What is an MPC wallet?

An MPC wallet is a digital wallet that uses multi-party computation technology to deliver reliable security. It keeps your private keys safe while offering shared access to individuals, groups, companies, financial institutions, and government organizations that actively manage digital assets.  

MPC wallets are a new and strong way to secure cryptocurrency. They’re not the first institutional-grade wallets that let multiple cryptocurrency owners control digital assets together. There are also other wallets like Multisig wallets. But before discussing the pros and cons of using an MPC wallet, let’s understand what differentiates them from Multisig technology. 

Key Takeaways

MPC allows multiple wallet holders – each holding their own asset data – to perform a computation without revealing any of the asset data held by each owner.

How does an MPC wallet work?

An MPC wallet uses a multi-party computation to keep your digital assets safe. The private keys are split into parts and given to different wallet owners or servers. This makes it hard for any owner or server to know the whole key. 

Such types of digital asset wallets keep your crypto-holdings super safe because no single person or server has all the power or authority to sign a transaction. Suppose you want to transfer cryptocurrencies to a decentralized crypto exchange in India. How would you do it with a digital asset management platform such as MPC? To execute crypto transactions, the wallet owners or servers are required to work together to give their parts of the signature without putting it all together. This way, your assets remain safe throughout the transaction process.

Imagine you’re playing a game with a friend, and you both have puzzle pieces. To unlock something, you need to put all your pieces together. But the amazing thing is, even if someone tries to steal your pieces or your friend’s pieces, they still can’t open the thing because they don’t have all the parts. So, your cryptocurrency is like that safe thing, and only when you and your friend work together can you open it and access it further.

History and Applications of MPC

Back in the 1980s, a new way of doing cryptography called MPC (multi-party computation) was invented. Before that, people used basic cryptography to hide information, but this MPC technology is about hiding some of the information while computing the rest of the data gathered from different sources. 

Here are the key moments in MPC’s history:

• 1982 – Introduction of secure two-party computation to solve the Millionaire’s Problem. 
• 1986 – Andrew Yao adapts two-party computation. 
• 1987 – Goldreich, Micali and Wigderson adapt the two-party case to multi-party.  
• 1990 – The study of MPC helped advance the field of universal composability, which in return made mobile devices safe. 
• 2008 – In Denmark, MPC wallet computation technology was used for a big auction, showing it works in real life. 
• 2010 – Digital asset custodians started using MPC to keep cryptocurrency safe. 
• 2019 – Automatic key-refreshing MPC algorithm offered a new way to improve MPC.

Now, MPC is used for many things, like electronic voting, data mining, keeping digital assets safe and trading them with the decentralized crypto exchange in India. It’s really popular for making sure important things stay safe while still being easy to use.

What is an MPC wallet used for? 4 example use cases

Group wallets for organizations, DAOs, and companies:

MPC wallets are great for teams like groups, companies, and projects. They help these groups work together safely. Multiple owners and investors can manage the digital asset wallet and agree on what to do with the respective asset. This is really helpful for groups that want to keep their cryptocurrency safe and work together well.

Escrow services:

MPC wallets can help with risk-free escrow services. This means that when wallet owners want to exchange crypto-assets, the transaction only happens when everyone agrees and the conditions are met.

Multi-user MPC-based Hardware wallets for investment clubs or consortiums:

MPC wallets let groups of investors work together on their investments. They can make decisions as a team and only do transactions when everyone agrees.

Secure key management for crypto-exchanges and digital asset custody services:

Both centralized and decentralized exchanges, including custodial services, can use MPC Wallets, especially cold storage, to make fund storage more secure. This way, the private keys are split up and not easily broken into by just one thing going wrong.

MPC wallets vs Multisig wallets: What’s the difference?

Just like an MPC wallet, a multisignature wallet needs more than one person to agree before doing a transaction. It’s like a rule that says, “At least this many people have to say yes before we can do anything with the digital asset.” This makes it safer because if one person does something that is not permitted by the rest of the owners, it won’t ruin everything. Both Multisignature wallets and MPC wallets are in some ways, but there are a few things that make them different:

Blockchain Protocol Agnosticism

Not all blockchains work with multisignature wallets since they’re a unique kind and new – which is why single-signature wallets exist as their alternative. But MPC wallets are different and protocol agnostic. They can work with various Web3 blockchain protocols that use the ECDSA method of signing transactions.

Identity and Privacy

Let’s consider a Digital Asset Insurance and custodian company that manages and keeps a wide range of cryptocurrencies safe. They might use a multi-signature wallet to hold and manage the funds securely. This type of wallet has some good points, like showing who agreed to a transaction – but it also reveals the holders’ identity.  

On the other hand, MPC wallets work towards increasing privacy for users. Since the signing transaction phase takes place off-chain, it becomes harder for anyone to identify the owner’s identity uniquely. This keeps keys and identity secret and is safer for everyone using the wallet.

Transaction Costs

Using multisignature wallets means transactions need more than one signature. This makes the transactions bigger and more expensive because you have to pay more to process them.   

But with MPC wallets, transactions only need one signature, which makes them cheaper. The work of putting signatures together happens off Chain. This makes the transactions cost less to process.

Administrative Overhead

For instance, with a multisignature wallet, if you want to change how many co-owner need to agree for a transaction, it involves multiple steps: You’d have to create a new wallet. The rules you set for the multisignature wallet at the beginning stay forever. Then, you’d need to move the cryptocurrency from the old wallet to the new one. Finally, you’d have to tell others about the new wallet address because any money sent to the old one might be lost. 

But with MPC wallets, if someone needs to stop using their special code, the rest of the group can agree to change things without making a new wallet or moving the digital asset. The address stays the same, and the cryptocurrency stays safe in one place.

What are the benefits of MPC wallets?

Decentralization

With MPC non-custodial crypto wallets, you don’t need to rely on any trusted third party to keep or use the private keys. These keys are split among the different people in the group. This makes it harder for any one person to have too much control. So, there’s less chance of problems caused due to centralization, corruption or collusion – preventing the loss of digital assets.

Data Privacy

MPC wallets also keep your personal information safe. They don’t share your private information with others in the group or a third-party service provider. This means nobody can access or tamper with your personal information without you knowing and saying it’s okay.

High Accuracy

MPC wallets are really good at computing with the highest degree of accuracy. They can perform complex functionalities like generating addresses, signing transactions, and verifying signatures without errors.

Removes Single Points of Failure

MPC wallets get rid of a single point of failure that some other wallets have, such as single-signature wallets and Hot storage platforms. Numerous wallets have problems with key mismanagement, user privacy risk, private key theft, hardware device malfunction, including cyber threats. But MPC wallets avoid these issues. MPC technology does this by breaking the private keys into parts and giving them to different owners. This makes it hard for attacks and key mismanagement to happen all at once – which is why, sometimes, it is referred to as the best digital asset wallet by experts.

Scalability

MPC wallets can grow easily. You can add or remove crypto owners from the group without causing problems. This lets you choose how safe and fast you want things to be. If you want to be extra safe, you can invite more people to join.

Flexibility

MPC wallets are really flexible. They let you make rules for how your digital money works. You can say things like “only if it’s a certain amount” or “only a certain number of times.” You can also change these rules whenever you want. You can even plan for emergencies in case someone can’t help anymore or the parties are unavailable. This way, your digital assets are in your control. 

