Why MPC Alone Is Not Enough for Enterprise Custody

MPC's core vulnerability isn't the key shards—it's the centralized server coordinating signatures. This creates a hot-wallet-like attack surface for hackers and a single point of administrative control for regulators.

• Risk: Compromise the orchestrator, compromise the transaction.
• Reality: Most 'decentralized' MPC wallets rely on a provider's centralized infrastructure.

MPC provides cryptographic security but zero built-in business logic. Enterprises must manually bolt on policy engines, creating fragile, custom code for approvals, rate limits, and compliance.

• Overhead: Requires integrating multiple external systems (SIEM, IAM, HSMs).
• Delay: Adds hours to days for simple treasury operations versus programmatic rules.

MPC wallets isolate funds by chain and vault. Moving assets for DeFi, staking, or cross-chain operations requires manual, signed transactions—locking capital in silos and missing yield.

• Inefficiency: No automated treasury management across Ethereum, Solana, Avalanche.
• Cost: Manual bridging and swapping incurs high gas fees and slippage.

The next layer combines MPC's cryptography with a decentralized settlement network and declarative intents. Think UniswapX or CowSwap for custody: define the 'what', not the 'how'.

• Security: No central orchestrator; execution via decentralized solvers (e.g., Across, Chainlink CCIP).
• Efficiency: Automated cross-chain liquidity aggregation and best-execution routing.

MPC nodes are software. A single compromised server running the signing ceremony can be manipulated to approve malicious transactions, bypassing key-splitting entirely. This is an orchestration attack, not a cryptanalytic one.

• Attack Vector: Malware, supply-chain compromise, or privileged admin access.
• Real Consequence: Silent fund drainage with valid cryptographic signatures.

MPC introduces operational fragility. Losing shards or administrators can permanently lock funds. Scheduled key rotations become high-stakes, manual procedures vulnerable to human error and coercion.

• Quorum Risk: Employee departure, hardware failure, or legal seizure of a shard holder.
• Rotation Overhead: Manual, multi-party ceremonies create windows of vulnerability and operational drag.

MPC shard holders are legal entities. A court can order them to reconstruct the key, nullifying cryptographic security. This is the legal single point of failure.

• Jurisdictional Risk: Shards held by entities in different legal domains are still individually compellable.
• Precedent: Similar to court-ordered seizure of multisig signers or exchange accounts.

MPC signs what it's told. Without an independent policy engine, it cannot validate transaction semantics (e.g., destination, amount, smart contract). This enables approval phishing and insider fraud.

• Limitation: Pure MPC cannot enforce "only withdraw to whitelisted address X" or "max $1M/day".
• Contrast: Hardware-based TEEs or policy-enforcing co-processors can evaluate context.

MPC generates a signature, but who authorizes it? Pure MPC lacks integrated governance for transaction approval workflows, leaving a critical gap between key shards and business logic.

• Requires integration with external policy engines (e.g., Fireblocks, BitGo TSS)
• Without it, you cannot enforce multi-user approvals or complex quorums
• Result: A technical key tool, not a custody platform

MPC secures the private key off-chain, but the on-chain transaction is immutable. An approved but erroneous or malicious transaction is irreversible.

• MPC does not provide transaction simulation or pre-signing risk analysis
• Enterprises need solutions like Fireblocks' DeFi Firewall or Coinbase's Asset Review
• Risk: Signing rights ≠ safety from smart contract exploits or address poisoning

True custody is a system. It combines MPC with hardware security modules (HSMs), geographically distributed sharding, and automated backup/recovery.

• Example: Coinbase Prime uses MPC + HSM clusters in Tier-4 data centers
• Key Benefit: Defense against both network and physical attack vectors
• Key Metric: >99.99% operational uptime and instant key revocation

Enterprises must prove fund control and transaction history to auditors and regulators. Raw MPC logs are insufficient.

• Requires immutable, tamper-proof audit logs for every key operation and approval
• Systems like CipherTrace or native platforms provide blockchain-level transparency for off-chain actions
• Without it, passing a SOC 2 Type II audit is impossible

MPC's cryptographic security does not equate to insured custody. Insurers require defined custody frameworks with clear liability structures.

• Pure tech providers (e.g., Sepior, Unbound) offer no insurance
• Full-service custodians (e.g., Anchorage, Fidelity Digital Assets) bundle $500M+ insurance policies
• Critical: Insurance requires proven operational controls beyond cryptography

Enterprise custody is a full-stack product: MPC + Policy Engine + HSM Infrastructure + Audit System + Insurance + Legal Framework.

• MPC is the cryptographic base layer, akin to AWS KMS
• Leading platforms (Fireblocks, Copper) build 10+ layers atop it
• Conclusion: Buying MPC is like buying a safe; you still need the bank vault, guards, and insurance.