What Are the Trade-Offs between ‘Hot’ and ‘Cold’ Storage in an MPC System?
'Hot' storage refers to key shards held online, allowing for fast, automated transaction signing, but with higher risk of cyber-attack. 'Cold' storage holds key shards offline, offering maximum security against online threats but introducing latency and operational complexity for transaction signing.
An institutional MPC system typically uses a hybrid approach, with a low-threshold hot shard for daily transactions and a high-threshold cold shard for large, infrequent transfers.
Glossar
Hot Storage
Accessibility ⎊ Hot Storage refers to cryptocurrency wallets that are continuously connected to the internet, providing immediate accessibility for the rapid execution of trades and transfers on exchanges and decentralized platforms.
Trade-Offs
Consideration ⎊ Strategic decision-making in quantitative finance, particularly concerning crypto derivatives, invariably involves weighing competing objectives such as maximizing alpha against minimizing execution latency.
Cold Storage
Storage ⎊ Cold Storage denotes the practice of securing private keys for cryptocurrency assets entirely offline, disconnected from any internet-enabled device, to provide the highest level of defense against remote hacking attempts.
Operational Complexity
Architecture ⎊ Operational Complexity within cryptocurrency, options trading, and financial derivatives stems fundamentally from the layered architecture inherent in these systems.
Mpc
Architecture ⎊ This abbreviation typically refers to Multi-Party Computation, a cryptographic technique enabling multiple parties to jointly compute a function over their private inputs without revealing those inputs to each other.