Introduction to MPC Wallets

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What are MPC Wallets?

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MPC Technology

Multi-Party Computation (MPC) is an advanced cryptographic technology utilized for key management on the blockchain. With MPC technology, private key shares are individually generated within separate secure environments, encrypted, and divided amongst multiple parties. Transactions are processed using these distributed key shares, without the complete private key ever being assembled or exposed. This means that the private key that executes transactions never exists or lives in any one device at any point in time — rather, it is decentralized and held across multiple parties / devices. MPC technology ensures that no single party can unilaterally move funds, eliminating a single point of failure and making key theft and internal fraud and collusion much more challenging for malicious actors.

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Threshold Signature Scheme (TSS)

A Threshold Signature Scheme (TSS) is a type of digital signature protocol used by MPC Wallets that allows distributed parties to each contribute independently to a transaction’s signature. In the MPC-TSS setup, a flexible threshold signature scheme (”m out of n” key shares) can be implemented. For instance, in a 2-2 signature scheme, two private key shares will be generated independently and both key shares will be required to authorize each transaction.

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Types of MPC Wallets on Cobo Portal

Cobo Portal offers two types of MPC Wallets: Organization-Controlled Wallets and User-Controlled Wallets.

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Organization-Controlled Wallets

In an Organization-Controlled Wallet, the management and control of the wallet lie with the organization itself. This setup allows organizations to securely safeguard and maintain complete control of their own funds or their end users’ assets. An Organization-Controlled Wallet utilizes a 2-2 signature scheme, with one key share held by the organization and the other key share stored within Cobo’s multi-cloud infrastructure. MPC Wallets for your organization’s own funds: MPC Wallets for your end users’ assets:

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User-Controlled Wallets

In a User-Controlled Wallet, end users of the organization are given full control of their digital assets. In this setup, each end user of the organization holds their own unique private key share to their MPC Wallet. With a flexible threshold signature scheme (”m out of n” key shares), User-Controlled Wallets allow the organization to customize how transactions are authorized. For example, under a 3-3 signature scheme, the organization and the end user each hold a key share, while the third key share is stored within Cobo’s multi-cloud infrastructure, and all three are required to independently authorize each transaction. Alternatively, a 2-3 signature scheme can be implemented, where the organization’s key share is held offline and utilized only in specific circumstances, such as disputes or critical events. To integrate non-custodial MPC Wallets into your applications, a 2-2 signature can be implemented, where the end user holds a key share and the other key share is stored within Cobo’s multi-cloud infrastructure, while the organization holds none. 3-3 signature scheme: 2-3 signature scheme: 2-2 signature scheme:

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Key features

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Flexible key share management

Choose from Organization-Controlled Wallets and User-Controlled Wallets based on your unique business requirements. Organization-Controlled Wallets allow you to safeguard and control your own treasury assets as well as your end users’ assets. User-Controlled Wallets allow you to integrate non-custodial wallets into your applications and provide your end users with the control over their assets.

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No single point of failure

Cobo Portal’s MPC Wallets utilize advanced MPC technology to decentralize the private key, ensuring that the full key is never materialized at any point. Authorizing a transaction requires multiple independently held key shares. This ensures that even if one key share is compromised, unauthorized parties cannot unilaterally access your funds. MPC Wallets safeguard your assets from external hacks, internal fraud, collusion, and human errors, significantly reducing the risk of asset loss.

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Robust asset recovery capabilities

With comprehensive backup and recovery mechanisms in place, Cobo Portal’s MPC Wallets ensure that you have access to your assets at all times – whether your key share is lost or compromised, or in the unlikely event of a system failure or service disruption. You retain the ability to manage the recovery process independently or engage the assistance of a third party disaster recovery service provider, such as an insurance company or security firm, for added peace of mind.

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MPC Wallets vs. Web3 Wallets

In practice, Web3 Wallets and MPC Wallets support most of the same features, and their capabilities for asset transfer and management are largely equivalent. The main differences are summarized below: