MPC vs. Multi-Sig — Which One Wins?
Multi-sig technology played a significant role in developing cryptocurrency security, but how does it compare to its newer counterpart, multi-party computation? In this article, we break down which comes out on top.
As crypto continues its inevitable trend towards mass adoption, protecting user funds remains at the top of everyone's priority list. There's no technology more precious than money, and no amount of buzzwords or marketing can change that. Therefore, fund security is paramount, and it is a responsibility that developers, exchanges, and users must share.
But security is tricky; everyone wants it, but very few are willing to take the measures necessary to achieve it properly. However, it's for a good reason, as the more bulletproof security techniques often add significant inconvenience to users, further hindering adoption. In addition, most people don't have the time, technical know-how, or patience to verify cryptographic proofs or create offline cold storage.
That's why adoption needs to think of the average user in mind. So how do we make crypto secure but easy for the average user to access and use?
Many in the crypto space discuss two more common technologies to secure private keys — multisignature (Multisig) and multi-party computation (MPC) — but there is often confusion about how these two technologies differ. MPC is the more secure solution, built for a rapidly maturing ecosystem, and will likely see much broader adoption in the coming years.
Let's discuss them both.
What is Multi-sig?
Multi-sig is a type of cryptography that requires multiple keys to sign a transaction before it can be settled. The benefits of multi-sig are that it distributes trust among multiple parties and makes it more difficult for a single entity to control all the funds. Multi-sig can be used with hot wallets (online wallets) or cold storage (offline wallets), and many times both. To access their funds, they would need the approval of a certain number of those people.
The most common use is the 2-of-3 multi-sig setup, which spreads a wallet's private keys among three devices or people. Then, to access funds, the sender would need the approval of two of those three people.
An easy analogy would be a safe deposit box that requires two keys to open. The account holder holds a key, and the bank holds the other. A third party also holds another key for added security, such as a lawyer or family member.
- Think of it like this: you have your key, I have my key, and our friend Alice has her key.
- To access the funds, two out of the three keys are required. This could be you and Alice, you and I, or Alice and I. But it cannot be just you or just Alice.
What is MPC?
MPC is a type of cryptography that allows multiple entities to compute a function while keeping their inputs private jointly. MPC is similar to multi-sig in that it allows multiple parties to sign a transaction, but this can be achieved using a single private key that is split into shards rather than multiple private key used by Multi-sig. In fact, at no point in the MPC process are any of the private key shards ever disclosed, only proofs of holding the shards are shared during the MPC singing process.
MPC is functionally similar to multi-sig but has one significant difference: MPC is designed so that no single party ever has access to the entire set of private key shards. So instead of having our key, your key, and Alice's key, MPC creates a "shared secret" amongst the three of us (or any number of people). This shared secret is then used to sign the transaction.
Secret sharing is a type of cryptography that allows parties to communicate and perform operations without revealing their private information. For example, when using MPC with private keys, the private keys are first split into multiple pieces using a cryptographic technique called "secret sharing." These pieces are then distributed to the various parties. Finally, each member performs a computation on their piece, and the result is combined to produce the final answer. Picture this like a puzzle: one member may have the first piece, another the second, and another the third. Then, each person puts their piece together to solve the puzzle (i.e., sign the transaction).
By design, only when all parties have put their pieces together can the puzzle be completed.
To oversimplify, MPC enables parties to do things together without revealing their private information.
MPC vs. Multi-sig: Which is Preferred?
The answer for us is MPC. Why?
- MPC is more enterprise-ready. Accessing funds in a multi-sig setup requires the manual approval of each party involved. This is not practical for businesses that need to move fast and have their transactions go through quickly. MPC can be automated, so companies can continue to operate efficiently.
- MPC is blockchain-agnostic, while multi-sig is not. MPC can be used on any blockchain, while multi-sig can only be used on select blockchains that support it.
While multi-sig marked a significant advancement in digital security, MPC marries good UX and safety. While this may not be for everyone, for our purposes, it’s a gold standard. MPC is a leap forward for digital security and has the ability to become the standard for safeguarding digital assets. At NOAH, we're committed to making our security as bulletproof as possible, so we chose MPC for our app.
Please be aware that:
- Cryptocurrencies are unregulated in the UK;
- Cryptocurrencies are not protected under Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS);
- Profits may be subject to capital gains tax;
- The value of investments can go down as well as up