What is a Multi-Party Computation (MPC) Wallet and How Does It Work?

What is a Multi-Party Computation (MPC)?

MPC stands for Multi-Party Computation which is also called secure MPC or SMPC. This is a protocol where various parties are colluding with each other to complete a given task. This type of protocol retains the user information private on the internet.

Various parties working at a blockchain project can find out the average salary without revealing individual salaries.

In this manner, MPCs are able to find average salary for the workers in the same capacity as them without revealing any personal information. MPCs are able to share information by dividing their data packs into various parts between various parties operating on the same platform.

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In this manner, all users on the platform are able to find the average of a given value set such as salaries without corresponding with them directly.

How do MPCs Work?

MPC is a branch of encryption method that was created in 1970s. However, in contrast to the encryption it is used to protect the information from investors hailing from outside. This technique is used to ensure that users are able to maintain data privacy with the participants of the network.

On this account, MPC is applied for different functions such as creating secure digital wallets or ensuring bid privatization during online auctions etc.

What is an MPC Wallet?

An MPC wallet uses the encryption technology in the form of multi-party computation to increase security for trading portfolio. Rather than generating a single private key, it splits a private key and distributes its parts among various users accessing the same wallet.

In this manner, the risk of hack attacks, cyber breaches, and losing access to the account reserves are also reduced.

Are MPC and Multi-Sig Wallet Same?

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Multi-sig wallets process blockchain transactions through unique signature that requires the approval form all participants with the private key part. In contrast, MPC wallets divide the private key among various parties. Therefore, MPC are easier to setup, execute, and user-friendly.

Advantages of MPC Wallets

Cryptocurrency investors can chose between custodial and non-custodial wallets. Custodial wallets grant more freedom to the consumers as the private keys are reserved with a third-party services provider such as trading platform.

On the other hand, non-custodial wallets grant investors full control, and ownership of their wallet reserves and portfolio.

However, the users need to have technical knowledge and awareness in order to operate non-custodial wallets. Furthermore, they have to account for keeping the private key secure.

MPC wallets on the other hand have features from both custodial and non-custodial wallets. They increase the security for the investors while reducing the associated risks with the loss of private keys. Here are some of its merits mentioned as under:

Added Privacy

MPC encrypt data at all stages and ensure that there is no need to depend on third-party protocols.

Increased Security

They remove a single point of failure by spreading parts of the private key among multiple users and/or locations.

More Convenience

The investors can store their trading portfolio in an online setup without worrying about the potential breach. Meanwhile, other investors may have to utilize cold wallet storage method in order to keep their portfolio secure.

Risks Associated with MPC Wallets

Slow Processing Time

Additional security on an MPC wallet can lead to slow transaction or transfer processing speed. At the same time, it can require more computational power during the process of private key generation and sharing it among various account holders.

High Transaction Costs

Sharing information and computational data among various users require operating on various networks which increases the transaction costs on an MPC wallet.


MPC wallets allow investors to ensure data privacy without risking the security. However, they also have some limitations. At the same time, the many investors avail them on account of features such as security, privacy, and an alternative to traditional data storage.

Author: Isacco Genovesi

Isacco writes news articles, reviews and guides about cryptocurrencies including technical analysis, blockchain events, coin prices marketcap and detailed reviews on crypto exchanges and trading platforms.

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