When employed in wallets, multiparty computation can assist users in securing their private keys and seed phrases.
What is a multiparty computation cryptocurrency wallet?
A crypto wallet that makes use of MPC technology to securely handle and store user funds is known as a multiparty computation wallet. The private keys used to access and control the users’ cryptocurrency are divided into numerous portions in an MPC crypto wallet, known as “shares,” and distributed among the participants in the MPC protocol.
The main benefit of utilizing MPC in a cryptocurrency wallet is that it enables users to handle their bitcoin in a secure manner without allowing single entity access to the complete private key. This can assist defend against a variety of assaults, such as those made by hackers looking to steal cryptocurrency from users by compromising the private key share of a single party.
MPC crypto wallets often employ secure communication protocols in conjunction with cryptography to let various parties handle users’ cryptocurrencies together. The method produces a secure and effective means to manage users’ bitcoin assets, albeit it may require complicated computations and extensive communication between the participants.
Multiparty computation is a technique used by cryptocurrency wallets like ZenGo to increase wallet security, and Coinbase has made it available for their noncustodial wallet. MPC crypto wallets can therefore offer more security and defense against certain assaults. They still demand more computing power than other crypto wallets.
Advantages of multiparty computation cryptocurrency wallets
- An MPC crypto wallet’s principal benefit is its ability to boost security for users’ cryptocurrency assets by dividing the private keys needed to access and control the cryptocurrency into various pieces and distributing those portions among various parties.
- MPC cryptocurrency wallets are superior to conventional wallets in various ways. Since they can guarantee that a user’s assets remain accessible even if one or more parties are absent or unresponsive, MPC wallets are more dependable. The fact that the private keys are divided into many shares and given to other parties enhances privacy as well.
- The user has a lower chance of losing their money by preventing any one party from learning their entire private key. Since the computations are done on encrypted outputs, which prevents malevolent parties from discovering important information, security is also strengthened.
Disadvantages of multiparty computation cryptocurrency wallets
- Nevertheless, utilizing an MPC crypto wallet could have certain drawbacks. One of these drawbacks, especially for those who are not cryptography professionals, is the intricacy of MPC protocols. Therefore, it may be more difficult for the average person to set up an MPC wallet.
- Additionally, MPC techniques could run more slowly because of the processing resources they require. An MPC wallet might be less effective than other crypto wallets in this sense. Finally, not all cryptocurrency assets can be maintained with an MPC crypto wallet, and managing some assets with MPC may be challenging or impracticable
Anyone who uses cryptocurrencies knows how crucial wallet security is, and the need for self-custody has grown even more clear in the wake of the failure of numerous well-known cryptocurrency companies and the loss of millions in user assets.
The user’s particular demands and requirements will determine whether they want to use an MPC crypto wallet. It might be helpful for individuals who value security and privacy, for instance, but some people might prefer a more straightforward alternative.