As the cryptocurrency market grows, the importance of security becomes increasingly paramount. Assets become more valuable, making it extra enticing for bad actors to engage in hacks and thefts.
For instance, in 2024 alone, the total value of cryptocurrency stolen amounted to more than US$2 billion.
This is where the enhanced security of multi-party computational (MPC) wallets comes into play. MPC wallets eliminate a 'regular' Web3 wallet's potential weakness by splitting up private keys into multiple encrypted fragments.
Read on to learn all about this breakthrough in Web3 wallet security and how you can pick the best MPC wallet for yourself!
What Are Multi-Party Computation (MPC) Wallets?
An MPC wallet is a Web3 wallet which utilises MPC technology to protect the owner’s assets and data. As mentioned above, an MPC wallet divvies up its private key and stores it on several devices (AKA parties). When the MPC wallet owner wants to sign a transaction, at least two parties need to approve it.
This sounds similar to multi-signature wallets, but one MPC wallet only has a single private key. There’ll never be an instance where the full private key is found on a single device either. Multi-signature wallets grant private keys equal to the number of wallet owners or approvers.
Furthermore, because an MPC wallet stores its private key across different devices, hackers face a much tougher time gathering every fragment. Remember, each fragment is encrypted as well!
4 Problems With Traditional Private Key Management
1. A Single Point of Failure
‘Regular’ Web3 wallets store their private key in one place, like the owner’s smartphone or PC. When said device or wallet is hacked, it’s easy for the bad actor to loot the owner’s private key and digital assets.
2. Custodial Risks
This is similar to the problem above. If you prefer holding your digital assets on a centralised platform, you run the risk of losing your private keys if the website or application gets compromised.
3. User Experience Issues
Because a private key is essentially a long string of numbers and letters, copying and pasting it can be an incredible hassle, especially if you transact regularly. Keeping it secure by writing it down is laborious too.
4. Susceptibility to Attacks
Because hot wallets and centralised solutions are constantly connected to the Internet, they’re vulnerable to security breaches 24/7. When full private keys are stored in these locations, it only makes them more susceptible to attacks.
How Do MPC Wallets Decentralise Private Key Management?
1. Key Fragmentation
This is the key feature of MPC wallets, which was detailed earlier on. Having multiple devices store an encrypted fragment of a private key decentralises how it’s managed.
2. Threshold Signatures
This refers to a minimum number of signatures needed before a transaction can go through, akin to the process a multi-signature wallet would undergo. If this threshold isn’t reached, the transaction can’t be executed, preventing a potential hack.
3. A Distributed Signing Process
It’s important to note that when an MPC wallet signs a transaction, it isn’t reconstructing its entire private key. The necessary fragments generate the signature together, tying back to the threshold signature function above.
4. Mitigating Risks
MPC wallets further mitigate risks by implementing an additional layer of security, such as biometric authentication. This is usually performed when you want to initiate a transaction.
Pros and Cons of MPC Wallets
{{mpc-wallets}}
How to Choose an MPC Wallet?
There are several considerations you need to make before selecting an MPC wallet:
- Would you prefer a non-custodial or custodial option?
- Do you need your MPC wallet to be open-source?
- How interoperable does your MPC wallet solution need to be?
- Is the MPC wallet solution user-friendly?
Keep all these in mind while you’re on the hunt for the perfect MPC wallet. Additionally, if you’re looking for an institutional-grade solution, it might be better to purchase MPC technology from a vendor and design the wallet yourself. This allows you to have an MPC wallet that’s made to you or your firm’s exact specifications.
In Conclusion
MPC wallets represent the next evolution in Web3 wallet security technology, especially as they become more user-friendly and less taxing on computational resources. What’s more, MPC wallets are true adherents to cryptocurrency’s principle of decentralisation – another plus point for digital asset purists!
If you’re holding a particularly valuable set of digital assets, or just want greater peace of mind, do think about securing an MPC wallet of your own.
Alternatively, if you need a highly secure Web3 wallet that provides a seamless Web2-like experience, why not look the way of Portkey? This Web3 wallet uses social recovery to secure the user’s digital assets as opposed to MPC, making it highly accessible without compromising on security.
Portkey is completely free to download and use as well, letting you make the jump to Web3 with no hassle at all. Manage your identity and assets on multiple blockchains, and connect to any dapp in a matter of seconds. Try it out now!
*Disclaimer: The information provided on this blog does not constitute investment advice, financial advice, trading advice, or any other form of professional advice. Portkey makes no guarantees or warranties about the accuracy, completeness, or timeliness of the information on this blog. You should not make any investment decisions based solely on the information provided on this blog. You should always consult with a qualified financial or legal advisor before making any investment decisions.
About Portkey
Portkey: Zero-Barrier Entry Into Web3
Portkey simplifies your connection to the Web3 world with its cutting-edge ZK social logins and ZK social recovery, offering a zero-barrier entry for users. Integrating into the Telegram ecosystem, Portkey seamlessly bridges Web2 users to Web3 through blockchain, leveraging advanced zero-knowledge technologies for privacy and security without compromising convenience.
Built on the high-performance AI layer 1 blockchain platform aelf, Portkey provides a smooth transition and an enhanced user experience, setting new standards in the realm of Web3 digital wallets.
Stay connected with the Portkey community at:
Website | X | Telegram | YouTube
