LATAEST ARTICLES
The world of crypto is expanding rapidly. At first, users start paying attention to a new sphere where they can get many benefits that don’t exist in web2. Then businesses hop in. Both new users flooding and web3 businesses expanding stimulate the growth of web3.
Using food metaphors, we can compare web3 to a healthy meal which boosts energy, increases health ratings, and reenergize the existing financial system. Web3 gives users financial freedom and broader opportunities for alternative ways to earn money, make money transfers, and what’s important to store assets safely. In addition, web3 is decentralized and there is no central authority to turn off the light in our healthy snack restaurant.
Moreover, staying fit is a modern trend, that’s why more and more users enjoy the taste of web3 and come back for more helpings. If in 2016 there were only 5 million active web3 users worldwide, in 2023 there are 425 million. By the year 2027, the number is expected to reach more than 900 million crypto users.
More users, more wallets. And, if we return to our food metaphor, a crypto wallet is just a plate for a healthy snack for the traditional economy. Of course, some people would like to eat with their hands, but using the plate is neater, and more enjoyable.
The same with wallets. User-friendly, appealing crypto wallets have a bigger potential to engage new users, retain old ones, and increase their overall satisfaction level.
Spatium Web3 Infrastructure Company
Dating back to 2017, Spatium was one of the first web3 development companies to start building MPC wallets. MPC made it possible to significantly improve the UX and UI of the wallet. Users don’t have to store private keys, remember seed phrases, or configure any wallet advanced settings. Spatium wallet is easy to operate for all users, irrespective of their technical background.
Eager to share their wallet development expertise with the rest of the world, Spatium has launched Wallet as a Service (WaaS) platform. Spatium wallets are non-custodial, decentralized, and surprisingly easy to build. All required elements are already pre-built. A bit of assembling, tuning together, making different parts work seamlessly according to your business logic, and you can get a secure user-controlled crypto wallet in no time.
Let’s check what are the components of Spatium WaaS and how applied together they facilitate affordable non-custodial wallet development.
Spatium Innovative Approach
The revolutionary way that is called to change the crypto wallet development industry is paved by three main products: Wallet SDK, Wallet Cloud, and Wallet UI Kit. Due to the pre-built nature of Spatium WaaS solutions, they help customers skip a big chunk of activities.
1. Wallet SDK is Blockchain-agnostic
Choosing the blockchain the wallet will operate on is one of the first steps. Spatium web3 infrastructure integrates the blockchain connector to the Wallet SDK. This module makes Spatium cryptography core compatible with all EVM-based chains, and also significantly facilitates the integration of other blockchains.
2. Wallet UI Kit is a collection of ready-made UI components
Wallet UI Kit is equally helpful if you require a website, web app, or mobile crypto wallet app. Instead of spending big bucks on custom design and the integration of business logic, Spatium web3 infrastructure company provides you with reusable customizable modules. By a team of at least two skilled React professionals, you could get an engaging, well-tested frontend for your product in less than a month.
Spatium crypto wallets feature user-friendly and intuit designs.
3. Wallet Cloud is One API for All Required Third-party Integrations
Spatium web3 infrastructure company offers access to the API. Noteworthy is that if a client purchases Wallet SDK, Wallet Cloud comes with a free limit of 5 thousand monthly active users and 25 thousand monthly active sessions.
Spatium Cloud API covers a variety of services required for the seamless crypto wallet operation. Paired with the client logic of the app and other backend layers, Cloud API helps to:
- create a crypto wallet and ledger account.
- display details of the account and history of transactions
- display blockchain addresses connected to the account
A welcome surprise is that Wallet Cloud and Wallet UI Kit share similar logic, which makes Spatium UI designs much easier to integrate than any other customly designed UI. Wallet Cloud saves a lot of development hours normally spent to connect various third-party providers, enabling robust crypto wallet operation in web3.
4. Integration of Backend Development Logic
Even though Spatium Wallet SDK, Wallet Cloud, and UI Kit are pre-built and heavily tested, a company still needs to create a backend for the project. Backend code is responsible for the seamless performance of the wallet-specific logic, features, and functionality, as well as user and transaction data interaction settings. Spatium can help with advising and consultation, but the backend development is entirely on the client side.
5. Easily Add New Features
Our clients can easily add extra DeFi functionality to their products. These could be issuing a card, crypto exchange, crypto swap, access to dApps, crypto trading, crypto investment, etc. Integration with WalletConnect provides access to DeFi. Adding a new feature might take from two weeks to a month, based on the product complexity level.
