Cold wallets, multisig, MPC, HSM: what kind of theft does each of these 4 terms protect against? A clear explanation using Blockstream’s new custody solution this week as an example
Different kinds of theft call for different protections. Many people treat these 4 terms as synonyms for “more secure,” but each one addresses a different part of the problem.
The example: On November 13, Blockstream announced an institutional custody solution with French technology and cybersecurity company Thales. The two companies have been working together for two years. The key change, in a nutshell: run the entire MPC signing protocol inside Thales’ hardware security module (HSM), so key material never leaves the hardware during signing. They also use FROST threshold signatures: several parties produce a signature together without ever reconstructing the complete private key.
Here’s how the example compares with the 4 terms:
1. Cold wallet: protects against “remote theft over the internet.” Private keys are generated and signatures are produced on an offline device, so a hacker would first have to get physical access to it. The drawback is that it’s slow: someone has to retrieve the device for each signature.
2. Multisig: protects against “losing one key and losing everything.” For example, if 2 out of 3 keys are needed to move funds, losing or having one key stolen won’t be enough to compromise them. The drawback is that the rules are written on-chain, where everyone can see them, and transactions are more complex.
3. MPC: protects against “the complete private key being stored in one place.” The private key is split into several parts from the start and stored on different machines. When signing, the parties run a round of calculations, while the result looks like a regular single-signature transaction on-chain. The drawback is that the protocol is complex and the machines have to communicate repeatedly—and those machines are often connected to the internet.
4. HSM: protects against “keys being copied off a server.” It’s specialized hardware: keys can be used but not exported. What Blockstream has done here is address the weakness of point 3 with point 4: MPC calculations take place inside the HSM, not on an ordinary server.
Blockstream CEO Adam Back put it more plainly to Cointelegraph: common MPC protocols are complex and require a lot of interaction, making them difficult to use for truly offline cold storage. As long as a device is connected to the internet, even with a firewall, there’s a risk it could be compromised or someone could obtain login privileges they shouldn’t have. His exact words were: “Complexity is the enemy of security.”
What does this have to do with retail investors? The solution is for institutions, so you don’t need to buy it. But you can put the same idea into practice today:
1. Keep large amounts of crypto that you plan to hold long-term in a hardware wallet. Write down the recovery phrase by hand and store it offline. Don’t photograph it, save it to cloud storage, or send it to any AI or customer support agent.
2. Keep the funds you trade with daily in a hot wallet or on an exchange, and only keep enough there for the week.
3. Enable a withdrawal whitelist and security keys for your exchange account. Disable withdrawal permissions for API keys.
The rule of thumb is simple: is the device connected to the internet when signing, and does the complete private key ever appear on a single machine?
Follow me for case-study lessons at 16:15. Each time, I use a real-world example to explain one concept.
#钱包安全 #冷钱包 #MPC #Education