The Art of Efficiency: Liminal’s Take on MPC Technology

| November 17, 2023

Share this article

The Art of Efficiency: Liminal’s Take on MPC Technology

The context of securing assets by distributing the power of transaction verification on the upper level and adding cryptography power to secure information packets and sender information on the deeper level goes as far as the 80s.

After the proliferation of blockchain build applications and supported digital assets, it became evident the need to install cryptography in and around processes like:

  • compute problems and share the output with different parties
  • require two-or-more entities to confirm an action
  • masking the signature of the party involved in the action
  • conceal the information input by each party

This form of cryptographic encryption termed as, Multi-Party Computation, has set a new vision to solve the much-debated areas of data security and privacy, critically for the use-case of digital asset wallets.

Lately, MPC has emerged as a definitive insertion for any digital asset wallet security system to authorize incremental parameters of security and functionality.

The problems apprehended more so by everyone including individuals, institutions and enterprises transacting in digital assets and protecting private keys are being directly resolved with the use of MPC that facilitates privacy and accuracy explicitly.

Ideally, we discuss the technological stack briefly, but MPC even as a stand-alone feature is too huge to be covered in a single-go, hence we present a two-part blog where we dissect the basic anatomy of MPC-powered wallet systems and the additional intelligence we have incorporated instinctively.

Functioning Definition of MPC

MPC wallets function in a totally divergent way evolving from the traditional method of generating a single key and seed phrase. The process involves distributing ownership of a private key among multiple parties whereby the key is fractionalized in shards to be held by different entities.

Now, when a transaction is called for, a valid signature is formulated when all the parties contribute their key shares to compute and execute the transactions.

Digital assets representing cryptocurrencies and NFTs are notorious for being susceptible to hacks and thefts, since most security standards followed by Web3 wallets, fall under the category of single-point-of-failure that hardly correlates with the overall domain identity of decentralization.

MPC also protects those who participate as official signers, since the input from signers is masked and their shared key is just part of the puzzle and redundant individually.

A former and more original version of MPC called Secure MPC directed a combination of parties to take an arbitrary data sample and compute a function to maintain the anonymity of parties at all times.

Mathematically dissecting this problem, establishes a relationship between the information sent and the one who authorizes the computation protocol. As mentioned before this circles down to two key aspects:

  • Privacy: All inputs are kept secret and not disclosed amongst each other
  • Accuracy: Final output always resonates correct function when inputs are correct

Adoption of MPC By Institutions At Large

Comprehending the nature of Multi-Party Computation constituting its ability to bring together operational flow into a conceptually secured framework, it has been integrated throughout major institutions vested in digital assets.

Institutional interest in MPC stems from a two-fold postulation that represents serious bottlenecks when looking to push digital assets to the masses:

  1. Secured Treasury: Apart from the whales and absolute degens, centralized or decentralized institutions are the one that carries a major portion of liquidity putting the wallet at paramount risk. Unfortunately, all the existing solutions seem distinctive and deterrent, making MPC an accurate piece of technology to integrate their wallets with, fortifying their key wallets (hot/cold/warm) to immobilize any theft attempts.
  2. Distributed Governance: Institutional operations involve the distribution of authorization for various departments and when it comes to finances, the distribution of authorization becomes even more significant. MPC invites multi-parties from the same organization in an m-of-n key scheme to validate a transaction when a set threshold is met. Additionally, only transaction signing is submitted on-chain securing parties involved in governance making (signers for a transaction).

Not just the practical application of MPC in an institutional setting make sense but the process of integrating it in an existing and interoperable architecture system personifies its adoption.

Institutions are aligned more towards solutions that can be added on top of their existing infrastructures as compared to building new ones, which is why MPC quickly transformed into an API-level integration for organizations.

Alternatively, interoperability is also a mandatory upgrade for any institution today because of the success of a multitude of layer-1 and layer-2 chains, ensembling siloed communities. To create a colossal ecosystem and wider user-accessibility multi-chain asset availability is paramount to institutions.

All in all, it is safe to say that MPC has attained a newfound space between Institutions, Investors and Wallet Security Infrastructures.

Fostering A Radcalized MPC-As-A-Service

The way digital assets have been subjected to an array of hacks and loss of funds within the bounds of an organizational setting has instigated a requisite to standardize wallet security measures.

From centralized exchanges to decentralized applications, from market makers to fund managers everyone is looking to adopt a holistic deployment of their wallets and most definitely looking to integrate MPC in their existing wallet infrastructure.

Ingrained with the vision of empowering institutional capacity of pushing digital assets to their maximum potential, we are working exclusively to work on technologies that equip the prowess of asset security on a multi-dimensional level, MPC being a primitive one, where we are not only building it as a white label solution but also characterizing parts of efficiency and optimization to capitalize on scalable applicability of in an aptly feasible way.

