What is multi-party computation (MPC)?
Multi-party computation (MPC) is a set of cryptographic protocols that enable multiple parties to perform joint computations without disclosing the input data of the participants.
The concept of MPC technology appeared back in the 1970s. Behind the creation of confidential distributed computing is Andrew Yao , a doctor of computer science . In the 1980s, he proposed a solution to the so-called millionaire’s cryptographic problem , in which Alice and Bob want to find out which of them is richer. At the same time, the main condition is that no one should know the exact amount of wealth, but only the inequality.
In the cryptocurrency industry, MPC began to be used in the 2010s. The technology was implemented for joint signing of transactions by participants of the same system. MPC makes it possible to divide the private key into parts that are evenly distributed between the parties to the protocol. This approach theoretically increases the level of security.
In 2020, a group of enthusiasts created the organization MPC Alliance , with the goal of “increasing awareness and adoption of the technology”. The alliance website has educational videos and articles about MPC capabilities.
How is MPC used in cryptocurrency wallets?
The MPC wallet is an innovative approach to the message signature system. Initially, there was a technology using one key on one side. Later, multisig wallets entered the market, where the transaction must be signed by several participants, while each of them has his own private key. In the case of the MPC wallet, the data of the segmented key is distributed between the parties.
At the same time, no device has access to the full version of the key. Using the MPC method to share the private key increases privacy and reduces the risks of hacking and loss.
How do MPC wallets work?
MPC wallets are becoming more popular due to solving the main problem of the crypto industry – ensuring the safety of funds. Let’s consider their working principle in more detail.
Basic principles of MPC wallets
MPC wallets are based on two technologies:
- distributed key generation (DKG) — ensures that the key will not be revealed in full at any time;
- threshold cryptography — protects information by encryption.
It is the DKG that divides the private key into fragments that will be in different parties and on different devices.
Threshold cryptography sets the minimum allowable number of participants required to sign a transaction. This approach ensures that neither side can act independently.
When signing a message, each device participates in the confirmation process, but does not completely reproduce the key, but only exchanges intermediate data.
Functionality of MPC wallets
One of the main functions of wallets based on MPC is the distributed storage of private keys. Some companies call this approach “keyless” . For example, the access code to MPC storage from the crypto exchange Binance resides on the owner’s device, in the cloud storage and on the company’s server.
Like any other cryptocurrency wallet, MPC-based tools allow you to buy and sell digital assets. The technology also stores transaction history and supports various cryptocurrencies, not limited to Bitcoin and Ethereum. In addition, the product may have a built-in swap function .
MPC wallets can be integrated with various platforms such as exchanges or decentralized applications.
Advantages and disadvantages of MPC wallets
The main advantage of MPC wallets is that the segmented private key is never displayed in its entirety on any of the devices. That is, it cannot be reproduced during key generation or by recovery. In this way, a number of potential threats, which are usually inherent in other methods of storing private keys, are eliminated.
MPC technology in cryptocurrency wallets:
- increases the level of privacy and security — it is able to perform calculations with users’ personal data without disclosing them;
- has high adaptability and scalability — allows you to customize the security protocol to your needs, in particular, choose the number of participants for asset management;
- makes wallets more resistant to cyber attacks;
- protects the system from internal threats — guarantees stability even in cases of malicious actions of individual participants.
For significant advantages, MPC wallets also have significant disadvantages. First of all, the implementation and configuration of the technology requires special knowledge of the cryptographic infrastructure. This can create problems for both developers and potential users.
However, experts are working on improving and simplifying the interface to increase the accessibility of MPC technology.
In addition, the necessary coordination between all system participants during the signing of a message can significantly affect the speed of transaction processing. At the time of writing, MPC wallets definitely cannot be considered the best choice for users who are actively trading digital currencies, where speed is important.
It is also worth mentioning the problem of compatibility of MPC with the existing blockchain infrastructure. And while there are already efforts to remove this obstacle, it will take some time before the technology becomes an integral part of the cryptocurrency ecosystem.
It is also worth knowing about disadvantages such as the complexity of managing the system in cases of corporate use, as well as the high cost of development and implementation.
What MPC wallets are there on the market?
Despite the novelty of the technology, some large companies have already managed to present their MPC-based products. At the end of 2023, the Web3 Wallet from the cryptocurrency exchange Binance entered the market.
In 2024, the Bybit team presented a similar product . The reliability of the program was checked by experts from the CertiK cyber security company.
Bitget exchange later also implemented MPC to strengthen security measures.
One of the popular MPC wallets is ZenGo. According to the project team, about 1 million people use the product , and the wallet has never been compromised.
How to start using MPC Wallet?
At the time of writing, some teams have already introduced wallets based on MPC. So, the user does not have to understand the installation and settings of the technology, but it will be enough to choose a provider, download the application and create an account.
The list of MPC wallets can be checked at the link .
A participant in the crypto industry gets access to all the benefits of the product while skipping most of the drawbacks. As companies have developed the infrastructure and interface. However, in any case, you should read the user agreement before using the product.
Conclusions
The security of digital assets largely depends on the reliable storage of the user’s private key. As a rule, by following the basic rules, you can avoid most threats to compromise your data. However, the use of MPC wallets significantly reduces a number of other risks associated with private key storage.
The technology is in demand even against the background of its shortcomings, such as slowness and complexity in settings. Moreover, a number of well-known Web3 companies are already implementing distributed computing technologies in their products, which indicates its potential.
