What Is a Multi-Party Computation (MPC) Wallet? The Complete Developer Guide

Written by Alchemy Team

Published on September 25, 202510 min read

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Multi-party computation (MPC) wallets have emerged as a significant advancement in institutional-grade crypto security, representing a major step forward from traditional single-key approaches. Alongside MPC, alternative technologies like Trusted Execution Environments (TEE) have also gained prominence, offering different approaches to solving the fundamental challenges of key management and user experience in web3 applications.

If you're building crypto infrastructure or evaluating wallet solutions for your app, this guide breaks down everything you need to know about MPC technology, explores how it compares to alternatives like TEE, and helps you understand which approach best fits your security and user experience requirements.

What Is Multi-Party Computation?

Multi-party computation (MPC) is a cryptographic protocol that enables multiple parties to jointly compute a function over their inputs while keeping those inputs private from each other. In the context of crypto wallets, MPC splits a private key into multiple encrypted shares distributed across different parties, allowing them to collectively sign transactions without ever reconstructing the complete key or any party knowing any information about the shares held by the others.

Think of it like a nuclear launch system that requires multiple officers to turn their keys simultaneously—except in MPC, the "keys" are mathematical shares that can create a valid signature without ever existing together in one place.

Or, for a more grounded example, consider a scenario where 3 developers are employed at a Web3 startup and want to determine their average salary without revealing their individual salaries to one another or to a trusted third-party during the calculation process.

In this scenario, the employees would use a multi-party computation (MPC) protocol to calculate their average salary without disclosing their individual salaries or private information. The MPC protocol would employ a well-known cryptographic technique called additive secret sharing, which involves dividing and distributing a secret among a group of independent parties. As a result, an external party could determine the average salary without interacting with the employees directly.

The Two Core Properties of MPC

Every MPC protocol must guarantee:

• Privacy: The private information held by each party cannot be inferred from executing the protocol

• Accuracy: Even if some parties deviate from the protocol or share information, they cannot force honest parties to output incorrect results

How MPC Actually Works: a Technical Deep Dive

Here's what happens under the hood when you use an MPC wallet:

1. Distributed Key Generation (DKG)

The wallet generates key shares using cryptographic techniques like Shamir's Secret Sharing or more advanced threshold signature schemes. Each share is meaningless on its own—you need a threshold number (like 2-of-3) to perform any operation. Furthermore, the complete private key never exists in any single location, not even during generation.

2. Transaction Signing

When you initiate a new transaction, the wallet creates a signing request. Multiple parties, each holding a key share, must engage in a cryptographic protocol to generate a signature for that transaction.

The parties exchange mathematical proofs without revealing any information about their key shares, maintaining the security of the setup. The end result is a signature that is identical to one created by a traditional single-key wallet.

3. Key Refresh and Recovery

Alongside that functional flow, MPC wallets can also refresh key shares periodically without changing the underlying private key. This is particularly useful in situations where an individual key share is lost, and the system can generate new shares that invalidate the old ones.

Comparing MPC Wallets to Other Crypto Wallets

The wallet security landscape offers several approaches, each with distinct tradeoffs. Understanding these differences is crucial for choosing the right solution for your application.

MPC wallets are technically a single private key wallet, where that single key is broken into shares held by different parties/devices. When implementing MPC, providers must decide how to distribute these shares, which fundamentally impacts both security and user experience.

Simple 2-Party Setup:

• User-required shares: User holds one share, provider holds another, both required for signing. Provides genuine security but creates UX friction—users must manage cryptographic material and risk permanent lockout.

• Provider-controlled shares: Provider holds enough shares to sign independently. Offers limited security benefits over traditional private key management since a compromised provider could still access user funds.

Advanced 3-Party Setup: More sophisticated implementations use a 2-of-3 threshold with:

• User device share: Sealed to the user's device (via TEE/Secure Enclave) and gated by biometric or PIN

• Provider share: Held by the service, often tied to social authentication

• Backup share: Stored separately (user's cold storage, app developer, or provider storage)

This setup allows users to recover access if they lose their device by using the backup share to create a new device share, while the backup share is restricted to re-sharding operations only. However, even these advanced implementations face fundamental limitations with modern authentication methods.

