White Star Capital Digital Assets Fund - newsletter #122
MPC Wallets- What are they and how do they revolutionise digital custody?
MPC wallets: What are they and how do they revolutionise digital custody?
White Star Capital Digital Asset Fund - newsletter #122
Crypto wallet security has always been a hot topic. Millions of crypto funds have been hacked or lost as owners lose or compromise their private keys. Private keys are alphanumeric codes used to authorise transactions, and anyone who gets their hands on them is therefore able to drain funds from the corresponding address. They represent final control and ownership- so if your private key is lost or stolen, so are your funds. This is why many people in crypto promote the principle ‘not your keys not your crypto’, and do not trust third parties with their private keys. But writing down this code, or storing it on a hard drive, is not feasible for businesses, or anyone who wants quick and easy access to their funds. So how best to store them securely and flexibly has been a long source of debate and innovation in the crypto space.
There are two broad option sets for how to store private keys. The first is cold storage, which is often in the form of a small, plug-in device that can be carried around (e.g. Ledger). This is cumbersome, however, to be regularly transferring between. Hot storage wallets (e.g. Metamask), are generally connected to the internet and more accessible. Both of these still have a single point of compromise however- they still simply store the private key. This is simply unusable for institutions who need secure and efficient ways to operate with their crypto funds. Two further options are available for decentralising management of crypto funds- multi-signature (enabling two or more users to sign transactions by a single private key) and, this week’s topic, multi-party computation (which removes the concept of a single private key entirely).
Multiparty computation (MPC) is a type of cryptographic technique that has existed since before the rise of cryptocurrencies and digital assets. It simply allows multiple parties to assess a computation without revealing any private or secret data held by each individual party. In other words, MPC allows parties to compute functions without knowing each other’s inputs. For example, a group of banks may want to know the total amount of money in their joint account, without revealing their account balances to each other. Or three individuals might want to know who has the highest salary, without revealing how much each of them makes. They could trust a mutual trusted friend (a Trusted Third Party- TTP) to keep the secret, and share the outcome, but MPC removes the need for a trusted third party entirely.
One of the top applications for multi-party computation is for securing digital assets. Multiparty computation crypto wallets, by contrast, use MPC technology to manage and store user assets by splitting the private keys into multiple parts. MPC technology means private keys no longer need to be stored in a single place and instead are sharded, encrypted and divided among multiple parties. These parties compute their part of the private key share to produce a signature without revealing the encryption to other parties, so at no point is a private key formed in one place. It therefore exists in a fully ‘liquid’ form.
Web3 companies like ZenGo, Fireblocks and Qredo offer MPC solutions, whilst major financial institutions like Revolut have announced transitions to MPC. Our portfolio company, DFNS, is building custodial wallet-as-a-service protocol, leveraging MPC and zero-knowledge cryptography to decentralise custody, making private keys unreachable. You can learn more here.
For the crypto world to succeed, customer and business funds need to be secure. Indeed, MPC has become a standard for institutions looking to secure their assets while retaining fast and easy access to them. Beyond flexibility and UX, it’s considered significantly more secure, because for a hacker to gain control over a user’s wallet, they now need to attack multiple parties across different operating platforms at different locations simultaneously. Lastly, this architecture solves for the single point of failure concern which is the main reason why users lose their funds: when a private key is misplaced or stolen, funds are compromised. With MPC, creating copies of shares as a backup is much easier, as no one share represents the one and only private key. Innovations in the space continue to improve the state of security in the industry and we’re excited to be backing leaders like DFNS in this journey.
🔦 White Star & Portfolio Spotlight
Cometh launches Web2-like onboarding enabled via Account Abstraction
Combining the power of WebAuth and Ethereum Account Abstraction, the experiment removes wallet installation and gas fees
Thala Labs token generation event (TGE) goes live
Thala will officially go live on mainnet once the TGE is complete
Introducing Ledn Transfer
Ledn Transfer is a P2P payments service that allows Ledn clients to send funds to each other via a Ledn Handle or email address
Safello enters into agreement with BCB Group for financial services
Safello, the leading crypto exchange in the Nordics, entered into an agreement with BCB Group, a global infrastructure and payment service provider for digital assets firms. The usage of BCB Group’s services aims to complement and strengthen Safello's trading and settlement infrastructure
🏦 Enterprises & Institutions
Coinbase to offer faster transactions on derivatives exchange through partnership with infrastructure provider TNS
The new infrastructure will enable institutional traders to increase storage capacity and process large data sets with minimal delay
Digital asset tech provider Metaco secures partnership with Liechtenstein private bank
Liechtenstein's VP Bank follows Citibank, Societe Generale, DekaBank and DZ Bank in selecting Metaco to assist with the development of their digital asset services
Yuga Labs joins Gucci to announce otherside-themed jewelry
Luxury fashion house Gucci recently teased a metaverse-oriented partnership with Yuga Labs, the $4 billion company behind the dominant NFT collection Bored Ape Yacht Club, that would blur “the boundaries between the physical and digital
Coinbase Ventures joins liquid staking protocol Rocket Pool’s Oracle DAO
The investment branch of one of the largest centralized exchanges will receive a share of rewards dedicated to Rocket Pool’s Oracle DAO
FIFA debuts AI-powered World Cup soccer mobile game, with plans for NFTs
The colorful mobile soccer game leverages AI tech, and FIFA and Altered State Machine plan to add NFTs too
S&P Global plans decentralized finance push as it looks for DeFi director
A recent job advert says S&P Global is looking for a DeFi director to “enable the successful build-out and execution of a DeFi team strategy.”
