MPC Wallet as a Service: All You Need to Know
MPC WaaS is a relatively new concept in the world of crypto wallets which for good reason has become extremely popular. MPC stands for Multiparty Computation which is a cryptographic protocol from the 1980s. Originally, MPC aimed at providing advanced encryption to conceal the data and distribute computation across several parties when no one could know the other party’s data.
MPC has been recently adopted by WaaS to provide a unique combination of security and usability when everyone regardless of their tech skills could hold digital assets and use them.
MPC In Action
MPC encryption in cryptocurrency could be compared to a musical piece. Notably is that each of the instruments (the minimum requested amount is two) has its role and the musicians playing them know their part only and don’t know anything about the partners’ note sheets. Each of the instruments contributes to the tune and the tune itself is the goal.
Let’s discuss how we make music out of cryptographic techniques in Spatium, an MPC wallet provider. Our MPC cryptographic protocol enables the distributed way of signing transactions through several proven algorithms. Some of them are MPC extensions: TSS, ECDH, EDDS, ECDS, and others, as well as homomorphic encryption schemes and zero-knowledge proofs. Sounds like a heavy orchestra, but let’s check how this cryptographic ensemble works.
Spatium MPC Protocol Model
Our MPC protocol enables users’ wallets stored on a combination of devices or servers when each of the parties generates secrets independently. These secrets are the substitution of the private key, which is never really created and stored anywhere.
The basic transaction signing model involves two secrets generated by two parties of the transaction (the user’s side and the service provider’s side) and one party - controlling the protocol - the guarantor (Spatium).
The first secret is generated independently when the user installs the wallet app on their device and registers there.
The second secret is generated independently on the server side operated by the business.
To sign a transaction or perform a backup of the account Spatium (guarantor) receives the first encrypted secret, and confirms its authenticity. Then it receives the second encrypted secret and confirms its authenticity. The guarantor cannot technically use these encrypted secrets but is only responsible for their integrity and securing the protocol’s performance. Bringing our musical metaphor, Spatium as the guarantor is the conductor of the orchestra, who gives a sign to which instrument should start and when it should finish and let the tune be played by other instruments.
Taking into consideration that there is no actual generation of the private key, Spatium MPC-powered wallets provide enterprise-level security for digital assets stored and the transactions performed. To hack a wallet, one has to compromise each of the parties of the transaction signing process involved in the protocol which is technically impossible.
Also, joint control over the access to the wallet is performed by the user and the service provider, having Spatium as a guarantor of all the processes is highly beneficial for everyone. Businesses can impose account management policies for additional security of users’ digital assets. These could be KYC and AML regulatory compliances, scoring practices, and other anti-fraud mechanisms. Notably, there is no need for businesses to comply with any custody regulations because no storage of the assets involved. Wallet custody is fully on the side of the user.
Advantages of MPC Wallets
The fact that the secrets needed to generate the private key are distributed among different parties eliminates the risk of centralization. Moreover, the risk of compromising an account which could affect its availability and security is eliminated.
MPC WaaS enhances users’ data security because no private information or other sensitive data is revealed to any of the parties involved in transaction signing. MPC allows for completely user-centric wallets when no one can access private data without the wallet’s owner’s consent.
MPC crypto wallets are powerful to perform complex functions such as signing transactions and signature verification, public addresses generation, and others with high accuracy and no errors.
No Single Point of Failure (SPOF)
Compared to other crypto wallets: hardware, multi-sig, and single key, MPC wallets have no SPOF. Users cannot lose the private key, it cannot be hacked. If the device storing one of the secrets gets lost or broken, it could be easily restored. Moreover, no phishing attack could hack the wallet because there is no private key to steal. MPC wallets don’t store the private key. It is split and distributed across multiple parties.
MPC WaaS offers flexible digital assets management by enabling dynamic workflows and policies. Users or wallet service providers may set various parameters for transactions. This could be the frequency of transactions, the maximum limit for one-time transactions, destination addresses, etc. These parameters can be modified at any time either by the user or the business once the user’s consent is acquired.