MPC vs. Multisig Wallets

While MPC wallets are technically a single-key model, they share a lot in common with multi-sig wallets. So what’s the difference between the two?

A multisig wallet uses a unique digital signature that requires more than one private key to authenticate an outgoing transaction. In contrast, an MPC wallet divides a single private key among multiple parties. In both cases, transactions require multiple parties/devices to sign a transaction, but the implementation of each model is different.

Multisig Wallets:

• Multiple complete private keys exist

• Requires on-chain smart contract implementation

• Visible on-chain (everyone can see it's a multisig)

• Higher gas costs due to multiple signature verification

• Limited to chains that support multisig natively

MPC Wallets:

• Single private key split into shares

• Works at the cryptographic layer (off-chain)

• Appears as a regular single-signature wallet onchain

• Standard transaction costs

• Protocol-agnostic (works on any blockchain)

MPC vs. Smart Contract Wallets (Account Abstraction)

The rise of ERC-4337, ERC-7702, the standards for account abstraction, created new possibilities for wallet UX, and you can see that full potential with Alchemy’s Smart Wallets, where enterprises are leveraging this infrastructure for powerful features, like programmable transaction logic (spending limits), social login (users can create onchain addresses with an email or phone number), gas sponsorship (apps can pay gas fees for their users), and much more.

Smart contract wallets still need key management, so MPC wallets are not a competitive product to account abstraction, and indeed many apps are combining them together to maximize their security while offering the best experience for their users.

MPC vs. TEE: The Modern Choice

Trusted Execution Environments (TEE) have emerged as a compelling alternative to MPC, particularly for applications prioritizing user experience:

MPC Approach:

• Distributes key shares across parties

• Requires coordination for every signature

• Cannot provide verifiable access control for email/social login

• Forces a choice between user complexity (users must manage cryptographic material) or provider control (provider holds enough shares to act independently)

TEE Approach:

• Hardware-isolated key storage and computation

• Can provide verifiable access control tied to email/social authentication

• Eliminates need for users to manage cryptographic material

• Enables seamless user experiences without compromising security

The Power of TEE + Account Abstraction

By combining TEE with Smart Wallets, you get the optimal feature set:

• Secure, hardware-isolated key management (TEE)

• Verifiable access control tied to familiar authentication methods (TEE)

• Programmable transaction rules (Smart Wallets)

• Gas sponsorship and batching capabilities (Smart Wallets)

• Social recovery options (Smart Wallets)

• Seamless user experience without key management complexity (TEE)

TEE can cryptographically guarantee that account access only occurs when proper authentication succeeds, enabling the user experiences that modern applications require.

What are the benefits of MPC wallets?

MPC wallets offer several theoretical advantages that made them an important stepping stone in wallet security evolution:

1. Distributed trust model: Private keys are not stored in one single place, theoretically reducing single points of failure.

2. Mathematical privacy guarantees: Data is encrypted and distributed, so no single party has access to the complete key.

3. Protocol compatibility: MPC works across all blockchains without requiring specific smart contract support.

4. Cryptographic innovation: Represents a significant advancement in applied cryptography for practical use cases.

However, these benefits come with implementation tradeoffs that alternatives like TEE can address more elegantly.

What are the downsides of MPC wallets?

The limitations of MPC have driven innovation toward alternatives like TEE:

• Computational overhead: MPC requires complex cryptographic operations that add latency and computational cost to every transaction.

• High communication costs: Coordinating between distributed parties creates network overhead and potential points of failure.

• Authentication limitations: MPC cannot provide verifiable access control for the email and social login methods that users expect.

• UX complexity: True MPC implementations require users to manage key material, while simplified versions may not provide meaningful security benefits.

• Implementation tradeoffs: The fundamental choice between user complexity (Option 1) and security theater (Option 2) limits practical applicability.