Which web3 wallets use MPC? List of top 8

Right now, there are lots of MPC wallet options you can use. Each one has its own upside. Some of the famous ones are:

• Coinbase
• ZenGo
• FireBlocks
• Mirror World
• UniPass
• Marble Wallet
• Portal
• MPCVault

Which MPC wallet is best?

The best MPC digital wallet for you will differ based on your requirements. Which one you should pick depends on what you want. Every wallet does something a bit differently. You should go through all of the available options and see which one fits what you need and like the most. 

Frequently Asked Questions (FAQs) 

What type of wallet is an MPC Wallet? 

Multi-part computation wallets, or MPC wallets, are cryptographic tools that employ cryptographic data from multiple parties owning multiple hardware devices to perform calculations using their combined data points without revealing their individual input. 

Is MetaMask a MPC Wallet? 

No, MetaMask is not an MPC wallet. 

Is Coinbase Wallet a MPC Wallet? 

Coinbase made a wallet called Coinbase Wallet in 2017, where you can keep your own crypto-assets, such as Bitcoin, safe. After looking at how people use it, they decided to make web3 wallets with MPC. These new wallets are easier to use and more secure. 

Can an MPC wallet get hacked? 

MPC wallets employ multi-Party Computation technology to split private keys into two parts. One is on your device, and the other is on a separate server. Even if one place is attacked, the wallet stays safe. The attacker can’t get in because they need both parts of the secret. It is one of the best digital wallets because it can’t be easily hacked. 

What happens if one of the parties holding a share of the private key becomes unavailable? 

MPC wallets can be set up with various rules. These rules say how many people need to agree for a transaction to work, even if some can’t be there. 

Are MPC wallets EVM-compatible? 

MPC wallets are chain-agnostic and support all types of EVM-compatible Blockchains.  

How do MPC wallets work? 

MPC works by dividing wallet private keys into parts and putting them in different device locations. This ensures that no one person can have all the power of the wallet’s private key. The big benefit is that different individuals and groups working together always use this private key. 

What does the MPC wallet stand for? 

MPC stands for Multi-Party Computation. This wallet offers a great alternative to traditional storage methods. 

What does MPC stand for Blockchain? 

MPC, also referred to as secure computation or secure multi-party computation, is a subfield within cryptography that aims to create technology for teams to compute a function based on the given input collaboratively, but without letting others know what that input is.

What is the difference between an MPC wallet and a smart contract wallet? 

Everyone knows all the input used in smart contracts. But with MPC, each person only knows their own input. Because of this, in MPC wallets, people have to follow a set of steps together, while in smart contracts, each person can conduct their execution without waiting for others.

What are the cons of an MPC wallet? 

MPC wallets are a bit more complicated than regular single-signature wallets, which is not true with Multisig technology. Also, there aren’t many MPC wallet choices yet because this technology is still relatively new and growing.

 

As digital currencies and tokens such as NFTs continue gaining mainstream adoption and widespread popularity, it’s crucial to learn how to keep them secure. A hardware wallet is one of the most reliable methods of safeguarding your private keys and cryptocurrencies.

Here, we’ve outlined the fundamental definition of a crypto hardware wallet and its functions, providing you with the necessary knowledge to use your favourite hardware wallet effectively.

Key Takeaways

• A hardware wallet for cryptocurrency lets you spend, swap, store, send, and receive assets securely. 
• Hardware wallets offer you complete control over your digital assets.

What are hardware wallets?

A hardware wallet is a physical device that securely stores your private keys. It allows you to manage your cryptocurrencies and digital assets offline effectively.

The crypto hardware wallet works by generating and storing your private keys offline, away from the internet, and downsizing the risk from potential hackers.

When you want to transact, the crypto hardware wallet device signs the transaction with your private key and broadcasts it to the blockchain network. This means that even if your computer or mobile device is compromised, your hardware wallet for cryptocurrency remains safe.

Most hardware wallets include additional security features like PIN codes, two-factor authentication, and seed phrase backup to protect your assets further. In fact, according to experts, crypto hardware wallets are universally considered the safest option for keeping your digital assets.

How does a hardware wallet work?

A crypto hardware wallet is a single-purpose computing device. It is designed to manage and perform one single function. Often, it consists of one or two buttons or a small screen. There is no direct way to connect the hardware wallets to the internet connection. Because the hardware wallet is not connected to the internet, your device is not at risk of being compromised by a hacker. No hacker can access your wallet content without access to your physical device.  

Any transaction from the crypto hardware wallet must be “signed” using the private key. The transaction is signed with the help of the hardware wallet and software known as a crypto bridge. Crypto bridge is designed to establish a connection between the wallet and the blockchain network and to support transactions executed using a hardware wallet.    

You can connect your cryptocurrency hardware wallet to the PC. With the help of a crypto bridge, you can transfer your crypto-transaction data from one computing device to another. After transferring the data, your hardware wallet signs the transaction using a private key. Once signed, the hardware wallet uploads them back to the bridges. The bridges broadcast the signed transaction to the rest of the blockchain ecosystem to complete the process.   

Throughout the process, your private key never leaves your hardware wallet. The single-purpose hardware wallet for cryptocurrency helps ensure that your private keys remain completely offline. 

Why is protecting the private key important?

“Not your keys, not your asset” 

The blockchain protocol uses the cryptographic private keys to establish a connection between the crypto-holder and the digital assets. It serves as a critical link between the asset and the asset holder.  

Let’s understand how keys work. Every blockchain address (account) is associated with a public and private key. The role of the public key is to function as the address that the crypto holder can share to receive cryptocurrencies and digital assets from other parties. On the other hand, the role of the private key is to grant exclusive and unrestrictive access to the cryptocurrencies and digital asset-related data stored at that address. 

The significance of private keys lies in enabling users with blockchain wallets to exercise control over their blockchain address and its contents.  

Most scammers and malicious actors target your private keys, either via physical means or via your internet connection, because the ownership of the asset is directly linked with the wallet’s private key. 

The Upsides of a Hardware Wallet

Security 

One of the most prominent benefits of utilizing a cryptocurrency hardware wallet as opposed to a web or mobile wallet is its increased security level. The private keys are always kept offline on the device with hardware wallets. This makes your keys far less susceptible to cyber threats or other phishing attacks.  

On top of that, you need to confirm your authorization before executing the transaction on the best crypto hardware wallet to complete the process. Often, this process is referred to as 2FA. It helps ensure that no external entity executes the transaction using your private keys. 

Convenience 

A hardware wallet for cryptocurrency is designed to be portable. It enables you to manage your digital assets while on the move effortlessly. Though hardware wallets are less prompt than web-based or mobile-based wallets, the portability factor is advantageous if you regularly engage in cryptocurrency transactions. 

Compatibility

Managing multiple digital assets on a single crypto hardware wallet device is highly convenient. Numerous hardware wallets in the market are compatible with a wide variety of cryptocurrencies and crypto-tokens, such as Bitcoin, Ethereum, and Bored Ape Yacht Club.  

The downside of a Hardware Wallet

Cost  

Software wallets that are web-based or mobile-based are free. Hardware wallets can be relatively costly compared to alternative choices, such as software wallets. The hardware wallets are shipped with a proprietary OS and a secure chipset. 

Damage 

In the event of a lost, corrupted, or damaged hardware wallet, you may lose access to your cryptocurrency unless you have a backup of your private keys. Most cryptocurrency hardware wallets come with key backup features. 

User-friendly Interface 

 Certain types of hardware wallets for cryptocurrency may possess intricate features that are challenging for certain users to comprehend and utilize. Over the years, using a hardware wallet has become easy, thanks to recent updates both on the hardware and software levels. But most modern hardware wallets make it easy for everyone to use. 

