This article is a summary of an article that was written by Frank Wiener Sepior’s CMO, MPC Alliance Co-Founder & Executive Director at MPC Alliance.
Until the fall of 2018, the most widely accepted scheme for secure multiparty approvals of cryptocurrency transactions was Multi signature wallets. Approximately one year later, the CEO of Binance tweeted that Threshold Signatures are “far superior” to MultiSig, saying they would “reshape the landscape for wallets and custodian services.” Let’s examine 5 great reasons to select Threshold Signature wallets over MultiSig.
Reason # 1: Single Signature versus Multiple Signatures
Implication: Universal interoperability versus custom integration
Threshold Signatures appear on-chain as a standard single signature. Presumably, every blockchain and digital asset protocol natively supports a standard single signature, so no special coding or smart contracts are required for multiparty approvals with Threshold Signatures. In contrast, MultiSig requires the ability for each digital asset protocol to record a variable number of multiple signatures. Bitcoin natively supports this capability for basic MultiSig, but most other digital assets do not. This results in the requirement for many MultiSig wallets to support smart contracts or other customizations which introduces the opportunity for new vulnerabilities, added expense, and often delayed support of new digital assets.
Reason # 2: Single Signature versus Multiple Signatures
Implication: Smaller transaction size, lower cost, higher prioritization
Threshold Signatures appear on-chain as a standard single signature regardless of the number of approvers. In contrast, MultiSig requires the recording of signatures for each participating approver. In the case of Ethereum, the processing of additional smart contracts required to support MultiSig consumes additional gas. In this case, the net result is an increase in the mining fees, which results in higher overall transaction fees for MultiSig.
Reason # 3: Single Signature versus Multiple Signatures
Implication: Increased privacy and security
Threshold Signatures appear on-chain as a standard single signature, regardless of the number of approvers. Approvers can be changed, added, or removed, and there is no change in the resulting signature. So potential adversaries have no visibility to the security policy of a particular wallet, the timing of periodic updates, etc. In contrast, MultiSig records the signature of each approver on the public blockchain for successful transactions. The result is, potential adversaries have full knowledge of security policies such as how many parties are approving transactions, and have visibility whenever changes are made. No other security scheme provides such transparency to adversaries because this information can be used to defeat the system.
Reason # 4: Key Share Refresh Without Changing Public or Private Keys
Implication: Increased security efficacy, without the burden of transactions
A best practice in key management security is to proactively change private keys on intervals that are frequent enough that a hacker is unlikely to gain access to and use them before a new key is activated. This can be done with MultiSig, but each time you change the private key, or replace a lost key, you must also execute an on-chain transaction to synchronize the public-private keys and accounts. This results in increased transaction fees and complexity that make proactive security impractical with MultiSig.
In contrast, Threshold Signatures use multiparty computation (MPC) to create a private key in the form of distributed key shares that are held by different parties. It’s possible to generate a massive number of different and random combinations of distributed key shares to represent the same private key. As a result, Threshold Signature wallets can proactively refresh the key shares on a recurring, on-demand, or combination basis without changing the private key (and eliminating the requirement for an on-chain transaction as is required with MultiSig). Doing so materially reduces the probability that an adversary could penetrate the defenses of multiple different parties concurrently, and collect enough shares to recreate an entire key and execute a fraudulent transaction. As a result, Threshold Signatures provide the option to be inherently more secure than what is practically achievable with MultiSig.
Reason # 5: Operational Flexibility
Implication: Ability to evolve and adjust to changing requirements
The only constant about the rapidly evolving digital asset market is change. Regulations are changing, customer expectations are changing, the digital assets themselves are expanding to include not only cryptocurrencies but security tokens which could completely redefine the scope and scale of the digital asset market. Regardless of how these things evolve, the nature of digital assets will require secure and increasingly flexible wallets. The off-chain nature of Threshold Signatures makes them profoundly more flexible and adaptable than the on-chain multiparty approval model of MultiSig.
Custodians, exchanges, and institutional investors who are starting with a clean slate will enjoy the competitive advantage provided by going directly to Threshold Signature wallets. The increased security, privacy, flexibility, and lower operational and transactional cost advantages will add to the motivation for incumbent MultiSig solutions to migrate to Threshold Signatures.
You can find the whole article on: https://www.mpcalliance.org/blog/5-great-reasons-to-choose-threshold-signatures-over-multisig