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MPC (Multi-Party Computation)

Multi-Party Computation (MPC) is a cryptographic technology that enables multiple participants to jointly perform a computation (for example, signing a transaction) without revealing their private inputs to one another.

In the context of cryptoassets, MPC is used for distributed management of a private key without reconstructing it in full.

Unlike traditional storage models, where a single private key exists in complete form, in MPC the key is never created or stored in one place as a whole.

Basic Operating Principle​

In the classical model, a single private key is used to generate a digital signature.

In MPC, the private key is mathematically divided into several fragments (shares). Each share is stored by a separate participant or on a separate server.

Importantly:

  • no participant possesses the complete key,
  • the key is never reconstructed in explicit form,
  • the signature is produced through collaborative computation.

The process typically proceeds as follows:

  1. A transaction signing request is initiated.
  2. Each participant performs part of the cryptographic algorithm.
  3. Intermediate results are combined.
  4. A valid digital signature is produced, identical to one generated by a conventional private key.

At no point does the full private key exist in the memory of any single device.

Threshold Schemes (e.g., 2-of-3)​

MPC is often implemented using a threshold scheme, conceptually similar to multisignature configurations.

For example, in a 2-of-3 model:

  • the private key is mathematically divided into three independent shares,
  • any two shares are sufficient to generate a signature,
  • using all three simultaneously is not required and is typically not defined by the protocol.

This implies that:

  • compromise of a single share does not enable signature generation,
  • operations require only the defined threshold (in this case, two participants),
  • the system remains operational even if one share is lost.

Such an architecture allows flexible distribution of key shares.

A practical example:

  • one share may be held by a custodian,
  • two shares may be held by the asset owner (for example, on separate devices).

In this configuration:

  • the custodian cannot sign transactions independently,
  • the user retains the ability to authorize transactions without requiring all three shares,
  • compromise of a single participant does not result in asset loss.

Threshold MPC schemes therefore enable a combination of self-custody and delegated infrastructure, reducing single-point-of-failure risk while maintaining operational flexibility.

Difference from Multisignature (Multisig)​

MPC is often compared to multisignature schemes; however, they represent distinct architectural approaches.

Multisig:

  • multiple independent private keys exist,
  • a predefined number of signatures is required (e.g., 2-of-3),
  • the multisignature structure is visible on-chain as a specific address or script type.

MPC:

  • mathematically, a single private key exists, but it is divided into shares,
  • a single standard signature is produced,
  • on-chain, the transaction appears indistinguishable from a regular single-key transaction.

Accordingly:

  • Multisig operates at the blockchain protocol level.
  • MPC operates at the cryptographic signature level.

MPC does not require special support from the underlying blockchain protocol.

Where MPC Is Used​

MPC is widely adopted by:

  • institutional custodians,
  • cryptocurrency exchanges,
  • investment funds,
  • corporate treasuries,
  • fintech companies.

It is also commonly offered as a service by specialized digital asset infrastructure providers.

Advantages of MPC​

MPC provides several technical advantages:

  • elimination of a single key storage location,
  • resistance to compromise of a single server,
  • flexible role distribution,
  • no requirement to create multisig addresses,
  • compatibility with virtually any blockchain network.

Key shares may be generated, stored, and used within one or multiple distributed HSM environments, further enhancing the security of cryptoasset storage.

Risks and Limitations​

Despite its high level of protection, MPC does not eliminate all risks:

  • implementation complexity,
  • reliance on protocol correctness,
  • requirement for continuous coordination among participants,
  • potential software vulnerabilities,
  • dependency on provider infrastructure (in MPC-as-a-service models).

Furthermore, if a sufficient number of participants are compromised (for example, the threshold in a 2-of-3 scheme), security is lost.

MPC also requires reliable network connectivity and synchronization among participating nodes.

Conclusion​

MPC is a cryptographic mechanism for distributed private key management without reconstructing the key in full form.

It combines the resilience of distributed control (similar to multisignature schemes) with the transparency of standard single-key signatures.

Within the cryptoasset storage infrastructure, MPC is regarded as an advanced institutional-grade solution that minimizes single-point-of-compromise risk while maintaining compatibility with existing blockchain protocols.