In-depth Discussion on Best Practices for MPC Wallet Management

Recently, an incident involving multi-chain Wallet management has sparked widespread discussion in the industry about the application of MPC technology. Despite the use of advanced multi-party computation technology, a certain cross-chain platform still faces significant risks, highlighting that merely using decentralized technology is not sufficient to ensure true decentralized management.

This article will deeply analyze the issues exposed by this incident and explore how to properly implement MPC Wallet management to fully leverage its advantages.

Event Review and Core Issues

According to reports, the CEO of a certain cross-chain platform has gone missing, resulting in the revocation of access keys to its MPC node servers. Further investigation reveals that all node servers are actually operating under the CEO's personal cloud service account, a highly centralized management approach that is no different from controlling all assets with a single signature Wallet.

The core issue exposed by this event is that the platform, although adopting MPC technology, has not truly achieved decentralization in actual management. All MPC shards are controlled by a single individual, and there is a lack of contingency plans to handle extreme situations.

Key Elements for Effective Utilization of MPC Technology

To fully leverage the advantages of MPC technology, we should focus on the following three aspects:

1. Increase transparency and prevent conflicts of interest.
2. Strictly adhere to the principles of decentralized asset custody to avoid excessive concentration of power.
3. Develop a comprehensive contingency plan for extreme situations

Preventing Conflicts of Interest: Rejecting "Black Box"

The event also affected other projects that collaborated with it. The founder of one affected project stated that they had previously received assurances about the decentralization of servers, access, and geographical distribution, but these promises were not fulfilled.

This highlights that when service providers are also users, it is easy to create an opaque "black box," increasing potential risks. The key to solving this problem is to introduce neutral third-party MPC service providers to ensure sufficient credibility and transparency.

Decentralized custody: eliminating single point risk

The direct cause of this incident is single point risk. To avoid similar situations, MPC Wallet management should ensure sufficient decentralization of servers, access permissions, and geographical locations.

A feasible solution is to adopt multi-signature technology, such as 3-of-3 multi-signature, combined with high-strength encryption and a trusted execution environment. At the same time, a multi-level private key derivation design should be implemented, which facilitates global control while accommodating different levels of management needs.

In addition, the use of online remote multi-active distributed storage, multi-level offline cold storage backups, and the integration of backup recovery services from professional institutions can minimize the risk of single points of failure.

Coping with Extreme Situations: Social Recovery Plan

Despite the measures taken above, it must be acknowledged that certain risks cannot be completely eliminated, especially in the face of uncontrollable factors in the physical world. Therefore, it is essential to design an "SOS mode" to cope with extreme situations.

This model can include the setting of additional SOS private key shards, which do not operate under normal circumstances but can be activated under specific conditions. Activation conditions may include emergency manual triggers, prolonged disconnection, active alarms, or governance voting, among others.

To prevent the abuse of the SOS mechanism, a delayed effectiveness period can be set, allowing regular private key holders to veto during this period; or a lock-up period can be set for assets in emergency transfers to prevent further transfers that may lead to asset loss.

By implementing these measures, we can effectively reduce various potential risks while fully leveraging the advantages of MPC technology, ensuring the security of assets and the flexibility of management.