6. Reduced Testing Time
Though Spatium web3 infrastructure company offers a WaaS approach and the main three components required to build a crypto wallet come as a package, the testing of the final product is highly desired. Even so, Spatium WaaS infrastructure still significantly cuts the general testing time.
7. Wallet Launch
Spatium web3 infrastructure company uses a pre-paid plan for SDK. 50% of the license is paid when the SDK is purchased, the other 50% is only paid after the product goes live. In addition, the Spatium team could help with the documentation to meet the requirements of the App Store or Google Play.
Conclusion
The time when crypto wallet development was a complicated process eating a big chunk of a company's budget has gone. Nowadays, more companies are offering WaaS infrastructure. It significantly speeds up development and saves precious development hours.
Companies can now concentrate on the concept of the product and the value it can bring to users. Also, a good option to spend the funds is to get a great marketing team. Leave the development to us, please.
If you would like to get to know more about Spatium and our products, [CONTACT_US_CTA]. Also, don’t hesitate to contact us asking about pricing, customizations, and any other issues concerning crypto wallet development.
Many have witnessed that the crypto sphere is going through a rough period of its development. Early adopters of blockchain were idealistically dreaming about a new financial world with minimum or no regulations, anonymity, and total freedom. In reality, things don’t always turn the way we want. Crypto mass adoption and the growing involvement of traditional businesses dictate terms and the crypto world is becoming more regulated.
What is the Status of Crypto?
With the growing adoption of crypto, national governments all around the world are changing their legislation systems concerning crypto assets. For example, the USA classifies crypto as a commodity, while some digital assets and tokens are even recognized as securities. Such countries as China, Singapore, and Great Britain determine crypto as property. Japan and Australia went further and recognized crypto as legal property. The majority of other countries either haven't made up their mind abиout it or are looking in the direction of crypto regulations.
Regulatory Dilemma
Based on the fact that many governments around the world have recognized the legal status of crypto assets, crypto projects, exchanges, and crypto assets service providers are facing a hard dilemma.
On the one hand, they have the perspective of growing and gaining benefits of web3.
On the other hand, it’s difficult to comply with regulations. They have to provide documentation, licenses, and legal counseling engagement which is eating the company’s funds and time. Not to mention that national regulators are stealing from their users a chance to stay financially free and anonymous, which web3 was initially about.
Spatium is proud to announce that we know how to cut this Gordian knot. But let’s start from the top and shed some light on the challenges existing in web3 and how national regulators are trying to stop illegal activity there.
What Rumbles the World of Web3?
1. Money Laundering (ML)
Due to the decentralized and anonymous nature of web3, there is a higher risk for transactions supporting illegal actions. This problem is rooted in their anonymous nature when no one can tell where the assets come from and who is the holder of funds. That’s why various money laundering schemes exist. And national legal bodies all over the world work around Anti-Money Laundering (AML) regulations.
2. Terrorism Financing (TF)
Combating the financing of terrorism (CFT) is another approach national regulatory executives are actively developing. Terrorist activity is increasing all over the world and web3 is often spotted as a convenient ecosystem to perform illegal transactions including the support of different terrorist groups.
3. Taxation
Since 2008, when the first blockchain was created, it has grown in size. Various new blockchains originate. This led to the growth of the web3 market size which is now around 3.25 billion dollars. National governments are interested in the introd34uction of a tax for companies and users operating in the crypto sphere. Some countries that recognize crypto as a commodity, introduce the same tax as for other types of commodities.
Other countries, which are still developing a holistic approach to crypto taxation, set different tax limits. For example, India introduced a 30% tax on crypto investments. The EU gives freedom to each of its members on the tax range, so it can be anything from 0% to 50%.
Top World Web3 Regulators
1. USA
Probably one of the most heavily crypto-regulated countries in the world is the USA. The country has developed a board network of crypto market regulators. Securities and Exchange Commission (SEC), Financial Crimes Enforcement Network (FinCEN), and Community Futures Trading Commission (CFTC) just to name a few. It’s quite understandable. The biggest user penetration in the crypto sphere, which is 22%, is in the USA, while global user penetration is only 8%.
2. European Union
In June 2023 European Union introduced the Markets in Crypto-Assets Regulations (MiCA) framework which embedded six Anti-Money Laundering Directives issued earlier. They target the protection of consumers in web3 and introduce new licensing requirements. MiCA will be activated and applied to crypto players at the end of 2024. It means that until that time each EU country keeps its national crypto regulations. After 2024 the regulators operating on the territories of the EU should comply with the MiCA framework.
3. Other Countries
In Canada, a country that is quite proactive toward crypto, there are two main regulators: the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Securities Administrators (CSA).
