Understanding Multi-Party Computation (MPC) Wallets

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Portal’s comprehensive guide to MPC. From basics to advanced security features, learn how MPC technology is innovating non-custodial finance and payments.

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This guide to MPC (Multi-Party Computation) wallets provides an overview of this critical technological advancement that stands out for both its usability and security in the world of blockchain. Designed to safeguard cryptocurrencies and other digital assets through distributed key generation and storage, MPC wallets are an increasingly popular method for storing and managing assets on blockchain. 

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Necessity of key management for non-custodial wallets

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Digital asset wallets are managed by a public/private key pair, where the public key is considered the wallet address and the private key is held securely to facilitate transaction signing. With custodial wallets, the private key is stored on behalf of the user. Non-custodial wallets are under the complete control of the individual owner; therefore, key management is the responsibility of the user. 

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Traditional non-custodial wallets require users to copy and store their private key information as well as a mnemonic of 12, 18, or 24 words to be used for key recovery. These words allow a user to restore a private key in case of a loss of wallet or compromise. While many people prefer this type of non-custodial wallet, the storage of the mnemonic causes significant friction for those new to buying, trading, and storing digital assets.

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Recently, a new set of non-custodial wallets have come on the scene that remove the necessity to remember the mnemonic through advancements in cryptography. Private keys can now be stored on trusted devices like a user’s phone or divided into key shares amongst multiple parties. These new wallets, particularly the Multi-Party Computation (MPC) wallet, are helping bring non-custodial wallets to the masses.

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What is an MPC wallet?

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Multi-Party Computation (MPC) wallets were designed to offer users a secure but familiar method for storing digital assets. Instead of a single private key on a single device, as is common with many self-custodial wallets, MPC wallets enable users to have multiple key shares across devices to manage access to their crypto. MPC protects users from phishing attacks and the risk of losing a seed phrase by removing the single point of failure created by one key on one device.

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Architecture options for MPC wallets

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There are two main cryptographic schemes that can be used to design MPC wallets, Shamir Secret Sharing (SSS) and Threshold Signature Scheme (TSS). 

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Shamir Secret Sharing 

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With SSS MPC wallets, a single private key is divided into shares and distributed to multiple parties. A minimum number of shareholders must reconstruct the key to sign transactions.

Threshold Signature Scheme wallets 

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Shares of the private key are generated and distributed to multiple parties. A minimum number of shareholders must reconstruct the key to sign transactions.

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Why does Portal use TSS MPC wallets?

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MPC wallets minimize user friction and costs, but the SSS architecture has a security vulnerability that TSS MPC does not have: The private key gets reconstructed, creating an attack vector. TSS MPC is increasingly recognized in the industry for key management functionality that lets users retain full control over their assets with a relatively friction-free, secure, and cost-effective setup.