Coinbase Wallet--MPC

Group : 9

Date : 30/11/2022
Outline
1 Background

2 Technology

3 Competitor

4 Benefits and Risks

5 Regulation
/01 Background
Background

Kucoin
$250million

2018
2011-2014
Coincheck hack
Mt.Gox
in Japan
$460million
$500million

Security, self-custody,
recoverability, interoperability
/02 Technology
What is Coinbase wallet

Different from Coinbase, which focuses It helps user take control of

on core brokerage and exchange their cryptocurrencies, NFTs, DeFi
businesses, Coinbase Wallet, launched activity and digital assets. It can also
in April 2017, is a self-hosted multi- be used to lend out crypto assets
currency wallet Ethereum wallet and and earn interest.
Ethereum browser application
What is MPC
Accuracy &Privacy:
The private
information held by multi-party computation
the parties cannot
be inferred from
the execution of
the protocol.

MPC is an important
encryption security measure
that enables multiple parties
– each holding their own
private data – to evaluate a
computation without ever
revealing any of the private
functional model
data

submit their assets to get the answer

without revealing their information
What is MPC wallet
A much more sophisticated way of
authenticating multiple signatures, cross-
chains by performing multi-party calculations
on private keys under the chain. In simple
terms, a private key is broken into multiple
pieces and the pieces are handed over to a
decentralized network for computation and
encryption.

• no single person or machine controls the

private key entirely

• jointly generate a public key by combining

the shares

• without exposing shares between the

parties
/03 Competitor
MPC wallet--Zengo

Features
ZenGo is a of ZenGo
keyless mobile
•cryptocurrency
Smooth user interface
wallet developed by
•Israel-based
Buy and KZen
sell within
Networksapp
–a
•company that buildson
Earn interest products for the
holdings with no
blockchain space with a strong focus
lock up
on security and user interface. ZenGo
was the first crypto wallet to support
MPC for consumers.
MPC wallet--Zengo

Coinbase wallet ZenGo

Set up function Top down Bottom up

Security Lower Higher

Supported More Less

currencies

Compatibility High Low

Kinds of Wallets
Conventional Wallets Ledger is a hardware wallet, a cryptocurrency wallet which stores the
user's private keys in a secure hardware device. The main principle be
hind hardware wallets is to provide full isolation between the private
keys and your easy-to-hack computer or smartphone.

This is a type of traditional wallet. They use the form of key, but the
disadvantage is that the key is easy to be lost or stolen, the account
security is low, and there is a single point of failure.
 Linen
• Bulletproof Security
Smart Contract Wallets Using a smart-contract, your crypto wallet is secured using 3 keys.
You lose one? You can still access your wallet. Someone steals one?
They still can't access it.
• Simple Keys Management
One key is stored in your cloud, one in your mobile device, and one
in Linen’s secure server infrastructure.
• Seamless Wallet Recovery
Seamlessly recover your wallet using your cloud drive, email, and
phone number.
/04 Benefits and Risks
• Coinbase Wallet related risk & benefits
• MPC wallet related risk & benefit
• Possible social and economic impact
Benefits and Risk – Coinbase Wallet Related

Safe from Coinbase but danger in

no loss compensation
• Coinbase has no keys, so no shadow banking

• Also, no responsivity

• If money is stolen, no compensation

Benefits and Risk – Coinbase Wallet Related

2
All eggs in one basket bringing
trade convenience and risks
• Coinbase wallet is a collection of multi-
currency accounts
• manage over 500+ digital assets
• convenient to trade
• if one asset has a bug, it may affect others
Benefits and Risk – MPC Wallet Related

Benefits Risk

• Reduce the chance of forgetting your keys • Off-chain Accountability

users do not need to maintain the keys themselves Off-chain rules and signatures obstruct transparency
prevent property losses brought on by users losing
keys. • Audit and Integration Difficulties
The MPC algorithm is neither standardized, nor it is natively
supported by institutional security devices.
• The MPC wallet is safer
As opposed to a smart contract wallet • Losing keys if a key holder is attacked
the third-party platform is attacked
The key is divided and controlled, which is more key is lost or partially lost
secure than standard wallets.
Potential Social & Economic Impact

• Increase the risk of Coinbase bankruptcy

• Endanger the stability of the financial system
Potential Social &Economic Impact

Coinbase and
Infrastructure
risk other crypto
in the entire cryptocurrency
ecosystem assets it hosts

20
Increase the risk of
Coinbase bankruptcy
1. it is likely to affect users' confidence in Coinbase
in case of bugs and crises in Coinbase wallet

2. Coinbase Wallet has no deposit insurance

A Bankruptcy
FTX
run
Coinbase‘s critical position

global and systematic

Coinbase manages $223 billion of Market share is about 30% as of this month (based on the transaction
assets ， volume), which is similar to the FTX volume (pink).
Ranking 3rd
Potential Social &Economic Impact——refer to FTX

• trigger systematic risks and chain reactions in the currency circle, cryptocurrency enter a colder
winter
may affect the future of cryptocurrency
drag down the development and evolution process and path of the broader market

• Customers and investors suffer heavy losses

huge losses to famous institutional investors
BlackRock Fund, Morgan Stanley and Renaissance Technologies

• American regulators are forced to further strengthen the supervision of cryptocurrencies and
digital assets
No comprehensive regulatory framework for cryptocurrencies or other digital assets
/05 Regulation
Regulation
Why it needs to be regulated?
The MPC Wallet stores part of the customer key. This technology makes
the exchange a centralized exchange. They also act as a custodian,
where they hold the customer's money (fiat and crypto) and trade on
the customer's behalf. In an interview, Markovich (2022) said that there
are issues with potential fraudulent activities on a centralized
exchange. It should be regulated in order to protect customers and
market integrity. The FTX collapse is an example of what can happen if
a centralized exchange is not regulated.
The FTX Collapse
FTX has a really bad management:
• Alameda Research, a subsidiary of FTX, uses
customer deposits from FTX for its trading activities.
• The customer's cryptocurrency deposit is not
shown by FTX on their balance sheet.
• As an investment firm, Alameda Research used too
much leverage.
• They (through Alameda Research) provided related
parties with a $4.1 billion loan, with their own CEO
Sam Bankman-Fried receiving $1 billion of that
amount (SBF).
• The majority of the assets owned by Alameda
Research are FTT tokens (coins published by FTX).
The FTX Collapse - A Need for Regulator

Does regulator know this?

No. At the moment, there is no regulatory body overseeing cryptocurrency

exchanges and wallets. Regulators are still working out how to control
cryptocurrency.

FTX's fraudulent activity is disclosed by other parties (the community and its
competitors)..
Thank you for listening