Multi-party accounting could provide better protection for crypto wallets


Multiparty computing (MPC) is a type of cryptographic protocol that allows multiple parties to jointly compute a function on their inputs without revealing those inputs to each other.

MPC can be useful when parties want to compute a function together, but want to keep their inputs private from others. For example, a group of banks might 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 contribution that they keep private. The process is performed by carefully encrypting the inputs and performing computation on the encrypted values ​​so that the end result is the desired function, while keeping the values ​​safe.

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

MPC is a complex and technical subject, and there are many variations and approaches to implementing MPC protocols. Some of the key challenges in the design of MPC protocols are ensuring the security of the protocol against various attacks, such as malicious parties trying to learn the inputs of other parties, and ensuring the efficiency of the protocol in terms of computational resources and communication costs.

What is a multi-party computational crypto wallet?

A multi-party computational crypto wallet is a crypto wallet that uses MPC technology to securely manage and store users’ assets. In an MPC crypto-wallet, the private keys used to access and manage users’ cryptocurrencies are divided into multiple parts called “stakes” that are distributed among the parties to the MPC protocol.

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

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

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

Pros and cons of multi-party computing crypto wallets

The main advantage of the MPC crypto-wallet is that it can provide additional security for users’ cryptocurrency assets by dividing the private keys used to access and manage the cryptocurrency into multiple parts and sharing these parts among different parties.

Tal Be’ery, co-founder and CTO of crypto wallet ZenGo, told Cointelegraph: “MPC solves the most pressing problem in cryptocurrency: the single point of error (SPOF) of the private key. This SPOF is the main reason users lose their funds: either by misplacing their private key , stealing their private key or accidentally sharing their seed phrase through a phishing scam.” He continued:

“In MPC, the unshared private key is replaced by multiple distributed secrets, often called ‘stakes’, so that a quorum of these shares can sign a message in a distributed manner – without generating a private key.

Be’ery mentioned that separating the parts of the private key and storing them in different places makes it harder for malicious actors to penetrate the user’s wallet.

“Having each of these shares in an orthogonal location (e.g., mobile device and server) makes it orders of magnitude more complicated for hackers to steal because an attacker would have to steal from multiple independent locations in different ways,” Be’ery said.

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

Parth Choudhary, founder and CEO of Web3 gaming and wallet app Glip, also told Cointelegraph: “MPC could make it so that the wallet provider can’t access or control the user’s money. It could also make it harder for hackers and other bad guys to steal private keys.” “

MPC cryptocurrency wallets have some advantages over traditional wallets. MPC wallets are more reliable because they can ensure that a user’s resources are still available even if one or more parties are unavailable or unresponsive. Privacy is also improved because private keys are split into multiple shares and shared among different parties.

By preventing any party from finding the user’s complete private key, the user has a lower chance of losing their funds. Security is also improved, as calculations are performed with encrypted outputs, preventing malicious parties from learning sensitive information.

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

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

Wallet security has always been important to anyone using cryptocurrencies, and the need for self-reliance has become even more apparent with the collapse of several high-profile cryptocurrency companies and the loss of millions of user assets.

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