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MPC Explained: The Bold New Vision for Securing Crypto Money



Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.

Advances in cryptography are converging to help developers bring blockchain applications closer to the core decentralizing principles on which this technology is founded.

Inventions such as atomic swaps, zk-SNARKS and Lightning-based smart contracts are allowing developers to realize the dream of true peer-to-peer transactions in which neither party, nor an outside intermediary, can act maliciously. Witness the rising number of non-custodial and decentralized exchange (DEX) services for trading crypto assets.

This is exciting. But it also shines a light on another big problem that has curtailed the widespread adoption of cryptocurrency and blockchain technology: secure key management.

For too long, the most reliable means of protecting the private keys that afford the holder control over an underlying crypto asset have been too clunky, insufficiently versatile, or difficult to implement on scale. User experience has been sacrificed in return for security.

Now, some big strides in another hugely important field of cryptography – secure multiparty computation, or MPC – point to a potential Holy Grail situation of both usability and security in a decentralized system.

A keyless wallet

Progress in this field was marked last week by Tel Aviv-based KZen’s public announcement of the specs for its new ZenGo wallet. ZenGo uses MPC, along with other sophisticated cryptographic tools such as zero-knowledge proofs and threshold cryptography, to share signing responsibility for a particular cryptocurrency address among a group of otherwise non-trusting entities.

The beauty of the KZen model is that security is no longer a function of one or more entities maintaining total control over a distinct private key of their own – the core point of vulnerability in cryptocurrency management until now. Instead the key is collectively derived from individual fragments which are separately generated by multiple, non-trusting computers.

The model draws on the genius of MPC cryptography.

With this approach, multiple non-trusting computers can each conduct computation on their own unique fragments of a larger data set to collectively produce a desired common outcome without any one node knowing the details of the others’ fragments.

The private key that executes the transaction is thus a collectively generated value; at no point is a single, vulnerable computer responsible for an actual key. (KZen’s site includes a useful explainer on how it all works.)

KZen is not the only provider of MPC solutions for blockchain key management. Unbound, another Israeli company, is going after the enterprise marketplace with its MPC solutions for crypto security.

Unbound’s prolific (if blatantly pro-MPC) blog offers different angles on the same argument.

It makes a repeated case for why MPC is superior to the two preferred approaches to crypto security of the moment: hardware security modules (HSM), on which hardware wallets like Ledger and Trezor are built, and multi-signature (multisig) technologies, which are favored by exchanges.

Attacking the trade-offs

If KZen and Unbound are to be believed, MPC solutions resolve both the hot-versus-cold trade-off in key management and the dilemma of self-versus-managed custody.

Cold wallets, in which keys are stored in an entirely offline environment out of attackers’ reach, are quite secure so long as they remain in that offline state. (Though you really don’t want to lose that piece of paper on which you printed out your private key.)

But bringing them into a transactable, online environment poses an overly cumbersome challenge when you want to use those keys to send money. That’s perhaps not a problem if you’re just a HODLer who transacts rarely but it’s a serious limitation to blockchain technology’s prospects for transforming overall global commerce.

On the other hand, hot wallets have, until now, been notoriously vulnerable.

Whether it’s the relentless “SIM jack” attacks on people’s phones that are emptying out both hosted (third-party custodial) wallets and on-phone self-custody holdings, retail participants’ horror stories are legion. And, of course, we all know the stories of custodial exchanges being hacked – from Japan, to Hong Kong, to Canada, to  Malta.

At the same time, the solution that regulated institutional investors are currently seeking – that custodians and exchanges build Fort Knox-like “military-grade” custody solutions  – inherently contain a compromise.

Not only does this approach fail to resolve the dependence on a third-party, but there are serious doubts about whether any such solution can be forever safe from hackers, who are constantly improving their methods for getting over firewalls. In best-case scenarios, the constant IT upgrades becomes a massive money suck.

Alternative to HSMs and multisig

None of this is not to say that existing security technologies are useless.

Ledger and Trezor’s hardware devices – a more nimble form of cold wallet – are widely used by individuals who are uncomfortable with both external third-party custody and online, on-device self-custody wallets. And, separately, multi-signature (multisig) solutions, in which an m-of-n quorum of keys are required to execute a transaction, have proven robust enough to be used by most exchanges.

