MPC
1. Broadly speaking, multi-party computation (MPC) enables a group of mutually distrustful parties to jointly compute input functions while protecting the privacy of these inputs. In cryptography, this is particularly useful for safekeeping private keys used to decrypt data or generate digital signatures.
MPC wallet eliminates single points of failure by using Threshold Signature Scheme (TSS). Under this paradigm, we create and distribute shards of private keys so that no one person or machine has complete control over the private key—a process called distributed key generation (DKG). We can then jointly generate the public key by merging the key shards without exposing each party's key shards.
To sign messages and transactions, each party inputs a shard of its key along with a public input (the message to be signed) to generate a digital signature. Thereafter, anyone who knows the public key (i.e. the validator node) should be able to verify the signature. Since the keys are combined and the signatures are generated off-chain, transactions generated from an MPC wallet are no different than those from a traditional private key wallet.
This provides MPC wallet users with a certain level of privacy. This functionality is available out-of-the-box for organizations that wish to keep their signature schemes and signer activities out of the public eye, as a series of processes occur off-chain. This way, organizations can keep internal logs about participating signers without making them publicly available.
Private key rotation is another MPC protocol that takes in individual key shards and outputs a new set of key shards. Old key shards can be removed and replaced with new key shards, which can be used in the same way without changing the corresponding public keys and addresses.
2. **Advantages of MPC wallet**
- No single point of failure. A complete private key is never concentrated on a single device at any time. There is no mnemonic phrase either.
- Adjustable signature scheme. Authorized quorums can change as individual and organizational needs change without changing addresses. Organizations can dynamically adjust signature schemes without having to notify counterparties of a new address each time.
- Fine-grained access control. Institutional users can assign an unlimited number of transaction approvers to a policy and delegate permissions that accurately reflect organizational roles and security measures (time locks, MFA multi-factor authentication, fraud monitoring). Individuals can choose a semi-custodial approach through MPC wallet-as-a-service, where a third party holds some of the key shards.
- Lower transaction costs and key recovery costs. MPC wallets are represented on the blockchain as a single address, and their gas fees are the same as regular private key addresses. This is very important for users who make hundreds of transactions per day, such as in B2C use cases. Lost key shards can also be recovered off-chain.
- Blockchain agnostic. Key generation and signing rely on off-chain pure cryptography. Compatibility with new blockchains is easy, as the wallet only needs to be able to generate signatures using an algorithm recognized by that chain.
3. **Disadvantages of MPC wallet**
- Off-chain accountability. Signature authorization policies and authorized quorums are managed off-chain, so these custom rules are still prone to centralization failures. Key shards are still cryptographic secrets and should be treated the same as a full private key. Off-chain rules and signatures hinder transparency and require stricter operational auditing.
- Not compatible with most traditional wallets adopted by most users (no mnemonic phrase, no complete private keys stored on a single device). The MPC algorithm is not standardized and is not natively supported by institutional-grade security devices such as iPhone SEPs and HSMs.
- Mostly individually customized products. Many MPC libraries and solutions are not open source, making it difficult for the ecosystem to independently audit and integrate them and perform incident analysis if a problem occurs.
