Multi-party computation could offer increased protection for crypto wallets

Published at: Jan. 11, 2023

Multi-party computation (MPC) is a type of cryptographic protocol that allows multiple parties to jointly compute a function over their inputs without revealing those inputs to each other. 

MPC can be useful when parties want to compute some function together but want to keep their inputs private from others. For example, a group of banks may want to determine the total amount of money in their joint account without revealing their account balances to each other.

In MPC, each party has a secret input which they keep to themselves. The process is done by carefully encrypting the inputs and performing the computation on the encrypted values so that the final result is the desired function, all while keeping the values secure.

MPC protocols typically involve multiple rounds of communication between parties exchanging encrypted messages and performing various computations on their own inputs.

MPC is a complex and technical topic, and there are many variations and approaches to implementing MPC protocols. Some key challenges in designing MPC protocols include ensuring that the protocol is secure against various attacks, such as malicious parties trying to learn other parties' inputs, and ensuring that the protocol is efficient with regard to computational resources and communication costs.

What is a multi-party computation crypto wallet?

A multi-party computation crypto wallet is a crypto wallet that uses MPC technology to manage and store users' assets securely. In an MPC crypto wallet, the private keys used to access and manage the users' cryptocurrency are split into multiple parts, known as “shares,” which are distributed among the parties involved in the MPC protocol.

The key advantage of using MPC in a crypto wallet is that it allows the users to securely manage their cryptocurrency without any single party having access to the entire private key. This can help protect against various attacks, such as hackers attempting to steal users' cryptocurrency by compromising a single party's private key share.

Recent: Remote work could redefine the global workforce for good

MPC crypto wallets typically use a combination of cryptography and secure communication protocols to enable different parties to jointly manage users' cryptocurrency. The process can involve complex calculations and communication between the parties, but the result is a secure and efficient way to manage users' cryptocurrency assets.

Crypto wallets like ZenGo use multi-party computation to improve wallet security, and Coinbase has the feature enabled for their non-custodial wallet. As a result, MPC crypto wallets can provide increased security and protection against certain attacks. Still, they also require more computational resources than other crypto wallets.

Benefits and drawbacks of multi-party computation crypto wallets

The main advantage of an MPC crypto wallet is that it can provide increased security for users' cryptocurrency assets by splitting the private keys used to access and manage the cryptocurrency into multiple parts and distributing those parts among different parties. 

Tal Be'ery, co-founder and chief technology officer at crypto wallet ZenGo, told Cointelegraph, “MPC solves cryptocurrency's most pressing problem: The single point of failure (SPOF) of the private key. This SPOF is the main reason users lose their funds: Whether by misplacing their private key, having their private key stolen, or accidentally sharing their seed phrase through a phishing scam.” He continued:

“With MPC, the indivisible private key is replaced by multiple distributed secrets often called ‘shares,’ such that a quorum of these shares can distributively sign a message — without creating a private key.”

Be'ery mentioned how separating the pieces of the private key and storing them in different locations makes it more difficult for malicious actors to compromise a user's wallet.

“If each of these shares is held in an orthogonal place (e.g., mobile device and a server), then it makes it orders of magnitude more complicated for hackers to steal, as the attacker would need to steal from multiple independent places in different ways,” Be'ery said.

“This type of architecture also solves the dilemma discussed above: Creating copies of shares as a backup against loss is much easier, as no one share represents the ‘the and only’ private key,” he added.

Parth Choudhary, founder and CEO of Glip — a Web3 gaming and wallet application — also told Cointelegraph, “MPC could make it so that a wallet provider can't get to a user's money or control it. It may also make it harder for hackers and other bad people to steal private keys.”

MPC cryptocurrency wallets have some advantages over traditional wallets. MPC wallets are more reliable since they can ensure that a user's assets are still accessible, even if one or more parties becomes unavailable or unresponsive. Privacy is also improved because the private keys are split into multiple shares and distributed among different parties.

By preventing any single party from discovering the user's complete private key, the user has a reduced chance of losing their funds. Security is also improved since the computations are carried out on encrypted outputs, preventing malicious parties from learning sensitive information.