But in both cases, vulnerabilities have been exposed. And to a large extent those risks come down to the fact that, regardless of the surrounding security model’s sophistication, the all-important keys are always sitting at single points of failure.

Just last week, researchers demonstrated how they could hack into a remote hardware security module. The irony: the researchers were from Ledger, which relies on HSM to secure its customers’ keys.

Multisig models arguably offer protections across such attacks, because a breach requires simultaneous control of more than one key held in separate locations, but the fact is that multisig solutions have also failed because of both technical and human vulnerabilities (inside jobs).

What’s more, both solutions are inherently limited by the need to customize them to particular specifications or ledgers. Crypto developer Christopher Allen pointed out last week , for example, that HSMs are particularly constrained by the fact that they are defined by government standards.

And in each case, the ledger-specific design of the underlying cryptography means there is no support for the kind of multi-asset wallets that will be needed in a decentralized interoperable world of cross-chain transactions.

By contrast, KZen is boasting that its key-less wallet will be a multi-ledger application from day one.

Challenges and opportunities

To be sure, MPC remains unproven in a practical sense.

For some time, the heavy resources needed to carry out these network computing functions made it a challenging, costly concept to bring into real-world environments. But rapid technical improvements in recent years have made this sophisticated technology a viable option for all kinds of distributed computing environments where trust is an issue.

And key management isn’t its only application for blockchains, either. MPC technology plays a vital role in MIT-founded startup Enigma’s work on “secret contracts” as part of its sweeping plan to build the “privacy layer for the decentralized web.”

(An aside: Enigma CEO and founder, Guy Zyskind, is also an Israeli. Israel has fostered a remarkable concentration of cryptographic expertise in this space.)

It would be unwise to assume that MPC, or any technology for that matter, will provide a perfect, totally infallible solution to security problems. It is always true that the biggest security threats come when human beings complacently believe security is not a threat.

However, if you squint hard enough, and think about how this technology’s prospects for better key management can be married to Enigma’s vision for an MPC-based secret contract layer and to the broader march toward decentralized, interoperable asset exchanges, a compelling vision of true peer-to-peer blockchain-based commerce starts to emerge.

At the very least, you need to watch this space.

Keys image via Shutterstock

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Retail Giant Target Is Working on a Blockchain for Supply Chains




Retail giant Target has been quietly working on a blockchain-powered solution for supply chain management.

According to the company’s own corporate blog, it recently open sourced the project as a blockchain solution for suppliers certification, dubbed ConsenSource. It’s also pledged to support the Hyperledger Grid project, a supply chain framework that earlier saw the participation from Cargill, one of Target’s suppliers, together with Intel and Bitwise IO.

“I’m proud that Target will support the Hyperledger Grid project, and that we’re committing dedicated engineering resources to build out components in the Grid architecture!” Joel Crabb, Target’s vice president of architecture, said in the blog post.

The post revealed that Minnesota-based retailer has been working on a blockchain proof-of-concept since mid-2018. The project was primarily focused on the certification of suppliers for the company’s own paper manufacturing. Target has been “working directly with the forest managers and certification boards” studying the technology and trying to figure out what data can be shared on a distributed ledger, Crabb wrote.

The exploration led to Target recognize the benefits of open-source projects – and even joining some.

The blog reads:

“Many companies – including Target – see the most potential for enterprise blockchain initiatives as open source. Open-source projects require all participating parties to define the governance model collectively from the outset, so companies then can focus their time working on blockchain-based solutions that will lead to greater speed, transparency and cost savings.”

To boost the DLT-related work, Target is now looking for a blockchain engineer and systems developer, according to the company’s career page. The new engineer will be contributing to the recently open-sourced ConsenSource and to Hyperledger Grid, developing “distributed ledger systems, protocols, smart contracts, CLI’s, and RESTful APIs in an open source environment,” the job posting says.

Target did not respond to CoinDesk’s requests for comments by press time.

A secret Hyperledger member

Earlier this year, CoinDesk learned from a source within Hyperledger that Target – the eighth-largest retailer in the U.S. – had been working on a supply chain product under the umbrella of the open-source Hyperledger consortium.

The source, who did not want to be identified, said Target had joined the Sawtooth Supply Chain project, which is developing a distributed application to track the provenance of food and other assets using the Sawtooth implementation of Hyperledger.