In the United Kingdom, the Financial Conduct Authority (FCA) is responsible for checking if crypto asset providers comply with the existing AML/CFT regulations. Also, if an exchange or crypto wallet provider suspects any suspicious activity, they have to notify the Office of Financial Sanctions Implementation (OFSI) as soon as possible.
In Japan and Australia, all crypto exchanges should be registered with national regulators and comply with AML/CFT requirements. A similar situation is seen in many other countries: Brazil, Singapore, India, South Korea, etc.
How Do National Regulators Approach Non-custodial Wallets?
The good news for all non-custodial wallet providers is that in the majority of countries non-custodial wallets are not regulated. At least, that’s the situation we witness right now. The recent attempt to bring more control over non-custodial wallets was taken by FinCEN (USA) in December 2020. The proposal was harshly criticized by the crypto community and was withdrawn a year later. Even such a powerful international organization as the Financial Action Task Force (FATF) hasn’t come up with a legal solution to introduce any regulations on non-custodial wallets.
As stated in the recent study: ‘The absence of technological solutions to ensuring FATF's ‘Travel Rule’, the problem of ‘unhosted (*non-custodial) wallets’, [and] the fact that P2P transactions do not involve any entity subject to AML-CFT regulations’ take them off the regulatory field.
The fact that non-custodial wallets are user-controlled and users only can initiate the transaction, approve or reject it, means that users are the custodians of their assets. From that perspective regulations which are introduced to protect consumers in web3 are excessive.
Some regulators claim that their policies facilitate web3 global adoption meaning the merging of web2 and web3 financial worlds. That’s true but if the wallet transaction activity doesn’t leave the solid well-protected walls of the web3, it is safe and no regulations are imposed either on users or non-custodial wallet providers.
Anyway, if you are located in the USA and would like to set up a crypto wallet company that will be making transactions with fiat, then it’s important to get to know more details about the regulations existing in the USA.
Licensing Peculiarities in the USA
Probably, the USA is the most complicated country regarding crypto licensing, or in other words, the one to be heavily regulated. First of all, each of the states have their own regulations, recognized on the state level. Secondly, all state-local crypto wallet providers should comply with federal laws as well.
That’s why there is never one license to obtain. I would say in general crypto wallet providers should get around 2-3 licenses to operate in the USA. All of them are expensive and take a lot of time to get. This is applied to custodial wallet providers, crypto exchanges, and non-custodial wallet providers who perform fiat transactions.
The majority of crypto businesses in the USA are recognized as money transmitters. Money transmitters and other businesses dealing with finances are categorized as Money Service Businesses (MSBs). The main body to regulate the activity of MSBs is the Financial Crimes Enforcement Network (FinCEN).
There are two main licenses a crypto wallet business might obtain: the MSB License (MSBL) which has to be renewed every 2 years and the Money Transmitter License (MTL), which might differ from state to state. For detailed information, it’s better to consult with a legal professional.
Also, for any financial activity, a business should comply with Bank Secrecy Act (BSA) regulations. It means that AML and KYC requirements should be met.
In addition to the MSBL and MTL, some crypto wallet providers operating in the USA might need other licenses:
Securities Broker-Dealer License: If a wallet is offering crypto that is recognized as security, then they have to comply with United States Securities and Exchange Commission (SEC) regulations as well. One of the examples of crypto which is recognized as a security are tokens issued during ICOs.
Commodity Trading Advisor (CTA) License: Crypto is recognized as a commodity in the USA which is why if any crypto wallet provider offers education materials on trading and provides any of the consulting or advisory functions, then, they probably have to obtain a CTA license.
In addition to all of that, crypto in the USA is subject to tax returns, it means that businesses as well as individuals should comply with the regulations issued by the Internal Revenue Service (IRS).
For any state-specific information, you have to consult with an attorney or a lawyer specializing in crypto wallet providers' legislation and regulatory compliances.
Based on how difficult the regulatory sphere is in the USA, it can be a solid idea to investigate other options worldwide to register your business.
Some of the most crypto-welcoming countries are Malta, Singapore, Germany, Estonia, etc.
Spatium Hybrid Solution
Spatium is an IT company, providing non-custodial Wallet as a Service software operating on MPC cryptography. We help businesses swiftly deploy user-friendly crypto wallets and concentrate on strategic business goals rather than tedious development routines.
Based on our unique technology and crypto wallet encryption implementation logic we assist our clients in two main ways:
1. Crypto Wallet for Web3 Interaction Only
Wallets built by Spatium don’t require crypto asset providers to obtain licenses to operate them. Starting from the day a business contacts Spatium to the product release date, the development takes less than a month.
