What are MPC Wallets and How Do They Work? 😎
As the crypto industry evolves, there’s a growing demand for secure and accessible methods to store digital assets. MPC technology is pushing the standards of privacy and reliability to new heights.
In this piece, we’ll dive into how MPC-based wallets work and what perks they offer.
What’s Multi-Party Computation (MPC)? 🤔
Multi-party computation (MPC) is a set of cryptographic protocols that allow multiple parties to perform joint calculations without revealing their input data.
The concept of MPC technology dates back to the 1970s, developed by Dr. Andrew Yao. In the 1980s, he proposed a solution to the so-called millionaire’s problem, where Alice and Bob want to find out who’s richer without disclosing their actual wealth.
The crypto industry started adopting MPC in the 2010s, using it for joint transaction signing within a system. MPC allows splitting a private key into parts that are evenly distributed among protocol parties. This theoretically enhances security.
In 2020, a group of enthusiasts formed the MPC Alliance to “raise awareness and implement the technology.” Their website offers educational videos and articles about MPC capabilities.
How Is MPC Used in Crypto Wallets? 💰
An MPC wallet is an innovative approach to the message signing system. Initially, there was technology using a single key by one party. Later, multi-sig wallets emerged, requiring several participants to sign a transaction, each holding their own private key. With an MPC wallet, segmented key data is distributed among the parties.
No single device has access to the full version of the key. Using MPC to split the private key enhances confidentiality and reduces hacking and loss risks.
How Do MPC Wallets Work? 🛠️
MPC wallets are gaining popularity by solving the main problem of the crypto industry—securing funds. Let’s look closer at their operation principles.
Key Principles of MPC Wallets
At the heart of MPC wallets are two technologies:
- Distributed Key Generation (DKG) ensures that the key is never fully present at any one time.
- Threshold Cryptography protects information through encryption.
DKG splits the private key into fragments that reside with different parties on different devices.
Threshold cryptography sets the minimum number of participants needed to sign a transaction. This approach ensures that no party can act independently.
During message signing, each device participates in the confirmation process but does not recreate the full key, only exchanging intermediate data.
MPC Wallet Features
One of the main functions of MPC wallets is the distributed storage of private keys. Some companies refer to this approach as “keyless.” For example, access to Binance’s MPC storage is on the owner’s device, in cloud storage, and on the company’s server.
Like any other crypto wallet, MPC-based tools allow buying and selling digital assets. The technology also maintains transaction history and supports various cryptocurrencies, not limited to Bitcoin and Ethereum. Additionally, a swap feature may be integrated into the product.
MPC wallets can be integrated with different 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 full form on any device. Thus, it cannot be recreated during key generation or through recovery. This mitigates many potential threats usually associated with other private key storage methods.
MPC technology in crypto wallets:
- Enhances privacy and security by performing calculations with personal data without revealing it.
- Offers high adaptability and scalability, allowing users to customize security protocols, including choosing the number of participants to manage assets.
- Makes wallets more resistant to cyberattacks.
- Protects the system from internal threats, ensuring stability even in cases of malicious actions by individual participants.
Despite significant advantages, MPC wallets also have substantial drawbacks. Mainly, implementing and configuring the technology requires specialized knowledge of cryptographic infrastructure, posing challenges for developers and potential users.
Moreover, the necessary coordination among all participants during message signing can significantly affect transaction processing speed. As of this writing, MPC wallets are not the best choice for users engaged in active digital currency trading, where speed is crucial.
Issues of MPC compatibility with existing blockchain infrastructure are noted, though developments are underway to overcome this barrier. It will take some time before the technology becomes an integral part of the crypto ecosystem.
Also, managing the system in corporate use cases and the high cost of development and implementation are drawbacks to consider.
Existing MPC Wallets on the Market
Despite the novelty of the technology, some major companies have already introduced their products based on MPC. By the end of 2023, the Web3 Wallet by Binance hit the market.
In 2024, a similar product was presented by the Bybit team. The application’s reliability was verified by cybersecurity company CertiK.
Later, the exchange Bitget also implemented MPC to enhance security measures. One of the popular MPC wallets is ZenGo. According to the project team, about 1 million people use the
How do you start using an MPC wallet? 🤔
Right now, some teams have already launched MPC-based wallets. So, you don’t really need to sweat the setup and all the tech stuff. Just pick a provider, download the app, and you’re good to go with creating your account.
You can check out a list of MPC wallets through the link.
As someone in the crypto biz, you get all the perks of the product without most of the downsides, ’cause the companies have already sorted out the infrastructure and the user interface. But yeah, definitely take a peek at the terms of use before you dive in. 🚀
What is an MPC Wallet in Simple Terms?
An MPC wallet “splits” the private key into fragments, which are stored with different parties on different devices. This setup makes it super tricky for any single party to access the entire key by themselves!
What Cryptocurrencies Can Be Stored in an MPC Wallet?
The variety of cryptocurrencies supported by an MPC wallet depends on the specific wallet. Generally, this technology is compatible with Bitcoin, Ethereum, USDT, USDC, and other assets. So, pretty much you can keep most of your digital coins safe in there.
What MPC Wallets Are Available? 🌍
There are several MPC wallets on the market. Major players like Binance and Bybit have launched their products, as well as projects like ZenGo, Qredo, and Fireblocks. So, you’ve got options to choose from depending on your needs and preferences.
How Do You Use an MPC Wallet? 🛠
Using an MPC wallet is almost the same as other types of wallets. You can buy, sell, and exchange cryptocurrencies. The main difference lies in the segmented storage of the private key, which adds an extra layer of security. Just download the app, create an account, and you’re all set to start transacting securely!
These are the essentials you need to know about MPC wallets, making it easier for you to navigate the realm of secure cryptocurrency storage! 😊
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