2025's Leading MPC Wallet Solutions

The MPC wallet landscape has matured significantly over the last few years, and there are a lot of players in the space. Here are some of the top providers on the market today.

For Enterprise

Fireblocks

Fireblocks offers industry-leading security with hardware isolation. It supports 300M+ wallets, is SOC2 Type 2 certified, and offers a range of features to ensure all enterprise needs are met, including hot and cold storage, node infra, and asset insurance.

Blockdaemon

Blockdaemon offers a suite of instutition-grade security offerings, including an MPC wallet product and a vault provider. It is ISO 27001 certified and designed for validators and institutional investors.

For Consumer

Zengo

Zengo supports 1,000 different assets with over 1.5M customers and is one of the first consumer MPC wallets on the market. A great product for mobile-first applications, Zengo offers biometric verification, 3-factor authentication, and multichain support.

Coinbase Wallet

Coinbase is one of the largest exchanges in the world, and it’s no surprise their wallet offering is pushing the limits of what’s possible with security. Offering seamless fiat onramps, MPC integrations, and an SDK for embedding in 3rd-party apps, Coinbase’s wallet offering is one of the most popular on the market today.

For Developers (SDKs and Infrastructure)

Web3Auth

Web3Auth is a tool that was recently acquired by Consensys and offers both MPC and account abstraction features. With support across Web, iOS, Android, and React Native, Web3Auth is a flexible framework for securing your users.

Portal

Portal recently repositioned as a stablecoin infrastructure provider. Offering simple SDKs and APIs, Portal offers a range of developer tools to quickly integrate MPC features into your wallet stack.

Alchemy Smart Wallets

Alchemy's Smart Wallets use TEE technology to provide the optimal combination of security and user experience. Supporting email/social login with hardware-level security and seamless account abstraction features, Alchemy enables developers to build wallet experiences that users actually want to use—representing the evolution beyond MPC's limitations.

Choosing a MPC Wallet

Integrating MPC wallets into your app isn’t as complex as you think and often involves a simple SDK integration. Here are the steps you should be thinking about.

Evaluate Your Needs

First, evaluate MPC providers based on your use case and needs. For example, if you are building a consumer app, you might prioritize social recovery features over enterprise vault security. If you’re building mobile-first, then maybe you want to prioritize biometric authentication.

Alongside evaluating the feature sets of various providers, you also want to consider:

• Chain support: Does it work with the chains you’re building on?

• Integration complexity: How much development effort is required?

• Compliance: Does the solution meet your regulatory requirements?

• Cost structure: What is the cost of the MPC provider and how does that cost change as you scale?

• Performance: What SLAs and performance benchmarks does that provider offer?

Security Best Practices for MPC Implementations

Whether using MPC, TEE, or hybrid approaches, security best practices remain crucial:

Key Generation and Storage

• Always use hardware-backed randomness for key generation.

• Implement key refresh protocols (monthly or quarterly) where applicable.

• Store shares in geographically distributed locations when using MPC.

• Use different security models for each component (HSM, TEE, secure element).

Network Security

• Implement end-to-end encryption for all key share communications.

• Use mutual TLS authentication between MPC nodes.

• Deploy nodes in separate network segments where applicable.

• Monitor shares for anomalous signing patterns.

Operational Security

• Require multi-factor authentication for all administrative actions.

• Implement rate limiting on signature requests.

• Log and audit all key management operations.

• Conduct regular security assessments and penetration testing.

Compliance and Data Privacy Considerations

Embedded wallet providers must navigate complex regulatory requirements when handling user authentication data, so as you’re thinking about building with wallets, you should keep the following in mind:

KYC/AML Triggers

“Know Your Customer” requirements can activate when wallets facilitate fiat on/off ramps, high-value transactions, or operate in regulated jurisdictions. Social login data can streamline compliance by providing verified identity information.

