In the world of digital assets, security is paramount. A digital crypto token is a valuable asset; therefore, it’s important to store it securely. The two most popular methods for securing digital crypto assets are using MPC, which stands for multi-party computation and multisig, which stands for multi-signature wallets. While both methods provide a top-notch level of security and a wide range of functionalities, they work differently.
Why do you need a crypto wallet?
Multi-signature wallets and multi-party computation (MPC) wallets aim to get rid of the single point of failure in crypto storage solutions, the private key. By requiring multiple parties to authorize transactions, both wallet types enhance the security of crypto transfers. Nevertheless, despite their shared goals, multi-sig and MPC wallets have distinctive characteristics that set them apart.
Here, we will discuss the key differences between the MPC and multisig wallet.
What is MPC?
Multi-party computation, or MPC, is a cryptographic protocol that allows multiple parties to compute a function collaboratively without revealing their inputs. In cryptocurrency, an MPC wallet allows multiple parties to work together to generate a private key without revealing any of their private keys.
An MPC wallet generates a shared key, which is then used to sign transactions. This shared key is divided among multiple parties, so only some parties have full access to the private key. This makes MPC wallets extremely secure since no single party can compromise the wallet’s security.
What is Multisig Vault or Multisig Wallet?
A multisignature wallet is a cryptocurrency wallet that requires more than one signature to complete and execute a transaction. For example, a 2-of-3 multisig wallet, as the name goes, require two designated parties to sign off on a transaction before it can be executed. This makes multisig vault wallets extremely secure since multiple parties must approve transactions.
Multisignature wallets are popular when multiple parties need to access cryptocurrency funds. For example, a company may use a multisig vault wallet where several employees are required to sign off on a transaction and approve it – before it can be executed.
Difference between MPC and Multisig Wallets:
Now that we understand what MPC and multisig vault wallets are let’s compare them and discuss their differences.
Both MPC and multisig wallets provide a high level of security. However, MPC wallets are generally considered to be more secure since no single party has access to the entire private key. With a multisig vault wallet, each party has a portion of the private key, and if one party’s key is compromised, the security of the entire wallet is compromised.
MPC wallets are generally more complex to set up and use than multisig wallets. Setting up an MPC wallet requires multiple parties to collaborate and generate a shared key. In contrast, multisig vault wallets can be set up with relative ease.
Multisig wallets are more flexible than MPC wallets. With a multisig wallet, you can choose the number of signatures required for a transaction, whereas an MPC wallet requires a predetermined number of parties to generate the shared key.
MPC wallets are generally more expensive than multisignature wallets. Setting up an MPC wallet requires specialized hardware, whereas multisig wallets can be set up with standard hardware.
Both MPC and multisig wallets provide high security for cryptocurrency storage. However, they work in different ways and have different strengths and weaknesses. MPC wallets are generally considered to be more secure, but they are also more complex and expensive to set up. Multisig wallets are more flexible, easier to set up, and have the most security features that MPC wallets offer. Ultimately, the choice between MPC and multisignature wallets depends on your needs and preferences.
When it comes to fiat currency and paper notes, it is possible to store all of your money in a single wallet, regardless of the number of currencies you possess. Conversely, it would be an impractical solution if you had to use separate wallets for each currency, such as one for Dollars, one for Naira, and another for Euros.
A similar scenario applies to cryptocurrencies, where managing multiple wallets and seed phrases for various digital assets can be daunting. This involves handling multiple accounts and ensuring adequate security measures are in place, which can quickly become overwhelming. Fortunately, with Yodaplus’s multisignature wallet, this process is simplified. While some may argue that multisig wallets are superior, this post will explore the upsides and downsides of both MPC wallets and multisig wallets for organizations managing digital assets.