What happens when you lose your hardware wallet?

You may be curious about the security and safety of your digital assets in case you misplace your cryptocurrency hardware wallet. Don’t worry; the good news is that your assets remain entirely secure. 

Digital assets and cryptocurrencies, such as Bitcoin and Ethereum, are stored on the blockchain rather than within the crypto hardware wallet. Its sole function as a tool is to provide access to your private keys. Your holding remains at its original address over the main chain. Additionally, all your assets can easily be retrieved using the recovery or seed phrases. 

When it comes to the possibility of unauthorized access to your crypto, the answer is still negative. Take, for instance, the Trezor or Ledger hardware wallet. Each cryptocurrency hardware wallet is safeguarded by a PIN code that only you know. Without that PIN, no one else can access your private data, even if someone discovers or steals your physical device.

Best Practices

Purchase a brand-new hardware wallet.  

For every user, it is critical to exercise caution when purchasing a hardware wallet. Avoid buying a used or secondhand device and purchase hardware wallet devices from reliable manufacturers. Usually, most hardware wallets and manufacturers feature a visible security guideline, such as a holographic sticker or tags, that alerts you if the respective hardware has been tampered with. When purchasing an ideal device, try to look for damages. If anything appears suspicious or not in its right place, refrain from employing the respective crypto hardware wallet. 

Check addresses before transacting large amounts. 

Hardware wallets are regarded as one of the most secure methods for storing private keys. Still, it requires adherence to standard security best practices. Before transferring a significant amount of cryptocurrency between wallets, verifying the receiving address using a small test transfer is important. It helps eliminate the risk of transacting with unfamiliar wallet addresses. Suppose your crypto hardware wallet features a screen. In that case, ensuring that the recipient’s address on your computer screen matches what the wallet is displaying before initiating a transaction is essential. 

Protect your seed phrase.   

It’s crucial to keep your hardware wallet and recovery seed phrase secure. A seed phrase is a set of 12-24 randomly generated words that serve as an emergency backup recovery method if a crypto hardware wallet is misplaced, erased, or damaged. Every user should treat seed phrases with the same level of care as your private key since whoever possesses them can gain unrestricted access to your holdings. Record your secret phrase on paper or another non-digital medium to protect it. It’s also essential to keep both the hardware wallet and the seed phrase in a safe place. 

Conclusion

Hardware wallets offer superior security, portability, and compatibility with various digital assets. Additionally, they are typically user-friendly. However, it is crucial to remember that they can be expensive and may be lost or damaged. 

Ultimately, whether a hardware wallet is suitable for you will depend on your unique requirements, budget, and personal preferences. If you prioritize security and convenience and are willing to invest in a hardware wallet upfront, it could be an excellent option.

Related Articles:

• How to secure crypto wallets

The notion of digital asset custody bears a remarkable resemblance to the principles behind traditional financial asset custody. Its roots can be traced back to when individuals securely stored their financial documents in personal vaults, such as paper certificates, warrants, and stock certificates. Over time, custody practices advanced, leading to the emergence of custodians in the form of banks and regulated entities. These custodians assumed the responsibility of safeguarding assets and providing the necessary infrastructure for asset storage and management. 

Key Takeaways 

• Digital asset custody is a digital wallet platform where your secret private cryptographic keys are stored away from potential threats.    

What is digital asset custody? Explained 

Digital asset custody encompasses various methods of securely storing and protecting digital assets on behalf of their owners. Similar to the custody of traditional financial assets, crypto custody providers assume the responsibility of safely keeping investors’ assets and often offer additional services such as buying and selling capabilities. 

However, there are notable differences between digital asset custody and custody of traditional assets. The nature of digital assets, particularly cryptocurrencies, emphasizes the criticality of secure custody. Digital assets are created and transferred through cryptography and decentralized blockchain networks. Ownership of these assets is proven through cryptographic keys issued to the owners, which are utilized for asset transfers and transactions. Unlike traditional assets, blockchain records transactions are the primary documentation of the assets’ existence.  

In essence, digital asset custodians do not store the assets themselves but safeguard the owners’ cryptographic keys. Protecting these keys is paramount to ensure the security of the owner’s assets. If the keys are lost or stolen, the assets may become irretrievable. Given these unique characteristics, secure custody of digital assets becomes even more crucial than traditional financial assets.

The public key and Private key infrastructure 

A digital asset custody wallet serves as a designated location for storing an asset owner’s cryptographic keys. Wallets typically hold two essential types of keys: private and public. These keys work together to ensure the secure completion of transactions, including cryptocurrency purchases. 

Private keys are huge, randomly generated numbers that serve as evidence of digital asset ownership. They come into play when transferring assets to other individuals or spending cryptocurrencies. Each transaction undergoes owner verification through digital signatures using their private key. Maintaining the utmost privacy of private keys is paramount; they should never be shared with anyone else. Sharing private keys could allow unauthorized individuals to transfer funds from the owner’s wallet. 

In contrast, public keys are also sizable numbers utilized during transactions. Unlike private keys, public keys can be shared openly. The public key generates a deposit address specific to the owner’s wallet. When transferring assets between owners, the sharing of deposit addresses facilitates the determination of the intended destination for asset transfers.

Safety

Digital asset custody is centred around safeguarding the private key, which is vital in storing, managing, and transferring digital assets. However, private keys present a potential single point of failure within the system. They are responsible for decrypting messages and authenticating transactions, making their protection crucial to prevent theft, loss, or destruction. Consequently, sophisticated technologies are required to ensure the security of private keys.  

The control and management of these private keys have given rise to specialized frameworks supporting the custody of digital assets as a distinct service offering. These frameworks are designed to provide enhanced security measures, mitigating the risks associated with private key vulnerabilities. By offering advanced digital asset custody solutions, these frameworks address the specific needs of managing private keys and provide a specialized service to protect digital assets.

Different types of Digital asset custody wallets:  

Various methods can enhance the security of storage solutions. Digital asset custodians or custody providers employ a combination of the aforementioned methods and additional features to enhance user safety. Multi-signature (Multisig) and multiparty computation (MPC) are two such mechanisms. Let’s explore these additional security features. 

Multi-Signature (Multisig):  

As the name implies, this feature requires multiple private keys to sign a transaction. By implementing Multisig, users’ assets remain protected even if one or a few systems are compromised. It typically follows an M-of-N arrangement, where N represents the number of authorized keys, and M represents the threshold required to sign off on a transaction. This approach ensures that no single individual has complete control over the assets, enhancing security. 

Multiparty Computation (MPC):  

Like Multisig, Multiparty Computation or MPC eliminates the vulnerability of a single point of compromise. However, it achieves this by dividing the private keys into fragments or “key shards.” Unlike Multisig, which requires multiple people with keys to complete a transaction, MPC combines multiple key fragments distributed across devices to form a single private key. Consequently, even if one device is compromised, a hacker cannot access the assets due to the fragmented nature of the keys.  

By leveraging these additional security features, such as Multisig and MPC, digital asset custodians and custody providers further fortify the storage of digital assets, reducing the risks associated with single points of failure and enhancing overall security.  

Digital Asset Custody Benefits 

Simplicity:  

Crypto custody providers offer simplicity by alleviating the burden of tracking and maintaining private keys for individual investors. This convenience becomes increasingly significant as investors’ holdings become more complex, involving frequent transactions and multiple digital assets. 

