In this post I'll be explaining how MPC wallets work, what MPC is and what the advantages of MPC are.
Let's dive right in!
MPC wallets and multisig wallets are similar in one aspect - both require multiple parties to approve a transaction before it can be executed. However, there are some critical differences between the two.
With a multisig wallet, each party holds their own private key. And each party is signing the transaction separately. Whereas with a MPC wallet, each party holds a key shard and only when the threshold is reached is a signature created. This means the quorum process for an MPC wallet takes place entirely off chain.
This key difference between multisig wallets and MPC wallets, results in some major advantages for MPC wallets.
Firstly, because the private key never exists in a whole state - with an MPC wallet your private key can’t be stolen. A hacker would need to steal the majority of key shards (depending on your quorum policy) before they could sign transactions on your behalf. At the same time, the key shards for an MPC wallet can be refreshed without changing the public address. Whereas with a multisig wallet, the private keys for the individual parties could be compromised. And the public address for a multisig wallet can’t be changed without setting up a new wallet.
The other major advantage is privacy. With a MPC wallet, the entire process happens off chain. Whereas with a multisig wallet, each signature is done on chain - making it possible to track and trace individuals that are part of a multisig, as well as the policies in place.
There are some other critical advantages to MPC wallets over multisig wallets. And I’ve covered them already here: MPC Wallets vs. Multisig Wallets