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What is multi-party computation (MPC)?

Multi-party computation (MPC)

Imagine that two millionaires, Alice and Bob, want to know which one of them has more money—but neither wants to tell the other one how much money they have. Finding out the correct answer to “Who's richer?" while still maintaining their privacy is challenging, but not impossible. In fact, it's a classic problem known as “The Millionaires' Problem," 1 and the solution is what forms the basis for an idea known as multi-party computation (MPC), which plays a key role in secure crypto custody solutions.

Read on to learn more about this key aspect of crypto that combines two of the field's most important advantages: security and privacy.

What is MPC?

Using a cryptographic protocol, MPC allows multiple parties to work together to solve a problem without revealing any of the parties' private information. By ensuring the confidentiality of any inputs, it encourages collaboration and helps all parties come to a solution.

How does MPC work?

Let's go back to the Millionaires' Problem, where Alice and Bob want to compare their wealth without revealing it to each other. To use the principles of MPC, each party would first break down their total wealth into smaller amounts, undisclosed to each other. On those smaller amounts they would then perform a number of computational steps. By taking advantage of cryptography, the computations would be done in a secure way that would help preserve the privacy of the inputs.

After making those calculations to encrypt the information, then Alice and Bob would be able to use a secure comparison protocol that offers the answer to their question—who's richer?—without revealing anyone's specific inputs.

How do the principles of MPC apply to secure crypto custody?

The “input" or private information that a crypto user holds is their “private key," which is needed to access and sign the user's digital assets and make transactions.

In some cases, the private key held is kept whole and online—and that can leave users vulnerable to attacks. If their digital wallet is compromised, their private key can be compromised as well, leading to potentially devastating outcomes.

That's where the principles of multiparty computation come in. For MPC wallets, the technique will break down the private key into smaller shares, and then encrypt each of those elements—just like in the Millionaires' scenario, where Alice and Bob broke down their total wealth into smaller amounts and encrypted them—before distributing the smaller elements across multiple places. That way, the underlying information is kept secure. When the user needs to access the key, a special protocol allows the underlying elements to be “reconstructed" into its full form—once again, without revealing any private information.

This process enhances security by adding extra layers of protection. A single point of failure will no longer compromise crypto custody and access.

How common are MPC wallets?

MPC wallets have not yet been widely adopted, perhaps because of their increased complexity combined with the fact that not all wallet providers offer the technology yet.2 However, their extra layers of security may make them increasingly appealing to larger organizations such as financial institutions.

Are there other practical use cases for MPC techniques?

In addition to digital asset storage and transfers, MPC techniques also have many practical applications when it comes to understanding large datasets while keeping private users' information confidential.

Thanks to these advantages, MPC techniques may have the potential to be employed in a wide variety of use cases from electronic voting3 that offers accurate outcomes while keeping individual votes private, to targeted digital advertising4 that results in a company's ability to sell more personalized online ads without having to share the individual user's data.

The future is exciting, as new ways to use MPC emerge that make our digital world more private and more secure at the same time.

Bakkt Trust Company LLC is licensed to engage in virtual currency business activity by the New York State Department of Financial Services.

This does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment, including any of the product(s) mentioned herein, or an invitation, offer or solicitation to engage in any investment activity. This information is provided solely on the basis that you will make your own investment decisions, and Bakkt does not take account of any investor's investment objectives, particular needs, or financial situation. It is strongly recommended that you seek professional investment advice before making any investment decision.

1 Scholarly Community Encyclopedia. "Yao's Millionaires' Problem." Accessed May 2023.

2 thirdweb. "What is an MPC Wallet?" Accessed May 2023.

3 Journal of Physics. "A Multi-party Secure E-commerce Voting Scheme Based on SDGHV Algorithm." Accessed May 2023.

4 Meta. "The Value of Secure Multi-Party Computation." Accessed May 2023.