Target, however, has largely stayed under the radar with regard to its blockchain initiatives. The company hired Aarthi Srinivasan – who has previously worked at JPMorgan and IBM, among others – as its director of product management for personalization, machine learning and blockchain, in 2016.

While it is still in the development phase and far from reaching production, the Sawtooth Supply Chain has been a hotbed of coding activity, with more than 5,000 commits from 46 contributors on GitHub. According to the ConsenSource’s GitHub repository, the project uses the Sawtooth code.

Among Target’s notable moves has been incorporating identity verification technology from another Hyperledger project called Indy. Cargill, the food production giant, is also known to be involved in the supply chain project.

The Sawtooth codebase, which was contributed to Hyperledger by Intel, is the main alternative to Fabric, the best-known Hyperledger implementation, developed by IBM. Fabric is already being used in food tracking on a network called Food Trust – a project spearheaded by IBM and Target’s big-box rival, Walmart.

Hyperledger didn’t comment on Target’s participation at press time.

Target image via Shutterstock

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Facebook’s ‘GlobalCoin’ Crypto Will Be Tied to Multiple Currencies: Exec




Yet more details have emerged about Facebook’s upcoming cryptocurrency, said to be called GlobalCoin, and this time they come directly from the company.

Speaking to German business magazine  WirtschaftsWoche earlier this week, Laura McCracken, Facebook’s head of financial services and payment partnerships for Northern Europe, confirmed that the planned stablecoin will not be tied to any single fiat currency, but will instead be linked to a basket of currencies in order to prevent volatility.

The executive also added to recent reports that GlobalCoin would be revealed later this month, saying that a white paper for the token would be published on June 18.

McCracken was talking to the magazine at a trade conference in Amsterdam.

The confirmation comes after reports listing some of the executives said to be working on the effort. These include MIT’s Christian Catalini as chief economist and Sunita Parasuraman, manager of the Switzerland-based foundation leading the token project.

Facebook may further set up physical portals for users to purchase the cryptocurrency, as well as charging third parties as much as $10 million for the privilege of supporting the network as nodes, according to The Information.

Elsewhere, Russian news site RBC reported Thursday that head of oil firm Rosneft, Igor Sechin, told the St. Petersburg Economic Forum that Facebook’s cryptocurrency could possibly be used in oil transactions “in the near future.” Sechin, however, seemed to be talking generally about how big U.S. tech firms like Google, Apple and Facebook are making moves into the energy industry.

He added the skeptical note:

“At the same time, someone might get the illusion that technology giants will make the energy market fundamentally more transparent and efficient, becoming a panacea for solving the acute problems of modern times.”

Facebook image via Shutterstock


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Budweiser Owner Invests in Blockchain Startup Working to Alleviate Poverty




Budweiser’s parent company, Anheuser-Busch InBev, is doubling down on its interest in using blockchain tech to assist unbanked workers.

Through its ZX Ventures arm, the brewing giant – which also owns the Stella Artois, Corona and Beck’s brands, among many others – has invested an undisclosed amount in a Series A fundraising for blockchain-as-a-service (BaaS) startup BanQu, according to an announcement.

Established in 2015, BanQu is a BaaS that connects workers, such as farmers who are often unbanked, directly with companies and organizations further along the supply chains they serve using a blockchain platform.

Using the platform, such individuals are able to access financial service provides such as MTN and Airtel via partner banks and mobile money providers, ultimately boosting their financial prospects. BanQu says it has so far helped over 200,000 individuals and aims to raise 100 million people out of poverty by 2023.

AB InBev and BanQu previously partnered on a pilot connecting 2,000 Zambian farmers to the mobile platform. The project was later extended to other countries, including Uganda, India, Brazil, Costa Rica, India, and more.

Tony Milikin, chief sustainability and procurement officer at AB InBev, commented:

“After BanQu’s outstanding pilot performance in our 100+ Accelerator, we are pleased to solidify the partnership with Ashish, Jeff and the entire team at BanQu through an equity investment. Together, we are working to improve access to modern banking for thousands of farmers in underserved rural markets, driving inclusive growth and contributing to our own 2025 Sustainability Goal as well as the UN’s Sustainable Development Goals.”

Proceeds from the Series A round will be used by BanQu to cement its existing operations and to help expand rollouts in China and Mexico later this year, the firm said.

Hat tip to Forbes.

Budweiser image via Shutterstock

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