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The stakes continue to rise for Digital Asset (DA) transaction security. Multiparty approval or using multiple approvers is one technique which dramatically increases transaction security. Unfortunately, many DA’s based on blockchains such as Ethereum, Binance, and others lack native support for Multiple Signatures (MultiSig) to enable multiparty approvals. They require the addition of special smart contracts or other workarounds to accommodate MultiSig, which can add cost, complexity, inconsistency and potential security issues as demonstrated by the Parity breach. Fortunately, there’s a compelling alternative that is natively supported by every DA and is not reliant on MultiSig?
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Threshold Signatures support the same multiparty approval concepts of a MultiSig, but without the complexities and dependencies of MultiSig, and with arguably better security. Just like MultiSig, Threshold Signatures can support virtually any quorum specification for conventional 2 of 3, 3 of 3 and so on, with up to 20 approvers. One of the many important differences is that Threshold Signatures can support this array of quorum schemes while appearing on-chain as a standard single signature. So, there is no dependency on the blockchain to natively support multiple signatures or special smart contracts.
Threshold Signatures can enable virtually any DA or smart contract using standardized digital signature algorithms, like ECDSA, EdDSA and derivatives, or Schooner signatures and more, to support multiparty approval, even when MultiSig is not natively supported by a blockchain.
One of the challenges with MultiSig is each approving party has their own full private key. As each party grants their approval, a digital signature is generated and recorded until the required minimum number of parties have granted approval. Recording each party’s approval on-chain creates a dependency for the DA infrastructure to natively support this scheme. It also results in performing basic key management and signing policy functions on-chain in a public manner which may be undesirable.
Threshold Signatures incorporate multiparty computation (MPC) to generate the private key used to sign and approve transactions using key shares (part of the full key) rather than multiple keys and multiple signatures. With ThresholdSig, each approver has their own key share which they use to provide their approval of a given transaction. Once MPC confirms availability of a sufficient number of partial signatures to approve the transaction, a single digital signature is generated.
Threshold Signatures run off-chain, so there is no dependency on the DA’s blockchain to support a particular on-chain model. The result is the ability for exchanges, custodians, enterprises and others to enjoy multiparty approvals with the consistency of operations across a variety of DAs. This allows them to enjoy security which is at least as good and frequently better than MultiSig, without requiring the DA to natively support MultiSig or complex workarounds.
To learn more about Threshold Signatures we invite you to visit Blockdaemon.
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