GDPR Obligations

European users have rights to data portability, deletion, and access when social login systems collect personal information. Therefore, wallet providers must implement data minimization and obtain explicit consent for European customers.

Compliance Checklist

Building with wallets and want to keep a few things top of mind? Be on the lookout for solutions that offer:

1. Data minimization: Only collect the essential information required for wallet functionality and regulatory compliance.

2. Regional key storage: Store cryptographic materials and user data in jurisdictions that align with regulatory requirements.

3. SOC2 Type II Reports: Implement enterprise-grade security controls and undergo regular third-party security assessments.

Common Pitfalls and How to Avoid Them

Understanding common implementation pitfalls helps guide better architectural decisions:

Pitfall 1: Overlooking Recovery Mechanisms

Reality: Users will lose devices and forget credentials, regardless of the underlying technology. Solution: Build multiple recovery paths from day one. TEE enables sophisticated recovery flows that MPC cannot easily provide, while MPC requires careful planning around key share recovery.

Pitfall 2: Ignoring Performance Implications

Reality: MPC signing can add 100-500ms latency to each transaction, while TEE operations are typically much faster. Solution: Implement fluid UI updates so users understand transaction states, and consider whether your application can tolerate MPC's inherent latency.

Pitfall 3: Authentication Method Limitations

Reality: Users expect seamless email and social login experiences. Solution: Carefully evaluate whether your chosen approach can provide verifiable access control for modern authentication methods. TEE excels here, while MPC faces fundamental limitations.

Pitfall 4: Vendor Lock-in

Reality: Switching wallet security providers can be complex once deployed. Solution: Abstract provider-specific logic and maintain portable key formats where possible, keeping migration paths open.

The Future of MPC Wallets: 2025 and Beyond

The wallet technology landscape is rapidly evolving, with different approaches finding their optimal use cases:

MPC's continuing role MPC remains valuable for specific institutional use cases requiring distributed control and regulatory compliance. Its cryptographic innovations have paved the way for broader advances in secure computation.

TEE as the consumer standard For consumer applications and developer-focused platforms, TEE technology has emerged as the preferred approach. It enables the seamless user experiences that mainstream adoption requires while providing verifiable security guarantees.

Hybrid approaches The future likely includes hybrid systems that combine the best aspects of different technologies. For example, using TEE for user-facing operations while leveraging MPC for institutional custody requirements.

Invisible security The winning wallet solutions will be those users never have to think about—they'll authenticate with familiar methods, operate with invisible security, and provide recovery mechanisms that actually work for real users.

Conclusion: MPC as the Foundation for Web3's Future

MPC wallets represent a significant advancement in cryptographic security and have been instrumental in pushing the industry toward better key management solutions. For developers building the next generation of web3 applications, understanding MPC provides important context for the broader security landscape.

However, the practical limitations of MPC—particularly around user experience and authentication—have led to the emergence of alternatives like TEE that can deliver both security and usability. The key is choosing the right architecture for your specific use case, whether that's institutional applications requiring distributed control or consumer platforms needing seamless onboarding.

As we move toward a future where every application integrates crypto functionality, the infrastructure that wins will balance security, usability, and flexibility. MPC has laid important groundwork, while technologies like TEE are delivering on the promise of invisible, secure user experiences.

Start Building with MPC Wallets on Alchemy

Ready to implement wallet technology in your application? As you evaluate different approaches for your users, consider what really matters: can your users actually use it, and does the security actually work? We’re here to help you make the right decision.

Alchemy Smart Wallets leverage TEE technology to deliver the seamless user experience and robust security that modern applications require:

• No key management burden for users: Your users log in with email/social media—no seed phrases, no key shares to lose

• Real security without friction: Hardware-level guarantees that keys only work with proper authentication and doesn’t introduce unnecessary friction for users.

• Works at Scale: No coordination overhead, no 500ms signing delays, no complex recovery flows

The result? Wallet experiences your users will actually want to use, backed by security that actually works.

• Get started today with Smart Wallets.

• Get in touch with our team to help you integrate the right wallet strategy.