Organizations seeking to securely hold digital assets must grapple with what type of technology to use in order to store and manage crypto-assets.
Often these groups are faced with a choice between using an MPC-based solution or a smart contract based solution (often called multisig), but what is MPC and what are multisig wallets?
What is MPC?
Multi-party computation (MPC) is a cryptographic technique that enables a group of participants to securely perform a computation without revealing their individual inputs. In simpler terms, it allows multiple parties to collaborate and perform a task without revealing their individual data.
MPC enables Threshold signatures which are a type of digital signature scheme that allow a group of participants to jointly produce a digital signature, without a single participant having total signing authority. This signing process is generally conducted through the use of a distributed key generation protocol, wherein the participants jointly generate a common public key and secret shares of said key. Following key generation each participant will normally hold a share of the private key and will then use the shares jointly to generate a signature for the whole key.
Threshold signatures are an application of MPC and are the primary way in which MPC is used in the digital asset context.
For example, if you wanted to securely store a private key corresponding to ownership of a digital asset or collection of digital assets, you could split that key into multiple parts and distribute those parts among multiple participants. Each participant would then store their respective part of the key, and no single individual participant would have access to the full key.
When access to the key is needed, the participants would use Threshold Signing (MPC) to collaborate and combine their respective parts to generate the full key. Since no individual participant has access to the full key, the security of the key is significantly increased.
What is Multisig?
Multisig wallets are smart-contract based wallets that require the approval of multiple private keys to execute transactions, like MPC multisigs allow for the distribution of control over assets among multiple parties.
Functionally, multisig wallets are quite distinct from MPC wallets. Multisig wallets are created with a set number of private keys and a set signature requirement (formulated in a smart contract). Practically, this takes the form of each party using a distinct wallet address in order to approve transactions on-chain and collectively process transactions..
MPC vs Multisig
Multisig wallets have amassed significant adoption over the last five years and have emerged as a secure crypto-native way to manage digital assets. Market-leading multisig wallets are permissionless and fully self-custodial appealing to DAOs, protocols, and small crypto-oriented businesses.
Yet, Multisig wallets suffer from limited flexibility, weak security standards, and a lack of functionality.
On the functionality side of things, Multisig wallets can only connect and interact with certain dApps, have high fees, and are not protocol agnostic, generally limiting the use of a Multisig wallet to a single chain.
Further, Multisig wallets have a larger surface area of attack, have suffered from a number of security breaches (e.g. Parity wallet hacks resulting in tens of millions of dollars stolen and hundreds of millions frozen), and provide unwanted transparency into the internal operations of an organization.
MPC wallets on the other hand provide robust functionality and leading security.
Since MPC-enabled signatures are generated as a standard single signature, support across multiple blockchains can be achieved. Further, MPC wallets boast lower fees, native connectivity to dApps, more flexibility when it comes to permissions, and enterprise-grade security.
Fortunately, with Tholos many of the tradeoffs are eliminated as we merge the best of multisig wallets with the best of MPC wallets.
At Tholos
We use MPC to provide customers with a secure and ultra-functional environment to store and manage digital assets. Our customers value the increased flexibility, security standards, and functionality that come with our MPC solution. So much so, that many of our clients are migrating from existing multisigs in search of a more functional and seamless environment to manage digital assets.
Our particular approach to MPC is unique in that our solution adopts many of the best traits of multisigs while also taking the best from MPC wallets meaning that our solution is highly performant, fully self-custodial, permissionless, and easier to use while boasting the increased functionality and security.
To learn more about how Tholos can help your organization, get in contact.