Talking on a utilitarian level, our MPC services serve rightfully in a wider perspective, everything that institutions require to securely manage their wallets, add governance layers into their administrative authority distribution, enable efficiency in the transfer of assets across wallets and also encapsulate functional mobility of signing transactions.

But for the sake of this three-part series, we’ll keep the spotlight on how we at Liminal are instituting institutional precedence on transactional governance.

Governance Consensus For MPC

At Liminal, we have identified how to amplify the feasibility of using MPC for signers and extract governance consensus in a seamless fashion. Throughout our wallet ecosystem, we have made sure to smoothen the interface interaction of signers when doing two crucial actions:

  • Setting up policies with our custom-built Policy Engine: To lengthen the use-case of MPC we have created an add-on on top of MPC to implement business-oriented policies based on pattern recognition and data analysis that can be executed on their own. Since, institutions don’t rely on one mode of wallets but integrate a suite of wallets; Hold, Cold and Warm, to diversify their portfolio and reduce pressure on susceptible wallets like Hot and Warm. But, when it comes to transferring assets between these wallets, it has to be done manually and mutually, which is a cumbersome process. We have nullified this manual process into a code-executed policy engine that can be transformed to set parameters on whitelisting addresses, transaction limits, wallet refill and fund swaps between different wallets. Although setting these policies is definitely in the hand of the wallet admin when signers get added, they have to approve each transaction which is pre-set by a threshold of signers, only then the policies set can be executed or transacted.
  • Transaction Signing Flexibility: Most MPC solutions are primarily curated for web usage, which means all the signing and validation by the signer have to be done on a desktop. This creates a lag in signing activity and a possible delay in processing transactions that can affect wallet balances and downtime and user transactions stuck as well. To solve the problem of instant signing functionality, we have developed a mobile app, Liminal Vaults, that supports MPC wallets and allows the capability of signing and validating transactions, and policies on the go. Moreover, to keep intact security parameters, we have also circuited the mechanism in such a way that a transaction or a policy setup cannot be initiated from the mobile app, as it is much simpler to gain anonym access to a mobile phone as compared to a system. Hence, the initiation step has to be done via a computer system which can then be carried out on Liminal’s mobile app for faster completion.

Both of the above-mentioned integrations we have build-up to complement our MPC, concisely represent how we are preparing solutions for institutions for greater redundancy and deploying defence structures around MPC to foster greater efficiency in day-to-day tasks run by admin and other team members to manage and optimize wallets.

Our stance on providing simplified governance by intensifying a signer journey from initiating a policy or transaction, to broadcasting it to other validators and finally confirming them through any device possible carried forward the idea into our implementation as well.

When you come back for part two of this blog, there will be some new integration types to talk about and again a round around the imperative accessibility of MPC as a service for Web3 wallets in the general and institutional levels.

Through MPC’s key management system, it single-handedly eliminates a single point of failure, the flexibility of securing assets on-chain and off-chain and

The use of multi-party computation ensures that attackers cannot transfer funds without authorization unless they compromise all parties simultaneously. MPC technology has been studied for years and allows parties to compute functions while keeping their data private. The “Millionaire’s Problem” serves as an early demonstration of MPC, where co-workers determine the highest earner without revealing individual salaries.

MPC wallets offer privacy, as individual inputs remain confidential and cannot be inferred from the output. Additionally, the protocol guarantees the correctness, ensuring accurate results as long as all participants act honestly. With these features, MPC wallets provide enhanced security for institutional users seeking to protect their digital assets.

More on Crypto

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Buckle up as we’re about to take a trip down memory lane. 

The year 2023 was a wild ride that showed signs of a plummeting market, groundbreaking innovation and regulatory hurdles. 

Contrastingly, in the same year, we saw no market-shattering crashes. Financial institutions extending an olive branch, key jurisdictions unlocking the doors to blockchain technology. 

Simultaneously, at Liminal, we experienced significant breakthroughs, re-engineering our positioning and becoming a pioneer in digital asset security with bank-grade custody. 

We took major strides this year, right from building comprehensive products to becoming a qualified custodian, from revamping our brand design to expanding our offices in newer locations, from partnering with hyper-local communities to onboarding a diverse set of clients,  we did it all. 

So, let us take you through everything we accomplished in 2023 and what the future holds.  

Liminal Became A Qualified Custodian

One of the prominent moves we made this year was to change our positioning as a regulated custodian from being a wallet infrastructure platform. 

We got two licenses in key jurisdictions to operate as a regulated custodian. 

The first one came from Hong Kong, where we acquired the TCSP license issued by the SFC, which oversees and regulates financial activities to ensure compliance with legal and regulatory obligations. 

Our next license came in the MENA region, where we got In-Principle Approval for the FSP license granted by the FSRA, a governing body in ADGM, to establish a progressive financial services environment. 

Both these licenses paved the way for Liminal to push its wallet infrastructure and offer bank-grade custody to institutions looking to operate in these particular regions. 

