Multisignature schemes and multi-party computation are both tools for splitting the responsibility for storing digital assets — the digital equivalent of padlocks that require multiple keys to be opened.
But the similarities end there:
Onchain multisignature schemes are executed on a single blockchain and rely on sharing multiple private keys between different holders.
Decentralized MPC is Qredo's unique implementation of multi-party computation. It uses BLS (Boneh–Lynn–Shacham) digital signatures to construct a threshold approval scheme that is secured by Qredo's own Layer 2 blockchain.
In this post, we cover five advantages that decentralized MPC offers over onchain multisig for organizations managing digital assets.
As the multichain universe expands, there are more digital assets than ever, split across a growing number of different blockchains.
But only a few of these chains — such as Bitcoin and Ethereum — have the technical capacity to support complex multisignature schemes. And because the signing happens on-chain, they only support assets tied to that specific chain.
For example, Ethereum multisig only supports ETH and Ethereum-based tokens, and Bitcoin multisig only supports BTC. This means that if your organization is dealing in dozens of different digital assets, you will need to have multiple signing solutions.
In contrast, Qredo's decentralized MPC will ultimately support digital assets across 95% of all blockchains, and is currently compatible with Bitcoin, Algorand, and Ethereum-based assets.
This wide ranging support is possible because the signing process is not conducted on the underlying chain, but on Qredo Network. The resulting digital signature is then presented to the blockchain in the widely used Elliptic Curve Digital Signature Algorithm (ECDSA) format, which is compatible with 95% of blockchain networks.
So instead of needing to juggle different signing solutions, you can manage multiple assets on one single platform.
The inflexibility of onchain multisig makes it cumbersome to use in a business setting — preventing dynamic digital asset firms from scaling effectively.
One of the biggest sticking points is fixed approval quorums. As new employees are hired and others leave, signing schemes need to be constantly adjusted to keep assets secure. But once an onchain multisig crypto wallet has been created, the approval quorum (typically expressed as M of N) is set in stone.
So when you need to alter the signature scheme and appoint or remove a cosigner, you will need to create a new crypto wallet, then pay network fees to move the funds over, and finally notify all of your trading counterparties of the new address — or risk the possibility of them sending funds to the wrong place!
Qredo's decentralized MPC allows approval quorums to be modified on the go to match dynamic organizational needs. So instead of needing to move the entire balance each time a cosigner is added or removed, you can retain the same address, reducing both the operational burden and the likelihood of catastrophic errors.
Although multisig allows signing permissions to be distributed, that's as far as it goes.
Multisig only enables basic (M of N) approval quorums that are subject to the scripting limits of that specific chain. For example, this could be a simple 3 of 4 quorum in which the C-suite of a company share four keys, and any three of them are needed to sign transactions.
Decentralized MPC enables you to take more granular control over governance — beyond simply deciding on the number of employees required to sign a transaction.
Not only can you assign an unlimited number of transaction approvers to a policy, but you can delegate a range of permissions that reflect real organizational roles — from administrators that can edit approval schemes, to traders that can only initiate transactions. This enables you to easily align digital asset management responsibilities with team structures.
Most blockchains charge network fees based on the number of onchain operations required to execute a transaction. So the more participants that are involved, the more costly it is to carry out.
For example, both Bitcoin and Ethereum support simple multi signature transactions. But the additional complexity of having multiple participants makes them much more computationally-intensive, which can double or triple the cost of the transaction.
Regardless of the number of signers involved, decentralized MPC will never have fees that are higher than an ordinary transaction on the underlying chain. This is because the signature is computed on Qredo Network, and then presented to the underlying blockchain as a single signature.
In addition, Qredo does not charge initial setup fees, annual subscription fees, or deposit fees. Qredo fees only apply to withdrawals and smart contract calls.
Over the course of thousands of transactions each month, the resulting savings can make a big difference to the cost of doing business with digital assets.
At certain times in crypto history — such as during the CryptoKitties craze of 2017 and the DeFi summer of 2020 — blockchains have been stretched to their limits by network congestion, and transaction fees have skyrocketed. At the same time, processing speeds have slowed to a crawl.
Multisig transactions, which are larger as they include additional metadata, take up more space, and can easily fall to the back of the queue in such times, because miners are seeking to squeeze the most transactions possible into every block. This makes delays inevitable unless you are willing to pay a premium for faster processing.
Decentralized MPC, on the other hand, does not rely on additional computation made on the underlying chain. Instead, the signing process is computed on Qredo Network, and then a single lightweight transaction is submitted to the blockchain — preventing excessive delays or sky-high blockchain transaction fees.