2. Crypto Wallet for Web2/Web3 Interaction
Spatium provides Wallet as a Service components to develop advanced non-custodial wallets. As we have stated above, if a non-custodial wallet is used to sign transactions, connect to dApp and DeFi functionality, and store NFT and other assets it’s more likely that it doesn't have to comply with any regulations. But if a wallet provider wants to connect the wallet services to the financial world of web2, then it’s better to consult with local legal advisors on the existing national regulations.
If in the country where the business is registered new regulation rules emerge, Spatium SDK could be easily integrated with AML providers and co-sign the approved transactions only.
Conclusion
Many things are happening in web3: it’s developing, growing, and maturing. That’s why it has become a spot of interest for traditional businesses. And anywhere they go, they are affecting the existing matter of things. Crypto, which once had anonymous status, was brought to the legal field and started to be regulated in many countries worldwide.
Non-custodial wallet provided by Spatium is engaging, easy to use, and at the same time secure. Such an option could be ideal to start a crypto business with minimum investment. After a while, when a business has a greater audience and would like to start offering advanced services connected with traditional financing spheres, it’s important to make a deep research of the regulation requirements and apply for licenses and certifications.
Contact us for more information, and get a friend in the crypto space who understands your pain and is eager to help.
Several years ago, the buzz about crypto and web3 started growing enormously. Companies and businesses worldwide suddenly felt the urge to go into the crypto space, conquer web3, and onboard their clients. Some of the projects have been very successful and some have become a complete failure.
As an example, we can take two companies: Nike and Porsche. Both of them rushed into the NFT craze, Nike in 2019, and Porsche at the beginning of 2023. Two of the companies issued NFT and connected the web3 collectibles with their real-world products.
The only difference is that Nike soared and the Porsche web3 marketing campaign went wrong. What are the reasons, we can only guess, but maybe a lack of frictionless onboarding was one of them.
All these cannot but lead to the realization that companies as well as users should be familiar with web3 onboarding strategies and have some experience in it. People need to be educated on how to use web3 wallets, monetize on chain achievements, and make peer-to-peer transactions, etc. But at the same time, businesses require much help with web3 onboarding as well.
When a brand is looking in the direction of web3, experimenting with various ways to generate value, and testing new forms of product ownership, they have to obtain the best web3 tooling: advanced, secure, and reliable. A web3 wallet which is primarily and so far the only means allowing businesses to onboard their clients to web3 is among them.
Web3 Onboarding Challenges for Businesses
Unlike the cozy and well-known web2 with its back-end architecture, cloud services, and third-party integrations, web3 onboarding imposes new experiences. Complicated blockchain architecture, an unprecedented amount of encryption, and various third-party integrations just to name a few.
Let’s go through the main challenges preventing users from exploring the web3 ecosystem and as a consequence eating more company resources to build their brand in web3.
1. High Level of Complexity
Being a nascent ecosystem, web3 is still shaping itself and these processes are reflected in the adoption of some disruptive technologies. Not many IT development companies know how to properly use them. Some concepts of decentralized finances, blockchain architecture, and complicated encryption protocols could be challenging for both companies and their clients which slows down their web3 onboarding.
2. Steep Learning Curve
One of the first things that hits a company is that web3 solutions including crypto wallet don’t normally provide similar to web2 user experience. Web3 onboarding processes could be confusing for users and companies, who have to spend more effort on educating their customers. If the learning curve is too steep and too long, it could be a serious obstacle for users to proceed.
3. Privacy Concerns
Based on the decentralized and pseudonymous nature, web3 is an easy target for malicious actors. They know that scamming right and left in web3 is much easier than in the centralized and heavily regulated web2, so they use every single chance they can. In such a situation, companies, who are onboarding their customers to web3, should be responsible for making users’ assets and data secure. Companies should educate themselves on the types of crypto custody and figure out which solutions could match their clients’ expectations best.
Main Strategies to Onboard Your Customers to Web3
There are several ways companies onboard their clients to web3. As long as each of the ways provides customers with facilitated onboarding processes, the company's growth in web3 will be smooth and soaring. Web2 customers are used to easy sign-up methods: via email, Google sign-up, Apple sign-up, phone number, etc. That’s why to retain clients and embrace new ones, businesses have to make web3 onboarding as user-friendly as possible.
The idea is to take away the hurdles of private key adoption. One of the best-in-class crypto wallets that are keyless are MPC wallets. MPC technology simplifies private key storage and activation, so users don’t worry about its technical complexities. Check one of our articles about MPC encryption technology and the way it assists in simplifying crypto wallet operation. At the same time, MPC technology ensures that the digital assets are highly protected and secure.
Let’s discuss what are the main strategies companies and businesses may use to bring their customers to web3 and open up a new world of possibilities.
1. In-house Crypto Wallet Development
Traditionally companies used to embrace the idea of having their own web3 crypto wallet development team to make sure that the core wallet code is robust and the web3 onboarding is seamless. This option is sound as it gives the business full control over the development processes, but there are two main downsides.
Firstly, in-house development takes a longer time to market. Based on this, it could be a problem to compete against the rivaling businesses who might follow a faster strategy.
Secondly, this option increases the budget for the development: including coders’ reeducation and time to obtain the needed extra training to cover all possible insecurities that might occur in blockchain.
2. Outsourcing Crypto Wallet Development
Outsourcing is a well-known practice in the modern world. Based on the living standards in various countries, some programmers ask for the same amount of work for a completely different amount of money. A San Francisco-based blockchain developer and a Poland-based one will charge the company a significantly different sum for their work, with absolutely the same quality of the codebase.
Outsourcing may bring businesses a market advantage: extra developmental resources. At the same time, taking into consideration that this option is better for companies who are trying to onboard to web3, it’s still not the best strategy.
3. WaaS SDK Implementation
Right now, many companies offer pre-built components for facilitated crypto wallet development and consequently seamless web3 onboarding. These could be SDK or API integrations, wallet-building platforms, etc. Such integrations save a lot of time, and developmental resources. It significantly speeds up the time to market, putting businesses ahead of their competitors.
At the same time, the solutions powered by pre-built SDK, for example, are secured because they come from experienced teams with excellent records. The only thing a company’s IT department is required to do is integrate these pre-built components into a tech stack or front-end application. Such a strategy mitigates the possible risks and facilitates the web3 onboarding processes with best-of-its-class blockchain and encryption practices.
Spatium SDK and Spatium Cloud Integration Options
An example of a robust and easily integrated codebase capable of providing users with a user-friendly and seamless web3 onboarding experience is Wallet SDK and Wallet Cloud delivered by Spatium.
Spatium SDK
Spatium SDK is powered by MPC encryption protocol. It helps to eliminate UI and UX complexity challenges through keyless web3 onboarding. The private key is divided into several secrets and shared across a user, a company server, and the Spatium server. MPC technology could split a wallet private key into even more parts and spread them across as many participants as requested.
The solution provided by Spatium is self-custodial allowing Spatium or/and the company to safeguard users’ digital assets during the co-signing practices and enforce regulation policies if required. At the same time, whenever a user would like to withdraw the MPC transaction signing mechanism, restore their private key, and turn a wallet into a traditional non-custodial solution, they can easily go for it.
Spatium Cloud
Spatium Cloud is in the majority of cases integrated into the project together with Spatium SDK, as it holds the strings of all required web3 crypto wallet integrations and enables its smooth operation. Timewise, it could take from one to a couple of months to fully integrate Wallet SDK and Wallet Cloud into your technological stack. Moreover, any IT developer can do it, no specialized blockchain development skills are required.
At the same time, Spatium Wallet Cloud could be purchased alone and integrated into your project. It saves much effort and time as one well-documented Wallet Cloud API may connect a web3 signing protocol, that you probably have already, to the world of web3: access to nodes, access to crypto market data, cloud backup, fiat on-ramps, access to crypto exchanges, dApps, DAO, etc.
Summing Up
Any company that is considering stepping into the roaming waters of web3, has to do substantial research on the various benefits the blockchain ecosystem could bring to their customers. Following the paradigm of a get-rich-quick scheme on the web3 hype is not a sound decision, as it prevents the company from making long-lasting relations with the client, as well as monitoring users’ satisfaction with the product and trying to make it better.
With the right business plan and a reliable partner who provides all the web3 needed infrastructure for crypto wallet development and successful onboarding of multiple users from web2 to web3, businesses could take full advantage of web3 services, at the same time diversifying and amplifying their users’ digital footprints.
Contact us for more information, and let’s start our digital walk into the world of new opportunities together.
Recently, more and more companies are realizing that the existing financial systems are becoming outdated. In such a situation, the companies as well as enterprises and even banking legacy systems are trying to find a way and make sure that they will stay afloat in the new emerging financial order. The rate of banks that have already adopted crypto operations is growing. Among the big names are Bank of America and Morgan Stanley.
The condition of running a bank-affiliated crypto account comes with shared digital control over the account, which stores private keys. Also, some institutional companies, as well as investment organizations, would like to have common access to account governance.