Liminal Introduced A Suite of Products & Features

Continuing our building spree, we launched new products and integrations to broaden the existing infrastructure and added more parameters of security, scalability and sustainability. 

Staking-as-a-Service

Liminal launched staking for institutions to eliminate the risks involved in running staking nodes and the vulnerabilities in hot wallet transfer. 

Hence, we introduced an industry-first mechanism of cold wallet staking to ease staking for institutions and secure assets explicitly.  

Whitelabel Solution

Accelerating the go-to-market time for organisations looking to build a secure and customisable application, Liminal launched its whitelabel solutions

Targeted to help organisations meet security standards, manage assets with maximum control, and add their custom branding to give it a personal touch. Our whitelabel solution is a first-in-class custodian-developed solution for institutional grade custody.

Smart Consolidation

We are building not just secure custody but also automation-based features to eliminate manual errors, increase the throughput of transactions and scale institutional wallets. 

Taking this ahead, we launched the Smart Consolidation feature to automatically calculate all the active addresses and consolidate them into a single address. With this level of automation, managing multiple addresses becomes uber easy for wallet teams. 

Travel Rule 

To limit the use of cryptocurrencies for activities like money laundering and terror financing by regulatory bodies, travel rule was mandated for institutions to follow. 

Continuing the latest compliance integration policy, Liminal partnered with Notabene to introduce Travel Rule, enabling institutions to manage counter-party risk and extend the process of due diligence right from the Vaults dashboard.   

Liminal Accured List Of Security Certifications

Following our ISO certification for data privacy and risk management, we added two new security certifications to fortify our systems and build trust for our clients. 

Liminal Achieves Crypto’s Highest Security Mark: CCSS Level-3 Certified

Cryptocurrency security lacked a gold standard, creating a vulnerable ecosystem. Enter the CryptoCurrency Security Standard (CCSS), setting the bar for auditing and certifying custodian infrastructure and establishing levels of trust and confidence for investors. 

Liminal became only the second wallet infra platform and the first regulated custodian to be accredited with Level-3 certification, deeming wallets, transfer environments, workflows and engines safe and secure. 

Liminal Reciueved SOC 2 Type II Certification

To tackle threats in institutional-grade security, organisations’ SOC has been identified as the primitive compliance standard for service organisations to handle customer data.

Liminal successfully attained SOC 2 Type II certification, validating its setup of security controls & compliance processes to be industry standard. 

Liminal Level Up

Liminal unveiled its most significant platform upgrade ever, revolutionising the future design standard of a qualified custodian. This level-up activity included revamping our website and product UI, giving a completely new look and feel to not “Liminal” but “Liminal Custody”. 

The Liminal level-up activity was a strategic step and the biggest one for us this year to create an intuitive, inviting and tailored experience for our clients. 

Liminal Reached New Borders

We spread out our operations this year, reaching new borders and onboarding a new wave of institutions across gaming, DeFi, HNI wealth, treasuries, and exchanges! From Indonesia and Africa to India, UAE, and Korea, we are setting up custody operations worldwide. 

This isn’t just a roster of clients; it’s a network ready to spark connections, collaborations, and shared success to further the definition of secure assets. 

Liminal Collaborated With Law Enforcement Agencies

The best and the proudest moment of Liminal for this year was when we collaborated with CBI & Himachal Prashesh police department to aid them in seizing digital assets. 

This partnership put us on the map, as we became the first point of contact for LEAs in India, and we standardised the process of secure seizure of digital assets. Leveraging our expertise, we enabled a safe space for officers to learn the basics of custody, contributing to a safer digital landscape.

Team Liminal Grew Bigger

Building such a massive infrastructure, prioritising security and compliance over everything else, we had to grow the team to build at pace and expand at an even higher level. Not only did we grow in team numbers, but we also elongated our footprint to new destinations. 

Team Liminal went from 32 to 70 with 5 new offices in Mumbai, Ahmedabad, Hong Kong, Singapore and ADGM, setting up our custody operations steadfastly. 

What’s To Look Out For In 2024

We are excited to announce that our commitment to integrating the most secure digital asset wallets with a cutting-edge custody platform is swiftly becoming a reality. 

The upcoming year, 2024, will serve as a testament to this transformative journey. Moving beyond self-custody, we are constructing a comprehensive infrastructure encompassing both custodial and non-custodial wallets. Exciting products are set to launch starting from the first week of January, some of which are: 

  • Official Custody Platform Launch
  • Liminal’s Off-Exchange Settlement Hub
  • Secure Custody of Real-World ‘Tokenised’ Asset

The Web3 space has evolved explicitly this year, pushing the narrative of secure digital asset custody and security, introducing new regulations and compliance standards, licensing VASP providers and standardising the use of custodians as a trusted third party. 

At Liminal, we took major strides this year, from building comprehensive products to becoming a regulated custodian, from revamping our brand design to building the full infrastructure of custodial and non-custodial wallets.

January 5, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture