What Is MPC Wallet

Have you heard of MPC? You might ask, what is MPC?

Multi-Party Computation (MPC) it is a cryptographic technique enabling multiple parties to compute a function over their private inputs without revealing individual inputs to each other. Essentially, it allows groups to collaborate on tasks while keeping their data confidential.

MPC (Multi-Party Computation) is a cryptographic technique that enhances the security of digital wallets by distributing the private key across multiple parties. This method significantly reduces the risk of theft or loss compared to traditional wallet methods AKA seed phrase wallets.

A practical example is three colleagues wanting to calculate their average salary without disclosing individual incomes. MPC facilitates this by dividing the information into encrypted shares, enabling the calculation without revealing underlying data. Hmm this sounds similar to ZK (Zero Knowledge) rollups tech.

MPC’s core principles are privacy and correctness. It ensures that sensitive information remains protected and that the computed result is accurate, even in the presence of dishonest participants.

MPC Wallets

The mantra of “not your keys not your crypto” is as powerful today as it was in 2017. But the result? Lost and stolen seed phrases, misplaced private keys, stress for new users, and a flight to CeFi exchanges and ‘crypto banks.’ This is because people don’t want to be responsible for their seed phrases.

An estimated $100 billion dollars of Bitcoin (just Bitcoin) has been lost forever, because of private key mismanagement.

MPC wallets allows the creation of a secure key management system without a single point of failure (the proverbial “private key”) in which multiple parties (for example a remote server and a mobile phone) can jointly perform all needed cryptographic functions (like key generation, transaction signatures and transaction verification) while neither of the parties reveal their respective secrets. It is important to note that in an MPC wallet a single private key is never generated, split, or reconstructed in the process. This makes it superior to traditional models based on a single private key.

Unlike traditional single-key wallets which are vulnerable to loss or theft, MPC wallets enhances security by requiring multiple parties to authorize transactions. This eliminates the risk of a single point of failure. Additionally, MPC wallets maintain user privacy by not revealing individual data during computations.

At this point you should have an idea of how different MPC Wallets and Seed Phrase wallets are. Let us take a deeper look at their differences.

 How MPC Wallets Differ From Regular Wallets

MPC wallets diverge significantly from traditional wallet types such as single-key, multi-signature, and hardware wallets. 

Single-key wallets rely on a single private key, making them susceptible to loss or theft. In contrast, MPC wallets distribute the private key into multiple shares, enhancing security. 

Multi-signature wallets require multiple signatures for transactions, which can be cumbersome and affect wallet availability. MPC wallets offer greater flexibility by requiring only a threshold of shares for authorization, streamlining the process.

Hardware wallets depend on physical devices, limiting accessibility and exposing them to potential damage. MPC wallets are software-based and don’t rely on physical hardware, providing greater convenience. 

Also, MPC wallets are protocol-agnostic and prioritize user privacy, unlike many other wallet types. This means that an MPC wallet is not tied to a specific blockchain or cryptocurrency protocol without being dependent on any particular one. It can operate on multiple blockchains without requiring significant modifications.

Benefits of MPC Wallets

MPC wallets offer several advantages over traditional wallet types:

Enhanced Security: By distributing the private key across multiple parties, MPC wallets greatly reduce the risk of theft or unauthorised access. 

Decentralisation: The distributed nature of MPC wallets minimises reliance on a single entity, promoting decentralisation and reducing counterparty risk.

Data Privacy: MPC protects user privacy by preventing the disclosure of sensitive information during transactions. 

High Accuracy: The cryptographic foundation of MPC ensures precise computations and reduces the likelihood of errors. 

Improved Availability: With multiple parties involved, the likelihood of wallet inaccessibility due to a single point of failure is diminished.

Risks of MPC Wallets

MPC wallets offer a lot of benefits, but they are not perfect, so let us take a look at their drawbacks:

Complexity: The underlying technology can be complex, requiring specialised knowledge for implementation and maintenance.

Interoperability: MPC wallets may not be compatible with all blockchain networks or applications, limiting their usability.

Cost: Implementing and maintaining an MPC wallet can be more expensive than traditional options due to the complex infrastructure involved.

Operational Risks: There’s a risk of collusion among parties holding shares of the private key, potentially leading to unauthorised access. Note, this collusion is highly unlikely.

Regulatory Challenges: The regulatory landscape for MPC wallets is still evolving, and compliance can be complex. 

It’s important to carefully take into consideration these factors when considering an MPC wallet for your needs. 

Popular MPC Wallets

MPC wallets have gained a lot of traction in recent years, with several prominent players emerging in the market. Let us take a look at some of the most notable names:

ZenGo

Focus: Individual users and Institutions

Key Features: User friendly interface, biometric authentication, support for various cryptocurrencies, Legacy Transfer feature, Decentralised recovery kit  and a strong emphasis on security through MPC technology.

Fireblocks

Focus: Institutional investors

Key Features: Robust security measures, integration with major exchanges and protocols, and support for a wide range of cryptocurrencies.

Binance Web3 Wallet

Focus: Mass market

Key Features: Integration with the Binance ecosystem, MPC-based security, and a user-friendly interface. Supports a huge number of coins and tokens.

Coinbase Smart Wallet (This is not fully an MPC Wallet)

Focus: Coinbase users

Key Features: Integration with the Coinbase platform, MPC elements for enhanced security, and a focus on user experience.

Qredo

Focus: Institutional investors

Key Features: Cross-chain liquidity, decentralised governance, and a strong emphasis on security through MPC technology.

It’s important to note that the MPC wallet landscape is rapidly evolving, with new players and features emerging regularly.

Conclusion

MPC wallets represent a huge advancement in the space of digital asset security. By distributing private keys across multiple parties, they mitigate the risks associated with traditional wallet AKA Seed Phrase wallet structures. While the technology presents some complexities and challenges, the benefits in terms of security, privacy, and decentralisation are compelling. As the cryptocurrency ecosystem grows, MPC wallets are poised to become a cornerstone of secure digital asset management.

MPC Wallet – What is MPC? – Zengo

Binance’s Innovative MPC Wallet | Binance Blog

What Are Multi-Party Computation (MPC) Wallets? | CoinMarketCap