Efficiency:  

This simplicity translates into enhanced operational efficiency for institutional investors. Managing a portfolio of digital assets requires less time and effort when entrusted to a custody provider, allowing institutions to focus on their core activities. 

Greater Security:  

Financial services firms specializing in crypto custody possess the necessary resources and expertise to deliver highly secure digital asset custody solutions. These solutions provide robust protection against potential threats, including hackers and internal misuse, offering investors peace of mind.   

Reduced Risk:  

Crypto custody providers prioritize advanced security measures and mitigate risks in various ways. Some providers obtain licenses from regional authorities to act as digital asset custodians. To obtain such licenses, providers must implement measures that safeguard investors’ assets from theft, loss, and unauthorized use. Additionally, prominent digital asset custody providers may offer insurance coverage, protecting against potential losses caused by theft or other unforeseen circumstances.

Conclusion

As digital assets gain prominence, the significance of digital asset custody services for safeguarding cryptocurrencies and other digital assets has grown substantially. As the market for these assets continues to expand, innovative forms of custody have emerged to cater to the requirements of investors. 

Digital asset custody services play a pivotal role in the crypto ecosystem by offering investors a crucial layer of security and protection. These services are expected to evolve further and adapt to the industry’s evolving demands as it progresses.

The term “Web 3.0” was first coined by the Ethereum co-founder Gavin Wood in the year 2014. He was the first to address the problem with the existing Web2.0 infrastructure, where most web users need to rely on a handful of private organizations to act in the public’s best interests.

Definition:

Web3.0 is the third generation of web technologies that employ blockchains, cryptocurrencies, and NFTs to give power back to the internet user in the form of ownership. Web3.0 transforms the existing internet infrastructure by being verifiable, trustless, self-governing, permissionless, decentralized, stateful, and robust.Decentralized applications and other blockchain-based technologies are the by-products of Web3.0 technologies. The driving factor of Web3.0-based technologies is that user gets more control over their data with the help of smart contracts, and they can conduct a financial transaction without relying on third parties or other centralized intermediaries.

What make web3.0 different from web2.0 and web1.0?

Decentralization

On web 2.0, the governance and applications are centralized, whereas Web3.0 is decentralized. There is no central authority in Web3.0 infrastructure that is enabling applications and services.

Blockchain-enabled

Blockchain help make decentralized applications work. It is critically important for enabling decentralization. The blockchain infrastructure heavily relies on user transaction data and network connection structured in a distributed format. On the other hand, every single web 2.0 application relies heavily on a centralized database infrastructure. An immutable ledger of transactions on the blockchain allows users to authenticate ownership and transfer valuable products across the Web3.0 ecosystem.

Native cryptographic currency

In the Web3.0 universe, users don’t have to trade goods and services using fiat currencies – as the central banks do not manage them. Web3.0-based decentralized applications come with their native crypto-currency, enabling faster transactions across the ecosystem.

Autonomous operations

Web3.0 is shipped with smart automation features that help establish decentralized autonomous organizations and build financial services.

Network fees

The fees charged for transactions and operations conducted on the Web3.0 protocol are directly channeled to network participants. The network fees literally stand nowhere – when compared to the charges stamped by middlemen in the existing financial infrastructure.

Censorship-resistant

Across Web3.0, users have the freedom to access all kinds of financial instruments and conduct all types of financial transactions in a decentralized, secure, and reliable manner without the permission of a centralized authority.

Web 1.0 vs Web 2.0 vs Web 3.0 – and how they work?

Let’s see some real-life applications of Web3.0:

Web3.0 is designed to work in conjunction with crypto tokens or cryptocurrencies instead of fiat currency. Numerous decentralized applications offer opportunities to people from technical and non-technical backgrounds to participate in the protocol and make a living. Let us see some actual use cases to understand why we should care about Web3.0:

Non-Fungible Tokens

NFTs or Non-fungible tokens are asset tokens minted and stored on a decentralized network or blockchain with the help of a cryptographic hash function, making it an independent and unique token – one that can be easily traded across the Web3.0 ecosystem

Decentralized finance

Defi or Decentralized Finance is one of the emerging branches/ applications of blockchain and Web3.0 technologies. The aim of Defi applications is to enable traditional financial services in a decentralized fashion – making financial infrastructure more accessible to masses beyond geographic boundaries

Decentralized autonomous organization

DAO or decentralized autonomous organizations are set to potentially become the way of organizing entities over Web3.0 infrastructure. DAO provides structure and governance to services in a decentralized fashion

Decentralized Applications

DApp or Decentralized applications are services developed on top of the decentralized network infrastructure by employing virtual machine-compatible smart contracts. Smart Contracts are programmable contracts designed to conduct business operations autonomously based on user inputs – these contracts are logged in an immutable ledger to record transactions and verify ownership.

In conclusion,

Web3.0 can potentially revolutionize every domain as it has already shown a glimpse of a new generation of the internet. We can say that, just like us, Web3.0 is a work in progress, and the future will tell what it holds.

Related Articles:

• Everything You Should Know About Decentralized Finance
• What Are Decentralized Apps (DApps) & Why Are They Used

What is a crypto wallet & what are the types of Cryptocurrency wallets?

 

Definition of Cryptocurrency 

The first digital money was called Bitcoin. It was started in 2009 by a person or a group named Satoshi Nakamoto. It’s still the most famous one today. And one of the best web3 crypto projects of all time. 

But what is cryptocurrency? Cryptocurrency, also known as crypto, is a type of digital money that is kept safe using cryptography. It’s not physical money like notes, coins, or bills. 

Cryptocurrencies work without a centralized issuing or regulating authority controlling them. Instead, they use decentralized systems such as consensus mechanisms and immutable ledgers to keep track of transactions and generate more currency units. 

 

Key Takeaways 

• Cryptocurrency wallets are like special types of lockboxes for your private keys. 
• Crypto wallets keep your digital assets and cryptocurrency safe. 
• Crypto wallets allow you to send, receive, and spend cryptocurrency.  

 

What is a Crypto Wallet? 

A crypto wallet is a software program installed on your computer or an external physical device, like a USB, that helps you keep and transact your digital asset, crypto-token or cryptocurrency. 

You can think of a cryptocurrency wallet as a digital version of a real wallet. This digital wallet holds keys like you keep money and cards in a wallet. These keys are unique signatures that prove you own cryptocurrency and can use it. The wallet also allows you to use your cryptocurrency easily, just like a real wallet helps you use your money and cards. 

With cryptocurrency, there’s no real money involved. One that you can touch or put in a physical wallet like you do with paper money (fiat currency). Instead, it’s a form of digital or virtual money that exists on a network of computer systems called the blockchain or web3 blockchain.  

Even though you can’t touch it, knowing how much you have and how to access it is important. It’s no different from you wanting to know how much money is in your traditional bank account. 

A cryptocurrency wallet helps you see how much cryptocurrency you own. It works just like a bank account that displays your account balance.  

It also lets you conduct transactions with your cryptocurrency. You can send funds or receive them from other parties and partners. It is no different from using a bank account to send and receive money.  

You can also use multiple cryptocurrency wallets to keep track of digital assets and manage your cryptocurrency. 

 

Importance of Crypto Wallet 

Crypto wallets enable you to collect and use cryptocurrency for lots of different things.  

The best crypto wallet in India and globally plays an important role in ensuring that you can use your crypto currency and digital asset tokens in ways you use fiat currency from a bank account. 

