Seedless and Secure: How 2PC-MPC is Transforming Key Management in Web3

If you’ve spent any amount of time in crypto, you’re likely to have heard the expression “Not your keys, not your bitcoin.” A mantra preached by privacy hardliners, it emphasizes the importance of using self-custody wallets rather than leaving your funds in an exchange account or software wallet.

\ Owning a self-custody wallet is analogous to storing your assets in a vault and retaining possession of the only key. Only unlocking the door is a bit more laborious: users must type in their ‘seed phrase’, a lengthy sequence of random words. Such is their importance, some individuals get their phrases hole-punched into sheets of metal, the better to survive a house fire or flood.

\ Although recovery phrases have long been the industry standard, they present significant challenges, requiring safe storage and the accurate input of meaningless jumbles of words. What happens if you misplace your phrase or, worse still, someone steals it? The cautionary tale of James Howells, who accidentally discarded a hard drive containing the private key to 8,000 bitcoins in 2013, stands as a stark warning. The poor guy is still urging his local council to excavate a landfill site in the fading hope of finding his pot of (digital) gold.

\ So, what’s the alternative to seed phrase-based wallets?

Crypto Key Management is Evolving

Although seed wallets are highly secure, providing users safely store their mnemonic phrases, alternatives are starting to emerge which provide the same level of peace of mind without the substandard UX. 

\ Among the options to have come off the production line in recent years are those secured by cryptographic technologies like Multi-Party Computation (MPC), Two-Party Computation with MPC (2PC-MPC), and Account Abstraction (AA), the latter of which allows users to utilize smart contracts as their accounts. We have also seen the arrival of passkey-based solutions, wallets that utilize biometrics and PINs to secure access rather than seeds.

\ Each of these options has merit, with 2PC-MPC representing a particularly promising innovation. While Two-Party Computation splits private keys into two distinct shares – one held by the user and another by a custodian – 2PC-MPC enhances the model by incorporating an additional layer of MPC. Thus, reconstruction of a private key cannot be made without participation from users and validation from a decentralized, non-collusive network of nodes.

\ The 2PC-MPC system’s high degree of programmability, meanwhile, enables the implementation of sophisticated security features such as spending limits and time-locked transactions, features more typically associated with smart contract wallets.

2PC-MPC at Scale with Ika

Two-Party Computation with MPC is a relatively recent innovation, but even still, it has made a big impact in a short time period. We can see evidence of this with the Ika Network, which describes itself as “the first sub-second MPC network.”

\ Capable of handling up to 10,000 transactions per second (tps) across hundreds of signer nodes while maintaining zero-trust security, Ika aims to tackle the shortcomings of traditional MPC networks particularly where scalability and latency are concerned.

\ At the heart of Ika’s vision is dWallet, the industry’s first truly noncollusive and massively decentralized signing mechanism. Rather than signing transactions with a seed phrase, signatures are generated based on agreement between the user and network signers. In other words, secret shares are generated by the user and the network (2PC) with the latter being encrypted and made operational through a threshold of nodes (MPC).

\ In short, dWallets function as trustless, programmable asset management tools.

From Private Keys to Human Keys

Complementing these advances is Holonym’s Human Keys, another recent innovation in wallet management. In contrast to mnemonic phrases, Human Keys generates high-entropy keys from human-friendly inputs like passwords, email addresses, or biometric data. By doing away with seed phrases altogether, Human Keys makes wallet management much more palatable to mainstream users.

\ Holonym’s implementation also includes zero-knowledge (ZK) proof of personhood for account recovery, meaning users can verify their identity without having to actually expose any sensitive information. Refreshingly, Holonym provides unified access to crypto assets across multiple blockchains via a single dApp interface.

\ The combination of 2PC-MPC’s robust security model with user-friendly innovations like Human Keys prove that seed phrases, for all their advantages, aren’t the only show in town when it comes to securing your wallet. By eliminating tradeoffs between security and usability, recent technological advances pave the way for greater wallet adoption while preserving the spirit of decentralization that represents the industry’s DNA.

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:::tip Vested Interest Disclosure: This author is an independent contributor publishing via our business blogging program. HackerNoon has reviewed the report for quality, but the claims herein belong to the author. #DYOR

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