along with the use of hardware isolation mechanisms, like HSMs is essential as HSMs are not entirely bulletproof. (See this evaluation of HSM technology).

Moreover, implementations with HSMs have the disadvantage that, if you lose the token that authenticates as well as the HSM client gets compromised a hacker can steal the funds from the. In reality, the compromise of the client’s credentials or the transactions generation program is the only way to accomplish this, and the items are not stored in the HSM.

We mix MPC and HSM technologies to dramatically improve the security of our system and create a real defense-in-depth security architecture.

In this manner the entire MPC crucial materials are stored, and then distributed to hardware isolated Intel SGX Technology-enabled server (Intel’s Secure Enclave) and mobile device secure enclaves (TEE). Furthermore the execution of the MPC algorithm, as well as its Policy Engine are all part of the secure enclosure, stopping malicious internal and external actors from modifying the process or the policy engine.


Institutions recognize that to be competitive they must make no compromises between security and accessibility. MPC technology allows companies to capture markets and use its digital resources in a safe environment that simply was not feasible prior to.

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