Use a crypto wallet as a tool that allows you to leverage the practical utility of web3 technologies: 

• Managing digital assets: Crypto wallets let you see how much cryptocurrency you have. 
• Sending and receiving cryptocurrency: You can use these wallets to send and get cryptocurrency from others. 
• Leveraging decentralized apps: If you want to use (web3) decentralized apps that work with cryptocurrencies, you need a crypto wallet to connect with them. 
• Username (public address): The digital assets are stored on a blockchain. In crypto wallet infrastructure, the usernames are associated with public key addresses. These public key addresses allow you to transfer funds on the blockchain. 
• Managing your keys: Crypto wallet helps you control the private encryption keys you need to access and transact your cryptocurrency safely. 

 

How Crypto Wallet Works? 

A wallet for your cryptocurrency doesn’t really hold the digital assets inside it. Instead, it keeps a private key to control your digital assets. These cryptocurrencies are actually stored on a computer network called blockchains that everyone can see, verify, and audit. 

You have to use a secret code called a private key to do things with your cryptocurrency, like sending or receiving them. This key consists of a special combination of numbers and letters that verifies your ownership.  

 

Confused! What is a Public or Private Key? 

Crypto wallet infrastructure consists of two types of keys, one is a private key, and another one is a public key.   

• A public key functions like a bank account number and can be shared with others.   
• A private key function like a secret password or PIN for your bank account should be kept safe. 

In public-private key cryptography, every public key has a private key. These keys consist of a special code made up of random letters and numbers. They work together to (encrypt-decrypt) lock-unlock information and verify ownership on the web3 blockchain. It works just like how you lock and unlock things using a key. 

 

How do transactions work with the crypto wallet? 

It’s important to know that when you send cryptocurrency, it’s not like you’re physically passing it from your computing device to someone else’s computing hardware. Instead, when you want to make a transaction, your private key signs the transaction. Your crypto wallet hardware or software then broadcasts this signed transaction to the blockchain main net. The network uses this information to change the amount of cryptocurrency present in both the sender’s and recipient’s wallet addresses on its ledger. 

But, how fast and safely these transactions happen can depend on the type of wallet you’re using. 

 

Types of crypto Wallet 

The following are the different types of crypto wallets: 

Hot Wallet Vs Cold Wallet 

Hot Wallet 

The hot wallet is a category of crypto wallet. The wallets that are referred to as “hot wallets” usually use online software or web-based applications to store and protect the private keys for your digital assets. 

• Web-based (Online) wallet: One very common type of crypto wallet is the web-based or online one. Not only that, but it is also one of the well-known types of crypto wallet India and across the globe because of its quick accessibility. It’s like a digital wallet that a website takes care of. The website, like a crypto exchange, holds your private keys. When you want to use your wallet, you just log in to the website. It’s good to choose one that has extra protection, like a two-step encryption. This way, using your cryptocurrency becomes simple, similar to using online banking or payment systems. 
• Desktop wallet: With a desktop wallet, your private and public keys are kept in a computer program on your desktop. 
• Mobile wallet: You can use a mobile app that safely stores your private and public keys. These keys help you access and use your cryptocurrency. 

 

Cold Wallet  

The cold wallet is also a category of crypto wallet. It is often referred to as a hardware crypto wallet. Cold wallets use offline electronic hardware devices to store your private keys and to retrieve data securely while signing transactions.  

• Hardware wallet: Hardware wallet is considered the best self-custody wallet in India and across the globe by experts. A hardware crypto wallet stores your private keys for your crypto asset on a physical medium such as a special-purpose USB drive. Such kinds of USB drives are encrypted. Your keys are stored offline. Plus, they are ideal for crypto storage if you don’t plan to use them all the time. So, when you need to use your private keys to sign transactions, you connect the USB to a computing device, and then it’s safe again when you disconnect it. 
• Paper Wallet: A paper wallet is an old-fashioned and low-tech way to keep your private keys safe. You write down the private keys and public keys on a piece of paper to keep them secure. 

 

Difference between Custodial and Non-Custodial Wallets 

Custodial Wallet 

The custodial wallet is a type of crypto wallet. The private keys associated with custody wallets are stored and managed by someone else (third-party provider). This third-party provider usually includes crypto exchanges. Crypto exchanges are the place where you buy and sell cryptocurrencies and digital assets such as collectables. You might prefer crypto custody platforms such as Binance and Coinbase because they offer an easy on-ramp for your cryptocurrencies.

Additionally, storage support is provided by the same crypto exchange that lets you trade your crypto holdings. But the safety and security of your wallet are at risk since a third party is handling your private keys. However, not all crypto exchanges automatically provide custodial wallet services for you. 

 

Non-Custodial Wallet (Self-custody) 

A noncustodial wallet, also known as a self-custody wallet, is a crypto wallet that lets you hold your private keys. You have to manage your non-custodial wallet’s private keys to keep your cryptocurrency safe on your device. These wallets can be pieces of paper with the private key written on it, or software wallets managed by you. These self-custody crypto wallets help you easily keep your crypto money safe. These wallets are considered to be safe because they’re not provided by the exchanges that enable your trades and hold your keys as digital asset custodians. 

 

Benefit of Custodial & Non-Custodial Crypto Wallet

Noncustodial Wallet Benefits: 

• You’re in charge of your private keys and entirely own your crypto currency. 
• You can quickly use your crypto whenever you want. 
• Transactions are harder to be controlled or censored by others. 

Custodial Wallet Benefits: 

• Easy to use because it’s connected to a wide range of services. 
• You can change your cryptocurrency to fiat currency easily. 
• Third-party wallet providers manage your wallet and keys. 

 

Example of crypto Wallet 

Cold Wallets: 

Ledger Nano: It is the best Hardware Crypto Wallet. Ledge offers various hardware wallets like the Nano S and Nano X devices. 

Hot wallets: 

MetaMask: It is the best crypto wallet for Ethereum. The wallet is available on Android and iOS. It is also available on desktop as a web browser extension. 

Electrum: It is the best desktop Bitcoin wallet.  

Coinbase Wallet: It is the best crypto wallet for beginners. They offer all three kinds of crypto wallets: online, desktop, and mobile choices. 

Exodus: It is the best wallet for a desktop. They give you choices for a crypto wallet you can use on your computer or phone. You can also connect it to the Trezor hardware wallet if you want. 

Crypto.com: It is the best deFi wallet. The exchange offers different services to its users, like a crypto wallet that you can use on the website and a mobile app. 

 

How to choose the best crypto wallet 

First, you should find a wallet that allows you to save different types of cryptocurrencies. Why? You can manage a few wallets and keys if your wallet has multi-currency support. It’s important to find a wallet that offers shared ownership and allows multiple owners to sign a transaction before executing it. Multi-Signature Wallets could be a potential pick. The multisig wallets might need approval from all the owners or just some of them. This is helpful when sharing digital asset ownership and access with others. Plus, it is helpful when staking coins or cryptocurrency for a protocol.   

When you’re picking a wallet or digital asset custody platform, look for features such as private key backup, crypto-transaction annotation and multiple sub-wallet support. 

At Liminal, we’re working diligently to create a comprehensive, secure, and user-friendly wallets, especifically hot and cold wallets with custodial and non-custodial setting for institutions who process millions of transactions everyday and look for robust, scalable and sustainable wallets to run their applications.  

 

FAQ 

Are crypto wallets secure? 

A cryptocurrency wallet is a safe place for your cryptocurrency. But there are different kinds, and some are safer than others. Cold storage wallets, also known as hardware wallets and non-custodial wallets, are usually the safest because they keep your secret codes offline, plus the private key is in your custody. 