Based on types of shared control over assets, there are three main types: single signature wallet, multi-sig wallets, and MPC wallets. The main difference between them is the way the private key is applied. In a single-key wallet, it could be only one person. In the case of multi-sig and MPC wallet implementation, there are several entities. It’s worth digging into the technological aspects of these types of wallets and highlighting the benefits they bring to the companies.
Single-Signature Wallet
Single key wallets are the ones to have a key management system designed straightforwardly. Transactions are signed with only one key. The entity that holds the key is the sole owner of the account. Though the option of single-handed access to the account seems as an attractive opportunity, the level of responsibility is also increasing. One man-made mistake or minor accident harming your computer or other device you use to access the crypto wallet brings you the total loss of your crypto assets.
Easy Target for Hackers
Because the key management involves only one key, it means that the wallet has a single point of failure (SPOF). As soon as the key is compromised, the access to your crypto assets is lost.
Not Suitable for Business Use
The high level of uncertainty regarding the management of the wallet makes it the least desirable option for companies. Businesses usually go for shared digital access control, when in emergency cases, the company may help users to restore access to their wallets, eliminating SPOF.
Moreover, in the case of shared account access, businesses could protect their customers against other unpredictable situations, such as: forgotten passwords, misplaced or damaged hard drives or phones, etc.
Multi-sig Wallet
A multi-signature wallet is a crypto solution that, unlike single-key wallets, provides shared access to the account. The condition when several people or companies apply their private keys to sign one transaction brings more security and protection to the digital assets. Also, the access to the funds online does not rely on one private key, which is connected to one device. There could be several devices scattered around the globe. Such a signing scheme is beneficial for companies and institutions, as it helps to share control over the assets of several entities without revealing their private keys.
3 Top Multi-sig Wallets
BitGo
This wallet is one of the most trusted. It uses a P2SH encryption protocol and supports multiple cryptocurrencies. One of the prominent features of this wallet is that it enables the creation of private blockchains. They could be quite helpful in business processes as blockchain offers better visibility of business processes. Also, they are easily programmed to restrict access to the system except for the required employees. At the same time, BitGo comes with high transaction fees and until now hasn’t become mobile yet.
Electrum
Electrum is considered to be one of the oldest multisig wallets, as it was launched in 2011. In addition to multi-sig features, the wallet also offers cold storage. It is available in open source. Also, integrations with other wallets are available. Electrum doesn’t store users’ private keys, and the transactions are also signed locally. One of the negative sides is that it’s not convenient for tech-savvy users, and the learning curve for newbies is quite steep.
Armory
It is one of the oldest multi-sig wallets, which is unfortunately not very convenient. Armory allows Bitcoin storage only. Moreover, it is stored offline, which makes it very secure. The wallet is available as a desktop app. Despite its high security and protection, the wallet doesn’t have 2FA and offline storage carries a threat of Single Point of Failure.
MPC Wallet
MPC wallets are a new trend in web3 wallet development, as they are fueled by Multi-party Computation (MPC). MPC wallets took the best of two worlds: single-key wallets and multi-sig wallets. Similar to multi-sig solutions MPC wallets let several stakeholders have joint control over funds. But the difference is that in the case of MPC wallets, one entity has access to one secret each. The combination of secrets provides access to the MPC wallet account. If some of the stakeholders don’t want to provide their secrets to restore the key and sign the transaction, then it’s not doable and the account owners need to go into more negotiation.
3 Top MPC Wallets
Spatium
Spatium is an MPC wallet launched in 2017. It’s a non-custodial wallet when users have full ownership over their digital assets. Quite recently, based on the Spatium encryption platform, Spatium SDK was released. It facilitates wallet development for companies, saving much time and effort. MPC wallets created with Spatium technology are convenient to use and extremely secure. The MPC technology protects the user’s private key and in case of an emergency (if the phone is broken or stolen) restores access to the MPC wallet. Also, the wallet is blockchain-agnostic and supports multiple cryptocurrencies as well as NTF. Moreover, wallets powered by Spatium Wallet SDK provide a facilitated approach to various Dapps in multiple blockchains.
ZenGO
ZenGo is another MPC wallet that was launched in 2018. It’s a multi-chain wallet that supports several types of crypto assets. Also, as an additional protection layer, ZenGo uses 3-factor identification (3FA) which is an email confirmation, biometric scan, and/or recovery file. ZenGo MPC wallet provides a legacy transfer function that enables digital assets to pass over generations or get distributed among friends.
