Broadly speaking, multi-signature and multi-party computation (MPC) wallets both serve the same purpose: to rid crypto storage solutions of their single point of compromise, the private key. These wallets require multiple parties to sign off on a transaction, thereby adding greater security to the process of sending crypto. However, while these two wallets appear to have similar aspirations, they are very different from each other. Tag along as we tell you more about multi-sig and multi-party computation wallets (MPC) and how they differ.

What is a multi-sig wallet?

In layman’s terms, multi-sig means a multi-signature digital wallet, where two or more individuals are required to provide their signature and thereby validate a crypto transaction before it is executed. These wallets usually require more than one key for the validation of transactions.

Multi-sig wallets have been in use since 2013 and play a significant role in keeping digital assets safe. These wallets come in various forms. The common form of a multi-sig wallet is the “two-of-three” multi-sig wallet, which ideally contains three unique signatures, out of which any two are required while validating a transaction. Other forms of multi-sig wallets include two-of-two, three-of-five and five-of-seven wallets.

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What is an MPC and how is it different from a multi-sig?

Unlike a multi-sig wallet, which requires more than a single private key for validating a transaction, an MPC wallet uses a single private key which is sharded and distributed between multiple individuals. When a transaction needs to be signed off, all involved parties must sign the transitions with their share of the private key. They may even do so from different locations. This method ensures that the private key never exists in its entirety in one place at any given time.

The MPC wallet was introduced as a step up from multi-sigs. This is because multi-sig wallets became popular with the advent of Bitcoin and were designed to enhance the security standards at the time. However, technology has advanced a lot since then, and there are downsides to using multi-sig wallets in 2022, where using MPC wallets makes more sense.

For instance, multi-sig wallets do not operate across all protocols. They were created almost a decade ago when there weren’t so many different blockchain protocols in the market. However, MPCs are designed to support several blockchains, even newer ones with advanced technical implementations.

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Secondly, multi-sig wallets are not very flexible. One cannot add or remove participants from such wallets. Instead, all funds need to be transferred to a new multi-sig that includes the desired participants. On the other hand, an MPC can accommodate such alterations without the need for a new address.

Another important feature of an MPC wallet is that its keys can be recovered in case of an emergency, while that is usually not the case with a multi-sig. And finally, MPC wallets are considered to be more private. This is because all fragments of the private key are stored off-chain, with only the final signature being stored on-chain. Not even the details of the fragments and their holders can be accessed. This is unlike a multi-sig which stores all private keys on-chain. Anyone with the right know-how and tools can ascertain the number of parties with access to the wallet and track their transactions.

Conclusion

MPC wallets pave the way for a more secure and privacy-focused digital assets ecosystem, which is the need of the hour. Further, 2022 has been one of the worst years in crypto history suffering some of the biggest hacks the industry has ever witnessed. At a time like this, secure storage solutions such as the MPC wallet provide.

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