However, there are also some potential disadvantages to using an MPC crypto wallet. One of these disadvantages is the complexity associated with MPC protocols, especially for non-experts in cryptography. So, an MPC wallet can be more challenging to set up for the average person.

Recent: Crypto layoffs mount as exchanges continue to be ravaged by the prevailing bear market

Additionally, due to the computational resources needed by MPC protocols, they may be slower to operate. In this regard, an MPC wallet may be less efficient than other crypto wallets. Finally, not all cryptocurrency assets can be managed using an MPC crypto wallet, and some assets may be difficult or impractical to manage using MPC.

Wallet security has always been important for anybody who uses cryptocurrency, and the need for self-custody has become all the more apparent with the collapse of several high profile cryptocurrency firms and the loss of millions in user funds.

The decision to use an MPC crypto wallet will depend on the specific needs and requirements of the user. For example, it may be useful for users who prioritize security and privacy, but some people may prefer a more simple solution.

Tags
Related Posts
Crypto wallets in 2021: From hot to cold, here are the options
After another jump in the price of major cryptocurrencies at the end of 2020, crypto enthusiasts began to mine, sell and buy currencies with renewed vigor — which means that nowadays, the topic of custodying cryptocurrencies is more relevant than ever. But unlike the past bullish waves, this time many users are also concerned with how to protect their assets. The blockchain industry is developing, and traders have become noticeably smarter, but scammers and thieves have also become much more agile. This is also indicated by the period appearance of news related to exploits and rug pulls, not only regarding …
Technology / March 14, 2021
Secure Bitcoin self-custody: Balancing safety and ease of use
Bitcoin’s supply is capped at 21 million, but a significant proportion of that total sum is likely lost forever. This situation is due to a variety of reasons such as lost private keys and discarded storage devices containing substantial amounts of Bitcoin (BTC). When Bitcoin owners are not being careless with their wallet passwords, they can sometimes be targeted by hackers looking to steal their precious crypto. Those who utilize third-party custodial solutions place their Bitcoin fortune at the mercy of the security protocols adopted by such services. Indeed, several attack vectors are constantly being utilized to try and gain …
Technology / Jan. 17, 2021
Simple steps to keep your crypto safe
As the cryptocurrency market is in the midst of a major bull run with Bitcoin (BTC) approaching its all-time highs, the security concerns of cryptocurrency self-storage are becoming more relevant than ever. On Nov. 12, Bitcoin — the world’s largest cryptocurrency by market cap — surpassed a $16,000 threshold for the first time since the 2017 rally landing BTC price at an ATH of $20,000. After hitting $16,300, Bitcoin has only ever been above this price for 12 days in its entire history. As Bitcoin is now sitting at its highest historical levels and the crypto community is anticipating more …
Technology / Nov. 15, 2020
FLUX, SFP and Badger DAO surge even as Bitcoin price falls to $47K
The year-long mantra that the crypto market would see a blow-off top in December has proven to be a dud thus far and for the last week, most cryptocurrencies have been under sell pressure and Bitcoin (BTC) is encountering difficulty in trading above $47,000. That said, it's not all bad news for cryptocurrency holders on Friday because several altcoins have managed to post double-digit gains due to new exchange listings and protocol upgrades. Data from Cointelegraph Markets Pro and TradingView shows that the biggest gainers over the past 24-hours were Flux (FLUX), SafePal (SFP) and Badger DAO (BADGER). FLUX benefits …
Bitcoin / Dec. 10, 2021
Seven common mistakes crypto investors and traders make
Investing in cryptocurrencies and digital assets is now easier than ever before. Online brokers, centralized exchanges and even decentralized exchanges give investors the flexibility to buy and sell tokens without going through a traditional financial institution and the hefty fees and commissions that come along with them. Cryptocurrencies were designed to operate in a decentralized manner. This means that while they’re an innovative avenue for global peer-to-peer value transfers, there are no trusted authorities involved that can guarantee the security of your assets. Your losses are your responsibility once you take your digital assets into custody. Here we’ll explore some …
Adoption / March 31, 2022