 

Can I have multiple wallets for different cryptocurrencies? 

Yes, using different types of crypto wallets for different purposes is considered a good practice because it helps you get to your cryptocurrencies easily and diversifies your risk. Even though numerous non-custodial and custody wallets are adding more types of cryptocurrencies, you still need different wallets to reach all the available ones. 

 

Are there any risks associated with using online/mobile wallets? 

There’s a chance malicious actors or hackers might try to get into your digital custodial wallet and use your payment info to send and receive digital assets and cryptocurrencies without your permission. 

 

Can I use the same wallet for different cryptocurrencies? 

Some wallets for cryptocurrency can only hold one type of cryptocurrency. But other types of custody and self-custody wallets can hold many kinds of cryptocurrencies, such as Bitcoin, Ethereum, Polkadot, and more. 

 

Can I transfer my crypto from one wallet to another? 

Moving cryptocurrency to a different wallet is similar to transferring funds to another person. Generate a set of keys for the wallet that will receive the cryptocurrency, and then send the cryptocurrency from your current wallet to that public key address.

 

Do I really need a crypto wallet? 

While most crypto exchanges will allow you to store your digital assets such as cryptocurrencies in an online, custodial, web-based wallet, but to keep your digital assets safe, it’s best to use an offline non-custodial type of crypto wallet as well. Such crypto wallets require a special key to open it, and once that key is made, no one can copy it.

 

Are crypto wallets safe?

No, not all cryptocurrency wallets are safe. This year, there have been a lot of security breaches. Hackers usually try to steal crypto wallet’s private key. And to steal your personal information, they go after things such as browser add-ons and the operating system of your computer. 

 

Is crypto wallet real money?

For a few years now, legal authorities and banks have been talking about whether to treat cryptocurrencies as a “real currency.” This would mean recognizing it as actual money. But right now, the federal reserve and subordinate banks don’t see cryptocurrencies as real money.

 

What kind of crypto wallet is best?

Non-custodial Cold wallets are considered to be the best crypto wallets by experts.

 

How many cryptocurrency wallets are there?

There are three kinds of crypto wallets: paper wallets, software wallets, and hardware wallets.

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Blockchain technology is a shared, auditable, immutable ledger of transaction records that is distributed across a peer-to-peer network of computer systems. These immutable record keeps track of assets and builds trust in the distributed system.

• It is distributed database that keeps track of ever-increasing list of ordered   transaction records, which are also known as blocks.
• In the distributed database, the blocks are linked using advance cryptography   algorithms.
• All blocks consist of a cryptographic hash of the previous block, a timestamp,   and   transaction data.
•  This help attain immutability – the transaction record cannot be altered   retroactively without the alteration of all the subsequent (previous) blocks and   the   shared consensus across the network.

Public-private key cryptography

The public-private key cryptography constitutes of a pair of keys (a public key and a private key). The public key is associated with an entity (an individual or business) that needs to authenticate its identity on blockchain or to sign transaction or to encrypt transaction data. The public key is published on the chain but the corresponding private key is only known to the actual owner and kept secret. The private key is unique to every participant. The public and private keys work in unison to unlock data on the distributed ledger.

Blockchain for Business

• From a business perspective, any object of value can be transacted and tracked   on the blockchain network which reduces risk and operational cost.
• Because records are immutable, there is less need for oversight.
• Blockchain enables participants to exchange valuable products directly   eliminating the requirement of intermediaries.
• Additionally, on blockchain, transaction settlement time is faster, thanks to the   trusted, shared, auditable ledger technology, as it doesn’t require verification or   certification from a centralized authority.
• Blockchain’s security features eliminates the possibility of tampering by a bad actor.

In hindsight, the purpose of the blockchain is to allow digital information to be recorded in a distributed manner but not be altered, deleted, changed, or destroyed.

Components of Blockchain

• Consensus mechanism is a fault-tolerant mechanism. It is employed by network of   computers, where multiple agents are involved, to achieve agreement over a signal   state of the network or data in a distributed fashion. It  authenticates and verifies   transactions across network. Proof of work, proof of stake, and practical byzantine   fault tolerance BFT are three main kinds of  algorithm employed to achieve   consensus. ‍
• Shared ledger is an “append-only” distributed public system. In shared ledger, the   transaction record including other associated information gets recorded for   only   once. The role of the shared ledger is to eliminate the risk posed by duplication of   records and maintain transparency across network. ‍
• Smart contracts are self-executing contracts or programs that are stored on the   blockchain network and gets automatically executed when predetermined   conditions are met by both the parties involved in the transaction. The set of rules   hard coded in the self-executing program governs the way business transaction   work. ‍
• Permissions help decide the level of network participation. Depending on the   permissions offered, the blockchain can classified into permissioned,   permissionless or hybrid. The purpose of the permissions is to authenticate and   verifies network participants. It also allows enterprises to comply with the regulatory   requirement especially the data protection regulations.

The Pros and Cons of Blockchain technology

Undoubtedly, the potential of blockchain technology as a form of the immutable record-keeping ledger is limitless. Unlike other technological innovations, blockchain comes with greater user privacy and heightened security protocol that helps eliminate the probability of errors.

Pros:

• Blockchain help improves accuracy by eliminating human involvement in the verification process
• Blockchain help eliminates the need for third-party entities, eventually reducing the   cost
• Blockchain’s decentralized ledger makes it impossible to tamper with record entries
• On a blockchain, the transactions are secure, private, and efficient. Transparency is instilled across blockchain infrastructure
• Blockchain provides a functioning alternative for banking. It also provides a secure alternative to citizens of countries with unreliable, underdeveloped, and corrupt governments

Cons:

•  Existing mining infrastructure consumes enormous amounts of electricity to   compute complex verification algorithms. The transaction per second performed on   the legacy blockchain is quite low.
• Not the entire blockchain ecosystem, but bitcoin has a history of involvement in   illegal ac activities, especially on the dark web.
• The regulatory uncertainty is among the driving factors that are disincentivizing    most investors from adopting the blockchain.
• There is a limit to the amount of information users can store on blockchain.

Did you know?

• The foundational principles of blockchain technology were first outlined in the year   1991 by Stuart Haber and W. Scott Stornetta, two well-recognized mathematicians.   They aim to develop a system where document timestamps cannot get tampered   at any cost.
  ‍
• The computer scientist and cryptographic activist Hal Finney introduced reusable   proof of work (RPoW) as a prototype for digital cash in the year 2004. RPoW help   solves the double-spending problem by maintaining the ownership of token  registered on a trusted server.
  ‍
• Blockchain, as we know it today, was first proposed/ invented by an individual or a   group of people – with the pseudonym Satoshi Nakamoto. He was the first to present   the original Bitcoin whitepaper, which later became the cornerstone of the existing   blockchain ecosystem.
  ‍
• The global blockchain market is projected to be worth $1,431.54 billion by the end of   this decade. The blockchain is expected to boost global GDP by $1.76 trillion by 2030.
• As of now (the year 2022), (according to Coin Gecko) there are 12,932 active cryptocurrencies, and 552 exchanges live. The global cryptocurrency market   capitalization today is around $1.05 Trillion.

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The Ethereum blockchain network supports a wide range of applications and associated economic activities – from the NFT art marketplace to Defi applications. The rise in demand for network availability often slowdowns the network as well as makes it economically unviable. Polygon network solves this problem by making the underlying blockchain protocol accessible to the masses.

Did you know?