Krayon
Krayon is a non-custodial MPC wallet for companies and institutions with flexible wallet management functions. In a similar way as it is in Spatium, Krayon Wallet provides user roles and permissions, payment management, and transaction reporting. In addition to upscaled wallet management Krayon wallet allows the management of various crypto assets.
MPC VS Multi-sig Wallet Breakdown
To have a clear picture of the benefits of multi-sig and MPC wallets as well as their limitations, let's compare them based on their functionality.
Conclusion
Sharing the control over assets is extremely important for companies and organizations, especially if the talk is not about a couple of bucks, but hundreds of thousands of dollars. For companies and enterprises, it’s vital to go with the most advanced technological achievements the blockchain can offer. MPC wallets are one of them. They are not only operationally flexible and secure, but also easy to operate and have enormous potential to onboard new users easily.
If you are looking for new business capacities and would like to embrace the power of blockchain, get in touch with us. Spatium Wallet as a Service SDK can provide your clients with user-friendly and secure crypto wallets in a short time with minimum effort.
Blockchain is a unique ecosystem where its participants conduct financial transactions in a zero-trust environment. It means that whoever you want to sell crypto or buy crypto from could be a bad actor. That’s why it’s important to be properly protected and have your assets secured. If someone hacks your wallet, your connection to a blockchain is lost, and consequently, you lose all your assets.
Moreover, it’s important to stress this out because the global crypto user rate is growing. In 2022, it was around 4.2%. In 2023 it’s believed to be 8,8%. By 2027 it’s expected to be 12,5%.
Whoever provides secure and robust crypto wallets will attract the growing blockchain audience and assist in the development of the blockchain ecosystem in general.
Crypto Wallet Is a Gate to Web3
When we use the phrase ‘crypto wallet’, some people think that it stores digital assets and when you need you can easily withdraw them. It’s not true, because, unlike the web2, web3 digital wallets are only gateways to blockchains.
They store the records of the blocks your assets are written in. If you think of an image, the blockchain and the crypto wallet act as a door keyhole and the key to open it. That’s why the question of who has custody of the key is utterly important.
Powerful cryptography ensures that the right key opens the right door. Wallets operate through the generation of private keys which are used to sign transactions. And as long as the interaction between the wallet and blockchains is efficient, your digital assets are reachable and secure.
Due to this, crypto wallets are hard to hack. We can compare them to the knight’s armor bravely protecting its owner from malicious attacks and the enemy’s arrows. But as with any armor, it’s pretty difficult to put on. That’s why knights welcomed the assistance of their servants.
To operate wallets in a hostile zero-trust blockchain environment, you need a reliable partner who can shoulder all the wallet developmental issues and let you grow your business.
Private Key Storage Types Explained
One of the first crypto wallets was specialized hardware devices, aka cold wallets. Based on the crypto custody type, such wallets are non-custodial which means secure. The only problem is that only tech-savvy users can use them. Moreover, if something happens to the equipment: it gets lost or broken, your assets are lost.
Later online wallets appeared. Anyone could install and use them from a computer or smartphone (desktop, web, and mobile), aka hot wallets. But even this step didn’t make them easier to operate due to exceptionally advanced and complicated cryptography which caused cumbersome private key generation.
Regarding the kind of crypto custody applied, hot wallets could be custodial and non-custodial, based on their technical characteristics.
Putting all the cryptographic functions on the side of service providers called to life custodial wallets when users gave away the right to operate them to the service provider, usually a centralized exchange. That was a very successful move until one by one exchanges got hacked and brought wallet owners to bankruptcy.
Right now, we are witnessing the rise of self-custodial (non-custodial) wallets which is the new acceleration in the crypto custody solutions space that harnesses the power of encryption and makes the wallet UX engaging and convenient for all types of users. These are MPC-powered wallets giving businesses and users full ownership over their digital assets and eliminating a single point of failure.
Let’s discuss the main two types of crypto custody solutions in detail and see how they could be beneficial for your business.
Custodial Solutions
If businesses or users delegate private key generation and storage to any third party, such wallets are called custodial. Institutional crypto custody wallets are often provided by centralized crypto exchanges, banks, etc. which operate them, store private keys, sign transactions, etc.
Benefits of Custodial Crypto Wallets
1. Friendly User Interface
Such custodial solutions are practical and easy to use. There is no need for users to store private keys, backup phrases, etc. When users want to access their wallets, they simply log in to their accounts and enjoy a similar web2 experience.
2. Security and Insurance
Wallets providing institutional crypto custody on the one hand are more secure because users cannot lose their private key as they simply don’t have access to it. On the other hand, many custodial wallet service providers offer insurance against the loss of assets. Anyway, in case of a malicious attack businesses who operate custodial wallets lose everything.
