How crypto is killing seed phrases to usher in mass adoption

Three millionaires, Tom, Dick, and Harry, gather at a dinner party. They want to find out their average net worth, but none of them want to disclose their exact information to each other or anyone else.

One solution would be to use a cryptographic technique called multiparty computation (MPC), which allows them to determine the answer without revealing any sensitive data.

Photo credit: Unchained Capital

This concept can be applied to a wide range of applications, from secure voting systems to confidential data analysis. It could also make crypto wallets more secure.

The collapse of firms like FTX and Celsius is the latest in a series of events that have reminded us of the mantra “not your keys, not your coin,” which has become a rallying cry for those advocating for non-custodial wallets.

In the week following the revelations about FTX, non-custodial players like Safe, Ledger, Trezor, and ZenGo saw a significant bump in traction.

Many popular non-custodial wallets for consumers, however, have one major flaw. In order to restore an account, users have to store a “seed phrase” – essentially a collection of words – somewhere safe.

The problem is that seed phrases can be retrieved by a malicious person that gains access to the device that stores them, representing a single point of failure. People can also be tricked into giving up their private keys through phishing scams.

Some users, for instance, got a rude awakening when password manager LastPass was hacked last week, leaving some people to suspect that their seed phrases were leaked.

Storing seed phrases on paper is the most secure way to remember them, but it’s cumbersome, and people might still end up losing them.

And besides, it doesn’t stop unencrypted pass phrases stored online from being leaked, which was what happened in August with Slope, a Solana wallet provider.

“It’s actually quite irritating for new users to onboard to a new platform via seed phrases, which takes anywhere from 10 to 15 minutes,” Zhen Yu tells Tech in Asia. He’s the CEO if Web3Auth, which aims to implement MPC for the masses.

These lengthy passwords can be a significant obstacle for non-technical users who are accustomed to the simple “forgot password?” workflows on traditional internet services.

People losing track of these long passcodes could explain why up to 20% of Bitcoin may be lost, one study estimates.

Enter MPC

Challenges in MPC adoption

Is Account Abstraction better than MPC?