• Ethereum blockchain network is able to process 14 transactions per second TPS. On the other hand, the polygon blockchain network is designed to process up to 7,000 transactions per second TPS. Speed and efficiency, including lower fees, are some of the top driving factors that attract developers and crypto enthusiasts toward polygon blockchain.

Definition: What is a polygon blockchain?

• Polygon blockchain, formerly known as the Matic Network, is a decentralised scaling platform for the Ethereum blockchain.
• It is engineered to support an interconnected mesh of decentralized-application-centric blockchain networks.
• It enables developers to build a diverse range of highly scalable, user-friendly decentralised applications with lower transaction charges without compromising on security.

Polygon has emerged as a platform that allows developers to launch interoperable blockchains.

Polygon network is home to a diverse range of decentralised applications – enabling users to experience virtual verse, play games, invest in limited edition artworks, and leverage a range of decentralized financial services.
The core purpose of the polygon blockchain protocol is to help Ethereum expand in size, security, operational efficiency, and usefulness – enabling developers to build enticing applications quickly.

What is MATIC Token?

• MATIC token is polygon’s native cryptocurrency used to run, govern and secure the polygon blockchain network as well as submit on-chain transaction fees.
• MATIC token is the currency of polygon application that enables users to interact with hundreds and thousands of Dapps involved in your blockchain ecosystem.
• MATIC token is employed as the base unit of payment and settlement between network participants who are involved in the transactions.
• MATIC tokens are ERC-20 tokens generated on top of the Ethereum blockchain network.

The supply of Polygon’s MATIC token is limited, contrary to other blockchain projects with an unlimited supply of crypto-token. Today, there are about 4,977,830,774 MATIC tokens in circulation. According to the team behind polygon, there will never be more than 10 billion MATIC tokens in circulation.

MATIC tokens are available on several leading centralised and decentralised crypto exchanges around the globe. You just need to sign up and set up an account with the exchange to get started. Exchanges allow users to buy MATIC tokens using fiat currencies such as the US dollar or INR – via bank transfer, wire, debit card, or credit card.

Polygon Blockchain Architecture

Proof of Stake

The polygon blockchain is a proof of stake (PoS) sidechain. The poS mechanism enables network participants to stake their MATIC takes in order to verify and validate transactions as well as to vote for network upgrades.

PoS is an abbreviation for proof-of-stake consensus mechanism. PoS consensus mechanism allows token holders to stake-holding and accumulates rewards while keeping the polygon blockchain network operational as well as simultaneously verifying transactions.

Proof of stake offers an additional layer of security to the underlying blockchain network. Additionally, it offers faster and inexpensive transaction processing.

Proof of stake doesn’t require network participants and validators to purchase specialised equipment or to solve computationally intensive and complex equations. This is the reason why – the proof of stake consensus mechanism is energy-efficient.

SDK

The software development kit offered by polygon blockchain allows users to develop and deploy Ethereum-compatible decentralised applications as sidechains. The decentralised app development team can build scalable services using the following mentioned scaling methods.

Plasma Chains

The plasma chain is also referred to as a child chain. It is essentially a subset or a micro-copy of the Ethereum main chain.

It segregates and bundles asset transactions into blocks, later accumulates and batches into a single submission block on the main chain.

Plasma chain employs sophisticated fraud proofs such as optimistic rollups to arbitrate and troubleshoot disputes.

The contract associated with the plasma chain act as a bridge enabling users to transfer assets between Ethereum’s main net and the plasma chain.

Even though the security aspect of the plasma chain entirely relies on the underlying Ethereum blockchain, its efficiency is heavily impacted by numerous design limitations.

ZK-rollups

A ZK-rollup is a layer two blockchain protocol devised to bundle a gigantic number of crypto-asset transfers off-chain into a single transaction.

It performs computation and stores transfer data off-chain while simultaneously holding crypto assets in an on-chain smart contract. The function of the traditional Layer 1 blockchain solution, such as Ethereum, is to validate blocks and transactions on the main chain.

ZK-rollups used “zero-knowledge proof” for submitting the final public record on the main chain. Under the surface, the ZK- rollup updates the existing state of the layer-1 blockchain network while consuming less block space and storing only a fraction of the total data.

Essentially, ZK-proof represents a comprehensive receipt that verifies and confirms that all the recorded transfers are authentic and therefore can be accounted for both in the rollup and the main chain.

ZK-rollups solve the dilemma of significant gas fees and low throughput. It enables users to pay significantly fewer gas fees on each transaction and scale quickly.

Optimistic rollups

Optimistic rollup is an L2 scaling protocol, also known as a layer two scaling solution, engineered for extending the throughput associated with the underlying Ethereum blockchain network.

Optimistic rollup help brings down the net computation load on the main Ethereum network by transferring computation and state storage responsibilities off-chain.

Such L2 solution help improves the transaction processing speed as well as expand the scaling capability of the Ethereum smart contracts.

It essentially employs “fraud proofs” to facilitate an instantaneous transaction on top of the Ethereum main net. It derives security from the underlying Ethereum blockchain protocol by publishing transaction results on-chain.

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Ethereum supports a vast array of decentralized applications such as DeFi, NFT, etc., making asset ownership accessible to all. But, the cost of transacting and accessing dApps is enormous on Ethereum main chain. This is what polygon is designed to solve. You might be wondering what is polygon and why does it matter? In a nutshell, the polygon network addresses two major problems faced by the Ethereum platform: high transaction fees and slow processing speed. 

Key Takeaways:

Polygon network is a decentralized Ethereum scaling solution that lets you develop and deploy scalable decentralized applications. With a polygon side chain, you don’t have to sacrifice security and pay high fees on every transaction.

Definition: What is polygon?

Polygon is a “layer two scaling solution”, also referred to as a “sidechain”. It helps scale Ethereum’s capabilities enabling you to conduct faster transactions at a cheaper fee. This is why polygon is also referred to as “Ethereum’s internet of blockchains”. It makes blockchain user-friendly. The polygon side chain runs parallel to the Ethereum main chain. Polygon has its own native cryptocurrency – MATIC. MATIC is used for staking and network governance. Using dApps, you can bridge your crypto-tokens to Polygon’s MATIC token. Polygon’s MATIC token let you interact with popular dApps that are only available on the Ethereum main chain.

How does Polygon work?

The polygon side chain employs a diverse range of technologies to create a faster parallel blockchain as well as links the side chain to Ethereum’s main chain. The proof-of-stake consensus mechanism ensures the top-down security of the polygon blockchain. Polygon’s PoS essentially rewards participants with MATIC tokens for holding funds via staking.

Validators: The role of the validators is to verify a new batch of transactions executed over the polygon chain as well as to add the batch to the chain. For verifying transactions, the validator receives a cut of transaction fees. In fact, the polygon network also mints new MATIC tokens for rewarding validators. To become a validator, you are required to have a dedicated computing device for running a full-time node as well as a wallet to stake MATIC tokens. In case you make a computing error, or there is a glitch in your internet connection, or the main chain registers some kind of malicious activity for your end, then the main polygon chain can penalize you. You can even lose a certain portion of your staked MATIC token.

Delegators: The role of the delegator is to stake their MATIC tokens indirectly through a validator. As a delegator, you don’t have to make any kind of staking commitment or offer uninterrupted computing support. But you are required to choose a validator. Even though delegator’s role is very different from the validator, still if the validator you opted for gets involved in any malicious activity, then you are likely to lose your staked MATIC funds.

What is polygon crypto-token (MATIC)?

