Digital Asset Custody Solutions: Comparing MPC Wallet Types
Apr 5, 2023
Not all MPC wallets are created equal and it’s worthwhile to step back and evaluate the different MPC wallet technology.
Secure Multiparty Computation (MPC) has emerged as the institutional- and custody-grade wallet technology of choice for both traditional and emerging players in the digital asset market. However, not all MPC wallets are created equal and it’s worthwhile to step back and evaluate the different MPC wallet technology options when planning to implement your next wallet.
At the core, all MPC-based wallets employ a similar methodology: minimize the risk of key theft by eliminating the existence of a complete key held by any single party. However, the MPC protocols and implementation approaches used by different MPC technology and wallet solutions providers can vary substantially, with noteworthy implications.
OPEN-SOURCE MPC WALLETS
Open-source MPC wallets are available from multiple sources, subscribing to the popular open-source licensing model where any developer is welcome to modify and share their designs for access and use by the general public.
Open-source MPC wallets are popular among startups and other early-stage innovators as a means to learn about and become familiar with MPC wallets and technologies. However, these wallets are generally not suitable for the demanding requirements of institutional and custody-grade service providers. Some of the primary concerns include:
Lack of Accountability: Who is accountable when one of the contributing designers introduces a bug or vulnerability? Who will assist you in resolving issues when they arise? Can you trust the depth of knowledge and council provided through open contributions in public forums?
Lack of Third-Party Attestations: Open-source MPC wallets lack formal third-party detailed reviews and attestations to ensure that the designs have been well vetted and follow security best practices, especially following any contributions to the open-source code by 3rd party developers.
Limited Performance & Scalability: Open-source MPC wallet designs are typically quite generic and provide basic levels of performance and scale. Open-source designs typically lack performance-enhancing attributes such as pre-processing to optimize computational throughput. And open-source wallets are commonly limited to a single wallet per operational instance, making it incredibly difficult to scale up as your customers and market share grow.
BASELINE MPC WALLETS
Basic or Baseline MPC wallets are more common and broadly used by companies who consider their wallets to be an operational convenience, but not an essential component of their overall service offering. Baseline MPC wallets typically follow a conventional text-book approach to implementing MPC, following well-documented approaches to implementing basic, yet secure MPC wallet operations. In some cases, baseline wallets are offered as a subscription: Wallet-as-a-Service (WaaS), where a basic set of common, pre-defined, user-selectable features are available.
Baseline MPC Wallets are more than sufficient for a wide-range of general, moderate scale use-cases. However, for serious institutional investors and custody-grade digital asset service providers these wallets lack several critical requirements:
Lack of Control: The convenience of WaaS makes it super easy for smaller and mid-tier service providers to get up and running quickly, but what happens if the WaaS provider is acquired or goes out of business? And what happens when the WaaS provider decides to introduce features you don’t want, or drops those that you do want? Overall, the lack of control and blackbox approach that is typical with baseline MPC wallets is problematic for many companies who view their wallets as more than just a technical convenience.
Limited Performance: One of the most common complaints from baseline MPC wallet users is performance. A common byproduct of a WaaS model that is continually expanding and evolving is that performance can degrade, in some cases resulting in many seconds to minutes of latency to execute a single transaction. Then consider the risks of using a WaaS model, such as Denial of Service attacks. We are still in the early days of the evolving digital asset market, so having systems which are under your control, and with sustainable high-performance may prove critical even for businesses that view wallets as a secondary concern.
Limited Scalability: Another common complaint with turn-key, baseline MPC wallets and WaaS offerings include the limitations on scale. While baseline MPC wallets commonly support dozens to hundreds of wallets, they frequently lack the ability to scale to thousands or millions of users that is required of large-scale service providers.
ADVANCED MPC WALLETS
Advanced MPC wallets address the constraints of the above wallet models and more. Designed for large scale institutional investors, exchanges, custody-providers, and mid-size companies that view a secure, high-performing, and resilient wallet as a critical component to their overall customer experience and business.
Advanced MPC wallets introduce more advanced MPC schemes with more scalable and resilient architectures, higher levels of performance, exponentially higher levels of scalability, and autonomous control. Some of the attributes and features behind those differentiators include:
Advanced MPC Algorithms: While a more basic 2-party MPC model is commonly used for open-source and baseline MPC wallet designs, advanced MPC wallets often allow more MPC parties. Increasing the number of MPC parties to 3 or more enables greater levels of service innovation and the ability to satisfy regional regulations related to custody, sub-custody, shared-custody, and non-custody responsibilities, all underpinned by core MPC cryptography. When security is a top priority, advanced MPC algorithms become a fundamental differentiator.
Massively Scalable, Microservices Architecture: Open-source and baseline MPC systems typically incorporate a monolithic architecture. While these more simplified designs are easier to implement and tuned for high-performance with moderate scale, they frequently encounter substantial limitations and degraded performance above certain levels of scale. In contrast, a cloud-native micro-services architecture follows the best practices of cloud systems design, which inherently produces orders of magnitudes of increased scalability, while maintaining a consistent level of performance. As a result, high-performance advanced MPC wallets can support any scale from thousands to millions of users and wallets.
Cloud-native micro-services architectures also introduce more resilient systems design, providing higher-availability services, without the costly monolithic approach of duplicating hardware.
High-Performance Pre-Processing: Some basic and all advanced MPC wallets incorporate at least some level of pre-processing techniques as part of their multiparty computational design. This technique allows certain levels of core MPC algorithmic processing to occur in advance of a transaction approval request. The result is minimized processing latency between transaction requests and approvals. These techniques can provide orders of magnitude performance improvements in transaction times, while maintaining the same level of security.
Variations of pre-processing can also eliminate the dependency on concurrent availability of all parties. This can maximize service resilience and even support off-line, air-gapped multiparty approvals which enable cold, hot, and hybrid wallet use cases.
Increased Flexibility: The micro-services architecture attribute of advanced MPC also introduces greater flexibility on product and service design and implementation. As an example, advanced MPC can be implemented where one or more of the MPC parties is a mobile device, or even an IoT device with a very modest amount of available processing and memory. On the other end of the spectrum, MPC nodes can be hosted on multiple containers running in different clouds, or any combination in between.
Complete Control: Advanced MPC wallets give wallet developers and providers full, autonomous control over their services. Service providers may choose to host their own wallet offerings using any model they choose, with software that is managed and controlled by the provider. Ongoing roadmap enhancements and pre-approved before being introduced into your code, and third-party reviews and attestations are available along every step of your product evolution journey.
Comparing MPC Wallet Types
As highlighted above, there are several major and numerous more subtle attributes that differentiate one wallet type from another. The following table may serve as a useful quick reference for comparing MPC wallets.
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