3. Customer Support
Centralized exchanges are offering their customers assistance and client services. In case users have some difficulties with their wallets or find some operations hard to fulfill, they may contact customer support and get answers to any questions they have. This is particularly beneficial to inexperienced users.
4. Alignment with Regulations
One of the reasons to choose such a kind of crypto custody solution like custodial wallets is their adherence to the standards. Centralized exchanges are governmentally registered and follow national strict security procedures.
These could be KYC, AML, or KML. Because of such practices, custodial solutions offer more transparency and accountability which could be a benefit for your business.
5. Small Fees
Based on the fact that custodial solutions are usually offered by cryptocurrency exchanges, they let users benefit from reduced gas fees while making financial transfers between the wallet and the exchange account. In addition, some other financial operations could be charged less by custodial wallet service providers as well as beneficial for those who would like to boost earnings.
Self-custodial Solutions
A wallet that gives full control over the private key generation and storage to the user is called self-custodial or non-custodial. These could be a variety of wallets: cold wallets, multi-sig wallets, and MPC wallets. Though all of them provide users with access to private keys, not all of these wallets are user-friendly.
Let’s concentrate on the benefits of MPC self-custodial wallets as that’s the only type of non-custodial solution that is convenient and engaging enough to attract users of all types and enable them to reap the benefits of the blockchain ecosystem.
Benefits of Self-custodial Crypto Wallets
1. Enhanced Security
In one of our articles, we have already discussed a variety of benefits MPC encryption technology offers to crypto wallet service providers. One of them is the increased security of the crypto custody solutions powered by MPC. The reason is the absence of the private key, which is substituted with the number of secrets shared across several parties.
In such a condition the hacking of the private key does not make much sense because, for a bad actor, the task has become much more complicated. To get access to the digital assets, they have to hack the wallet, the service provider platform, the wallet provider platform, and any other platforms that could be storing the unlimited amount of secrets used to generate the private key.
2. Increased Control
Self-custodial wallets service providers do not need to align with governmental regulations, because there are no digital assets stored on their sides and this is one of the biggest benefits of this type of crypto custody solutions.
The full control over the assets is on the side of the user and the service provider only helps to safeguard the account and assist in its restoration in case the user loses access.
3. Cost Effectiveness
Businesses have to pay the fees to the crypto custody provider for wallet management. The bigger the business grows, the higher the fees are. The ideal solution for businesses is a self-custodial Wallet as a Service SDK, which is easy to use and allows building secure wallets with a meager budget.
4. Flexible Governance
MPC-powered wallets that are self-custodial crypto solutions allow the introduction of various policies enhancing the control over users’ financial flow. As an example, it could be the introduction of the daily limit for transactions, notifications of any suspicious activity on the account, or any other management.
5. Greater Privacy
Unlike custodial wallets when all financial transactions are known by the custody provider, self-custody provides businesses with much greater privacy. All transaction data stays on the side of the business and that’s why it’s better protected.
6. Convenient Interface
Until recently, self-custodial solutions were super secure but not very convenient for inexperienced users. With the MPC encryption technology, the situation changed. Modern MPC-powered crypto custody solutions are engaging and extremely user-friendly.
Anyone, who has any experience of interaction with web2 digital wallets, will feel no difference while shifting to web3 wallets. Advanced MPC technology made it possible to eliminate seed phrases through storing secrets used for private key generation in the encrypted cloud and the introduction of biometric backup.
Conclusion
It’s important for businesses to choose the right kind of crypto custody and the type of wallet. The wallet is the key element of users' interaction with the blockchain ecosystem and to get customer appreciation it should be well-protected and easy to operate.
Spatium has revolutionized the wallet space by bringing to the market a highly competitive wallet powered by non-custodial WaaS SDK that is engaging and user-friendly and at the same time does not compromise users’ privacy and ability to fully control their digital assets.
Moreover, Wallet as a Service SDK offered by Spatium saves much time and effort, in addition to being financially beneficial. There is a very small learning curve involved before companies can start integrating Spatium institutional crypto custody wallets into their business processes.
To make sure Spatium is the right partner for you - send us a line and let’s discuss what are our touchpoints and how our technologies could help you nourish your businesses.
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 world 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 party 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
Decentralization
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.
Data Privacy
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.
Accuracy
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.
Flexibility
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.
Scalability
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.
Compliance
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.
User-friendliness
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.
Overall Complexity
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
SMB Companies
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.
Investment Organizations
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.
Joint Custody
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.
Voting Systems
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.
Summing Up
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.