TradFi banks team up to create digital bonds trading platform on Blockchain
France's Credit Agricole CIB and Sweden's SEB are creating a system with a goal of being environmentally friendly
Amazon NFT marketplace could feature Beeple, Pudgy Penguins
Amazon’s upcoming NFT marketplace will be on a private blockchain, though future multichain compatibility is not yet ruled out
Major energy companies are trading tokenized emissions credits
Natural gas outfit PureWest is trading tokenized emissions credits with major methanol producer Proman, a long-regarded blockchain use case
Visa and Bitcoin rewards app Fold expand partnership to new regions
Plans include empowering existing local financial service companies to launch their own bitcoin rewards through the Fold infrastructure
⚖️ Government & Regulation
Binance denies Changpeng Zhao 'CZ' faces Interpol Red Notice: Spokesperson
Rumors have been floating around Crypto Twitter that Zhao was issued a Red Notice by Interpol
Crypto exchange Kraken commits to tougher rules required by Canada
Kraken has filed pre-registration paperwork with the Ontario Securities Commission as it works towards becoming a registered Restricted Dealer in Canada
UNICEF hatches plan for a prototype DAO, following its crypto fund
UNICEF, an agency of the United Nations that provides relief and humanitarian aid to children, is testing concepts for a decentralized autonomous organization (DAO)
💰 Funding & Exits
LayerZero funding round hits $3 billion valuation with backing from Christie’s, Samsung
The LayerZero protocol has drawn prominent investors from both within and outside the crypto space
Polychain leads $15M funding round for crypto startup Polyhedra Network
Polyhedra Network, a startup that provides Web3 infrastructure backed by zero-knowledge (ZK) proofs, has raised $15 million in a pre-Series A funding round led by Polychain Capital
Dragonfly invests $10 million in derivatives exchange Bitget
Dragonfly Capital has invested $10 million in Bitget as the derivatives exchange looks to grow its spot and earn products
Crypto startup Li.Fi Raises $17.5M in funding round
CoinFund and Superscrypt led the round for the cross-chain bridge and decentralized exchange aggregator
Alchemy Pay raises $10M at $400M valuation to push South Korean expansion plans
The funding came from DWF Labs, its eighth investment of $10 million or more in the last six weeks
Conduit annocunes $7M seed round from Paradigm and in collaboration with Optimism
Conduit is a crypto native infrastructure platform designed to empower and accelerate the builders in crypto
AI-Focused crypto protocol Fetch.ai raises $40M to deploy decentralized machine learning
The funding marks yet another investment by market maker DWF Labs, its sixth this month
Crypto hardware wallet maker Ledger raises most of $109M round
The company's valuation remains at about the same $1.4 billion it was valued at in its previous funding round in June 2021
Delphi Labs raises $13.5M for Web3 accelerator
P2P led and Jump Crypto joined the incubator’s first external funding round
Re7 Capital, Republic Crypto go live with $100 million fund for liquid tokens
Re7 Capital and Republic Crypto launched RxR Opportunities Fund on April 1. The fund invests in liquid crypto tokens, focusing on those with smaller market caps
🚀 Project Launches & Updates
Aave eyes expansion to BNB Chain, Starknet and Polygon zkEVM
The Aave community is actively pursuing opportunities to broaden its footprint across diverse blockchain networks, emphasizing the protocol’s expansion and adaptability
PancakeSwap DEX launches version 3 on BNB Chain and Ethereum
V3 brings four different trading fee tiers: 0.01%, 0.05%, 0.25% and 1%, compared with V2's single level of 0.25%
What the Ethereum Shanghai upgrade means for you, ETH, and the SEC
In just shy of two weeks, if all goes to plan, Ethereum’s eagerly anticipated Shanghai upgrade will go live, enabling the withdrawal of staked ETH from the blockchain network and effectively completing its years-long transition to proof of stake
DYDX set to launch private testnet of its Cosmos-based blockchain
Decentralized exchange DYDX is moving to its own Cosmos-based blockchain
🔥 Other Bits We're Excited About
NFTs are the ultimate disruptor of Hollywood's entertainment status quo
Web3 technology is already being used in the film industry to build communities and monetize niche content offerings. NFTs are the next big step
Uniswap volume beats Coinbase and registers its best month since 2022
Spot market volume on Uniswap was above $70 billion for the first time since January 2022, beating Coinbase again
7 Real-world NFT use cases that should be on your radar
From art to gaming to real estate, NFTs are finding more and more niche applications
What Web3 gaming can offer to (at least) 40% of the world’s population
Web3 gaming has the potential to be a natural bridge between Web2 and Web3, argues Aptos Labs Co-Founder and CEO Mo Shaikh
Zero-knowledge rollups get cheaper with scale
As the race to deploy zero-knowledge technology heightens, we look into how zk rollups will make transactions more affordable