Stolen privacy keys are one of the major reasons behind nightmares for crypto wallet development teams. Over the years, cryptocurrencies worth millions of dollars have been wiped-out to hacks, and no one including the biggest brands could fight it out completely. While multi-signature protocols did strengthen the security layer, they have their own limitations, discussed later in this blog primarily dedicated to MPC crypto wallet development.
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Table of Contents
MPC (Multi-Party Computation) crypto wallets use MPC technology to provide enhanced security for storing and managing cryptocurrencies. These wallets use a combination of advanced cryptographic techniques and distributed computing to securely store and manage private keys, which are used to access and manage cryptocurrency assets.
MPC wallets typically use a technique called “threshold signatures” to ensure that private keys are only accessible to authorized parties. With threshold signatures, a private key is split into multiple “shares” that are distributed among different parties. In order to access the private key and manage the crypto assets, a certain number of shares must be combined.
Because the MPC wallet splits the private key into multiple shares and distributes among different parties, it becomes much more difficult for any one party to gain unauthorized access to the private key or the cryptocurrency assets.
Additionally, the wallet requires multiple approvals from different parties before a transaction is executed, further increasing security.
Upgrading your wallets with MPC algorithm enhances the user experience with the following:
MPC wallets may vary in terms of implementation and security protocols. In general, the following 3 phases are common in their operation.
Key generation
The first process includes generating public and private keys within the wallet and furthermore the registry of both the keys of the devices.
Unlocking devices generate a set of public and private keys, which are combined with other devices to create a public and private key for the MPC crypto wallet. This multi-signature wallet design aims to distribute control and prevent a single point of failure, making it more secure against hacking or malicious attacks.
The below mathematical formula specifies the generation of these keys:
F (d1, d2, d3) = max (d1, d2, d3)
This means that; each of the participants each has a private data (recognized as d1, d2, up to dN).
By incorporating private data, the public function “F” can be utilized to calculate the value of the private data, enabling the use of the wallet. The cryptographic signature algorithm selected for this purpose can be ECDSA, EdDSA, Schnorr, or any other suitable algorithm.
As a result, the sum of these private data provides a cryptographic certainty necessary to give access to the wallet.
Address generation
Anyone from the signing parties can request public key generation. This makes it easier to receive the desired amount of money through that address.
The process of deriving the public key is so complex that it is almost impossible to reverse it. This makes it safe to generate a unique public key for each participant, from which additional public keys can be derived for allocation of funds to the MPC wallet.
The objective of every MPC wallet development project should be to distribute control of the private key among multiple devices, reducing the risk of loss or theft of funds.
Access to funds
Just as the generation process requires specific conditions, access to funds in the MPC wallet is only possible if the conditions established during its creation are satisfied. For example, if three devices with private data were involved in the generation process, all three devices must be present to access the wallet.
The security of the devices may be ensured through cryptographic systems, hardware security modules (HSM), or other security measures. The reality is that only the devices that were originally paired can access the MPC wallet and control the funds.
Just like for any digital product, MPC wallet development too goes through the SDLC process. If you plan a MPC crypto wallet development project, then research existing MPC crypto wallets and understand the underlying technology and cryptographic techniques used. Plan the features, functionalities, and user experience of your wallet.
Next steps to follow:
This includes staying up-to-date with the latest security vulnerabilities and patches, and monitoring the network for any unusual activity.
MPC enables a group of participants to collaborate in computing a function or executing a transaction while keeping their inputs and outputs confidential from each other.
Meanwhile, a Multisig wallet requires multiple approvals or signatures from various people or entities before a transaction can be executed, providing added security to prevent unauthorized access or misuse of the funds in the wallet.
Multisig wallets are declining in popularity due to a variety of factors, including insufficient protocol adaptability and rigid operational structure.
MPC wallets are now a preferred solution for institutional-level custody solutions. Leading financial institutions, like Revolut, have already declared their move to MPC, which eliminates the presence of entire cryptographic keys, thereby providing protection against both internal and external threats.
Very soon, joining the list of MPC wallet providers is AnCrypto, a decentralized multi-chain crypto wallet that will release their MPC wallet later this year.
In addition, recent advancements in consumer-focused products have made it easier for MPC wallet users to engage with the wider web3 ecosystem. For example, purchasing and selling non-fungible tokens (NFTs) on popular NFT marketplaces has become more user-friendly and secure.
MPC has several potential use cases, some of which include:
CMP is a variation of MPC that enables constant computation over encrypted data, meaning that the encrypted data can be processed and updated continuously without revealing the underlying information.
Both MPC and CMP wallets provide users with better privacy and security compared to traditional digital wallets, where data is stored and processed by a single central entity. MPC and CMP wallets also allow users to maintain more control over their personal and financial information, as they do not need to rely on a central authority to manage their data.
Moreover, both the wallets use decentralized networks to process and store data, enabling users to securely and privately manage their digital assets and transactions.
While they are just introduced, Fireblocks published an insightful post explaining their new protocol. The blog mentions a new security feature that automatically refreshes the MPC crypto wallet in minutes-long intervals.
That means a malicious actor only has a few moments to steal all the key shards before the shares are refreshed and they have to start over – effectively adding a new layer of protection to our multi-layered security system.
As per Fireblock, their MPC-CMP enables digital asset transactions to be signed in just 1 round, meaning that it offers the fastest transaction signing speeds of any MPC algorithm by 800%.
While traditional cold wallets require physical proximity and trust for certain employees to operate these wallets without making an error or acting maliciously, MPC-CMP operationalizes cold wallets – creating a solution for today’s high-paced crypto markets.
Antier is the backbone behind successful launch 100+ crypto wallets across a range of blockchain products. As pioneers of white label wallet solutions, we have the high-level view of the challenges and opportunities through the wallet development journey. We believe 2023 will witness a transition from multi-sig to MPC protocols for all web3 products.
If that excites you, we are eager to answer any questions on MPC crypto wallets.
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