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MPC vs Multisig! Today's article will explore the difference between multisig wallets and MPC wallets. We will discuss the qualities that make the best multisig wallets and explain the advantages of MPC wallets.
A multisig wallet is a type of cryptocurrency wallet that requires multiple parties to sign off on a transaction before it can be executed. Multisig wallets work on m-of-n concept where m out of n parties must sign off on a transaction.
Multisig wallets are typically created using a combination of public keys from the involved parties. The wallet will only allow transactions if a predetermined number of these parties have provided their signatures.
The easiest way to store crypto is to use a software wallet; more advanced users are utilizing the security of hardware wallets or even a combination of the two, but none of these approaches are ideal for businesses and organizations, which is where multisig shines. Creating a multisig wallet for your organization means you are protected if a single employee's key is compromised.
Say that you are a partner in a VC fund. There are four(n) partners in total, and you all decide to create a multisig wallet where three(m) of four(n) partners are required to approve the order for the transaction to execute (3-of-4 setup). What does this mean?
This means that no single partner can move funds of their own, whether they choose to do so or because their private keys are compromised. Resulting in your funds being safe and uncompromised.
We know that the standard way to create a transaction is to sign it with your private key and execute it. The result is a single signature transaction that is then broadcasted over the selected blockchain network. As convenient as this is, this approach entertains decreased security.
If the transaction is signed with a single private key and the key is compromised, an attacker can access and transfer all of the funds associated with that wallet. This instance creates what is known as a Single Point of Failure (SPOF) and increases the risk of theft through key mismanagement.
When dealing with more significant amounts of crypto in your wallet, people have created multi signature or multisig wallets to prevent SPOFs and create trustless systems for larger transactions to be safely executed.
1. No Single Points of Failure
2. Trustless Process
3. Customizable Approvals
1. Too Complex for New Users
2. Not Protocol Agnostic
3. Slower and Costlier Transactions
4. Transactions Are Not Private
Multi-Party Computation, or MPC, in short, is a cryptographic protocol that allows multiple parties to jointly compute a function on their private inputs without revealing their inputs. This means sensitive data can be processed collaboratively without parties accessing the other's data.
Additionally, MPC wallets, also known as multi-party computation wallets, use cryptographic techniques and distributed computing to protect the key shares used to access and manage cryptocurrency funds.Now, that sounds like something that would find a perfect application in blockchain systems, given that we have private keys that we wouldn't like to share with others. And luckily, it did find its place there, as the MPC wallets can be used for transactions on every chain.
Let’s take the VC example and bring this concept home.
Instead of having 4 private keys with 4 different addresses, the MPC wallet creates a single address and multiple shares for four partners of a VC fund. Key shares are distributed amongst 4 partners, already creating a base for cheaper transactions.
Let’s say the 3-of-4 quorum still holds. The concept is the same as with multisig. However, now, to execute a transaction 3 key shares are needed to form a single address (instead of 3 addresses) and sign the tx.
The key shares of the partners are never revealed nor shared so that single users can’t have complete control over a multisig wallet.
If you want to dive deeper into MPC, feel free to check out this article.
Multi-party computation (MPC) technology forms the foundation for multi signature (multisig) wallets, enabling secure management of cryptocurrency funds by multiple individuals or entities.
However, it is important to note that while multisig wallets can use MPC technology for added security, they are not solely dependent on it. At Bizzllet, our team is utilizing MPC technology to address the shortcomings of other multisig wallets and create an optimal business wallet experience.
Multisig wallets can be implemented using various techniques, including traditional cryptographic methods or smart contracts, but MPC technology offers an advanced and robust way to achieve multisig functionality while safeguarding sensitive keys and transactions.
1. Flexible User Quorums
2. Protocol Agnostic
3. Faster and Cheaper Transactions
4. Private Transactions
1. Too Complex for New Users
2. Not Smart contract-based
3. We discussed the advantages and disadvantages of both MPC wallets and Multisig wallets. Let’s expand on them and bring this battle to an end.
When it comes to multisig protocols, during earlier days, the only implementations that existed were on Bitcoin and through smart contracts. As time passed, every protocol started to develop its own native multisig processes that differed in comparison. That’s why MPC wallets become a better solution due to their protocol-agnostic nature. In theory, it sounds like the same thing; however, if you wanted to use an EVM-compatible multisig such as Gnosis’ Safe, you would need to open a new multisig wallet for every other non-EVM chain you wanted to use. When it comes to MPC based wallet, you would only need one wallet.
Working with key shares instead of keys is a significant improvement from a security standpoint. If a single share is compromised, our funds are still safe, and we can even implement key share rotation to prevent the possibility of shares being stolen even further. If it still happens, with MPC wallets, we can produce new shares and distribute them to parties while keeping the public key identical; no fund transfers are required. This is not the case with Multisig wallets.
Most organizations overlook using standard multisig setups, both native and smart contracts. They are broadcasting their security policy to the world. How, you might ask?
Well, when you sign a transaction with a multisig wallet, every signature is recorded on the chain, so all the information, such as how many keys there are, who signed the transaction, and who didn’t, is recorded.
MPC wallet produces a signature identical to the signature produced by a single private key, meaning that in the case of cryptocurrency, transactions signed with MPC wallet are precisely the same as transactions signed by a standard private key wallet. That means no one knows how many parties are involved and which were part of the signing process. This dramatically increases the privacy of your wallet, which in turn also increases the security.
MPC records key share signatures completely off-chain, which offers benefits in terms of privacy, speed, and transaction costs. By signing and paying for a transaction off-chain, it becomes much cheaper and faster compared to doing it on-chain. But why is that?
The speed and fees of every transaction on-chain depend on three factors: the chain's base costs of operation, the transaction size, and network congestion. When more people are involved and the network is congested, transaction fees increase and transaction speed slows down. This is why we use MPC and go completely off-chain. Only the final transaction is recorded on-chain.
The added complexity of having multiple participants makes transactions much more computationally intensive, resulting in a doubling or tripling of the transaction cost. However, MPC-based wallets will never have fees that are higher than an ordinary transaction on the underlying chain, regardless of the number of signers involved.
We at Bizzllet are developing a self custody business wallet to manage crypto payments, expenses, and invoices using MPC technology.
With this approach, you can securely use our MPC-based wallet with a web2-like experience and easily switch from our custom MPC implementation to a traditional wallet like MetaMask or any other wallet you are comfortable with.
MPC technology is utilized to address the limitations of multisig wallets. Although MPC wallets share similar features with multisig wallets, they operate on a fractionalized key principle. In summary, it is essential to note that MPC wallets are a type of multisig wallet, but not all multisig wallets are MPC wallets.
Don't miss out on the opportunity to stay current on Bizzllet’s progress and how it can transform how we use MPC to store and manage digital assets.