MATIC token is Polygon’s native cryptocurrency. It is mostly utilized to pay fees for conducting operations over a polygon network. For instance, you want to interact with a dApp that is live on the Polygon network. To use that dApp, you are required to have MATIC tokens to cover the transaction costs. Other than that, MATIC is also used for network governance. If you hold MATIC, then as a holder, you have the authority to vote on changes that are yet to occur in the core polygon network. MATIC token is widely accessible. There are numerous exchanges that list polygon’s MATIC token – making purchase and selling of the tokens easy for retail and institutional token-holders.

MATIC was developed on top of the Ethereum Virtual Machine (EVM) employing the ERC-20 token standards. The polygon network also leverages the extensive capabilities of EVM. Because polygon is compatible to EVM, it is easier for developers to port their decentralized applications code over the polygon network. As per the recent trends, developers are opting for polygon networks over Ethereum because of the high gas fees. According to the Polygon core team, the maximum supply of MATIC tokens is capped at around 10 billion.

Top Perks of Polygon over Ethereum:

At this point, you understand exactly what is polygon crypto-project is all about. But there are numerous other reasons why most popular dapp projects choose Polygon blockchain over the Ethereum mainchain.

Gas Fees:

Compared to Ethereum’s main chain, the transactions committed over polygon cost relatively less. Since polygon blockchain employs a proof of stake consensus mechanism, it is able to process “batches” of transactions promptly. Such PoS mechanisms help make the gas fees cheaper for its users and rewarding for its participants. When you transact over polygon blockchain, as a user, you don’t have to pay more than a penny.

Transaction Speed:

The transaction speed is of utmost importance when transacting over blockchain because crypto-users and smart contracts commit transactions. Because polygon employs PoS, it can process transactions faster per second compared to Ethereum’s main chain. According to polygon’s core development team, the network can handle and process 7,000 transactions per unit of time (second). At such a processing speed, it is able to eliminate the congestion-related problems faced by Ethereum main chain.

Security:

It is true that the polygon sidechain is not as decentralized as Ethereum main chain. Still the underlying polygon protocol is able to achieve reputable security standards in accordance with the crypto industry’s requirements. It essentially derives its security capabilities from the Ethereum main-chain. It is among the leading layer-two solutions because of its top-notch security protocols as well as support for EVM-compatible smart contracts. Additionally, Polygon’s core teams constitute some of the most talented web 3.0 developers and security experts ensuring the reliability of the underlying blockchain infrastructure.

Conclusion

The polygon blockchain aims to foster the rapid growth of the Web 3.0 application by delivering the decentralized infrastructure required for Web 3.0. More than 35 thousand plus decentralized applications have migrated to polygon blockchain – employing their infrastructural capabilities to quickly scale dApps performance.

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You bought your favorite crypto-currency, but where should you store it? You need a storage vault that keeps your crypto investments safe. Multisig wallet is something that fits your security, compatibility, and portability requirements. But what is multisig wallet? Multisig wallet is built to address the need for multi-key crypto storage technology that reduces the risk of fund mismanagement. Did you know? – Multisig wallet is not really a new technology. It existed long before the advent of crypto-currencies. But it emerged with the rise of Bitcoin. As the bitcoin price embarked on an upward trajectory, the demand for crypto-storage technology sky-rocked. Multi-sig wallet technology was first employed in unison with the core Bitcoin network back in 2012.

What is Multisig Wallet?

Multisig wallet is a digital wallet that generates a unique digital signature using multiple private keys. These multiple keys are utilized to authorize ownership and sign the ongoing transaction. It relies on multi-signature addresses to operate over blockchain protocols.

Types of Multisig Wallet

Multi-sig wallet can be configured into multiple combinations based on your custom requirement. There are essentially two main types: n-of-n and n-of-m. For instance, 2-of-3 and 3-of-4 can be categorized under n-of-m types of wallets where you only need “n” number of signatures out of “m” to approve a transaction. On the other hand, 3-of-3 and 2-of-2 can be categorized under n-of-n types of wallets, where you need all the signatures to approve a transaction.

Upsides of Multisig Wallet

There are numerous notable upsides of multi-sig wallet:

Improved security

Multisig wallets are designed to deliver a higher degree of key protection. Getting access to multiple keys stored across multiple devices is relatively hard for any hacker. Diversification of keys across multiple storage media drastically reduces the risk of a single point of failure. Multisig crypto wallet helps investors restrict unauthorized withdrawals of digital funds. With Multisig Wallet, you don’t have to rely on a single entity or single device. In case you lose one of your keys, you won’t incur the risk of losing access to your funds – that’s what multi-sig wallets are built for.

Supports Escrow transactions

A structured legal agreement between two parties; where a trust-worthy external entity or a third party holds the digital funds up until proposed conditions are successfully met is referred to as an escrow transaction. For instance, consider your organization is going to employ a 2-of-3 multi signature wallet. It allows you to involve a trusted third-party in each and every transaction. The role of the trusted external entity is to escrow transactions between two parties. In case a dispute arises between both parties, the third party will get to make the final call.

Managing access to digital funds

Multi signature wallets make every individual key holder accountable for the funds under management. It is designed to offer an additive layer of security to your main crypto wallet. Such shared key model help ensure that the funds are not mismanaged or misused by a single key holder. Multi signature wallet doesn’t allow any one holder to unilaterally withdraw funds. It reduces the single point of failure. In fact, the institutional decision-making process becomes more decentralized and democratized as more key-holders get involved in the transaction and authorization process.

Wallet management

A few years back, setting up a crypto-wallet was a tiresome process. Just to operate the wallet, you were required to have a technical understanding of the wallet architecture. It used to be hard for regular, less tech-savvy crypto-user to navigate the set-up stage. This is not the case anymore. Most of the latest versions of multisig wallets are easy to setup and easier to manage over the long term.

Downsides of Multisig Wallet

There are numerous distinct downsides of a multisig crypto wallet:

Speed

Transaction speed is of utmost importance when trading crypto over exchanges. Profit and loss, including costs, depend on your rate of executing a trade. When it comes to the wallet, for most users, the next important factor is security. Regarding crypto-wallet, it is essential to note that speed and security have an inverse relationship. Multisig wallets are often considered slow but secure compared to other types of crypto wallets. To execute a transaction successfully, multi-sig wallet owners rely on other users with private keys and signing authority, eventually slowing the transaction process. This is usually not an issue for institutional users who less frequently uses crypto-wallets. But, if you want to use funds frequently, then a multisig wallet might cause inconvenience.

Key recovery

Usually, the custodial crypto-wallets key recovery process is considered simple since the custodial service provider holds the private keys for you. In case, you lose access to your keys, the custodial service provider will provide the backup keys. And if you forget the password of the crypto-wallet, the custodial wallet provider will provide you with the reset password option. But, in this entire custodial key retrieval process, the security gets compromised. This is different with the non-custodial multi-sig wallet.

Even though multi signature wallet’s key recovery process is slow relative to other types of wallets. With a multisig crypto wallet, the integrity and security of the wallet remain untampered. In the multisig wallet’s key recovery process, you are only required to provide 12 to 24 words recovery phrase, which is uniquely assigned to each and every owner of the wallet. Since multsig wallets are non-custodial, you’re not required to share your private keys.

Conclusion

Institutional and retail asset holders can leverage the limitless capabilities of a multi-sig wallet. These wallets are shipped with customization features enabling you to explore a wide range of practical applications. On top of that, a multisig wallet lets you set up your own security steps making your storage experience simple and more reliable.

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