Crypto wallets powered by MPC allow users to remove or add parties from the protocol while its functionality is intact. security levels could be adjusted, performance parameters can be altered according to the priorities. The parties are added to the protocol the higher the security level is.
If requested, the MPC protocol could comply with Know Your Customer (KYC) and Anti-Money Laundry (AML) requirements. MPC-powered wallets could comply with global standards and regulators through anonymous identity and funds source verification.
MPC wallets are very convenient compared to other crypto wallets. They simplify the confusing UX of traditional crypto wallets and substitute it with similar to web2 mobile app functionality. There are no key management and seed phrases, automatic public addresses generation, and network switching.
Risks of MPC Wallet as a Service
Some risks indeed exist in MPC-powered crypto wallet development but Spatium knows exactly how to reduce them and make wallet building effortless and seamless. Being the pioneer in MPC wallet development, we have solid expertise in the field of cryptography and know exactly how to make MPC wallets engaging and efficient.
High Gas Fee
Standard MPC protocol execution needs a lot of communication from multiple parties involved in the protocol operation. Thus, network latency and bandwidth usage are increased which means higher fees per transaction. Spatium is planning to decrease gas fees through the optimization of the transaction timing, when all MPC-related communication is off-chain.
Cryptographic technologies used for MPC realization are disrupting and advanced. It sometimes takes months for developers to understand how they work and apply them accordingly. Quite often bugs as well as other vulnerabilities might happen which could compromise the overall security of the wallet. The good news is that Spatium has this covered. Our Wallet SDK together with Wallet Cloud and Wallet UI make up the best-in-class MPC non-custodial wallets with minimized efforts.
Not Interoperable or Open Source
The lack of open source for MPC algorithms implementation leads to the inability to standardize the technology and make it compatible with other non-MPC wallets. Spatium acknowledges such a necessity and advocates for more interoperability in blockchain as it brings more benefits for users and service providers. That’s why we are working hard on making our Wallet SDK open-source and available for the blockchain community. Keep up with our latest news and don’t miss this big day.
Use Cases of MPC Wallet as a Service
MPC is a convenient encryption protocol that enables the involvement of more than one party to approve the transaction. If there are organizations that have the requirement that several people or parties take custody of the account and manage the assets together, then an MPC wallet is an ideal solution.
One of the characteristics of MPC wallets is that one wallet can be used by several people at the same time. In the case of investment organizations, it’s exceptionally useful if a group of investors would like to manage the assets together. Such a wallet provides them an opportunity to make a common decision and invest funds only when everyone from the group gives their consent.
Custodial Service Providers and Exchanges
MPC encryption could also be used in custodial wallet development to increase the level of wallet protection. Instead of users, the secrets used to generate the private key can be shared across the company servers, protecting the wallet’s private key.
MPC wallets could be ideal solutions for individuals who want to share the custody of their accounts with family members, financial advisors, or any other trusted parties. No single party will be able to access the funds on their own without the consent of other account holders.
MPC Wallet as a Service could bring transparency and more security to online voting. Each voter holds a secret to generate a private key and the voting is successful when all the requirements are met and the secrets are activated. Such votings are extremely difficult to tamper which means that their results are trustworthy and accurate.
Games and Collectibles
MPC wallets could be used to store and manage gaming achievements. Game developers and collectors could share custody over users’ wallets to prevent fraud and theft. Once the security of users’ assets is protected, game developers can concentrate on the game’s innovative experiences.
MPC Wallet as a Service plays a crucial role in the modern web3 world. The MPC protocol implementation provides flexibility, scalability, and enhanced security. Users have better control over their digital assets. The fact that multiple parties participate in the management of digital assets brings better management efficiency and enhanced risk mitigation.
Spatium is an innovator in MPC-powered wallet development that found a way to simplify MPC wallet creation. Check our products: Wallet SDK and Wallet Cloud which facilitate the development tenfold.
We are excited to get to know how we can be helpful to you and your business. Drop us a line and we will get back to you as soon as possible.