Introducing the dWallet Network: Composable Modular Signature Network with Noncollusive & Massively Decentralized dWallets

This post introduces the dWallet Network, a composable modular signature network, that is the home of dWallets, a new Web3 primitive and the first noncollusive and massively decentralized signing mechanism in Web3. dWallets are building blocks that builders on L1s and L2s can use to securely manage assets and implement logic across all of Web3.

Introducing the dWallet Network: Composable Modular Signature Network with Noncollusive & Massively Decentralized dWallets

Following the first wave of Web3 where Bitcoin introduced decentralized value, and the second wave with decentralized applications pioneered by Ethereum, the dWallet Network heralds a new wave in Web3, by introducing dWallets. In this introductory post we will delve into the motivation behind the dWallet Network, explore its groundbreaking technology, examine its security and design and uncover the multitude of possibilities it opens up in the Web3 landscape. dWallet is not just a network; it's a vision of a more integrated, secure, and user-centric blockchain future.

The State of Web3 and the Silo Problem

Web3 and blockchain represent the next frontier in technology infrastructure, where users enjoy unprecedented control and ownership over their data and digital assets. However, this promising landscape is not without its challenges, and has gone through many changes during its relatively short lifetime.

Web3 started with Bitcoin and a premise that was powerful in its simplicity - storing and transferring value without needing to trust and rely on 3rd party intermediaries. The Bitcoin solution revolves around two pillars, who went on to become the foundations of the entire Web3 space: User ownership and decentralization. User ownership was a solved problem, since a cryptographic method exists to prove a person's digital signatures exist

The fragmented nature of blockchain ecosystems, each operating within its own silo, has led to issues of interoperability, security, and user experience. Managing assets across multiple blockchains often involves complex and insecure bridging solutions, undermining the very principles of decentralization and user sovereignty that Web3 champions.

In the current state of Web3, builders have an impossible choice to make - they can remain confined to a signle blockchain and the user experience it enables, or they can deviate from the fundamental Web3 principles of user ownership and decentralization. We call that the Silo Problem and current state-of-the-art in cryptography can't offer a satisfactory solution.

The Inception of dWallets - Multi-Chain Instead of Cross-Chain

At dWallet Labs, The team behind the dWallet primitive, we have extensive cybersecurity and cryptography background, so naturally we looked at the Silo Problem from that perspective. In its essence the Silo Problem is rooted in access control - since authentication in Web3 is based on public key cryptography, the default access control is binary and relies on holding a private key.

The most obvious solution for access control in Web3 is going back to centralization, and abstracting away keys for the users. The obvious problem with centralized solutions is that they defeat the purpose of the decentralized web, and take away the most significant advantage of using Web3 in the first place - user ownership - and the collapses of giants such as Celsius and FTX served as a bitter reminder of that truth.

The motivation for a decentralized alternative led to the materialization of cross-chain solutions, such as bridges, cross-chain messaging and federated MPC. These solutions bypassed the basic authentication of a private key owned by the user in order to allow builders to operate across different chains. By doing that, cross-chain solutions sacrifice the native security assumptions and guarantees of blockchains, and offer collusive and/or centralized workarounds for builders.

Advances in access control within siloed networks, such as Account Abstraction, further highlighted the issue for builders who wished to provide the same level of user experience outside the confines of a siloed network - without sacrificing security. Even within the EVM ecosystem for example, operating across L1s and L2s still means a very limited user experience unless builders don't resort to collusive or centralized cross-chain solutions.

So in order to remain within the multi-chain paradigm, we had to come up with a new programmable building block that will generate a signature in a manner which is both noncollusive and massively decentralized - and we called that new primitive the dWallet - a dynamic decentralized wallet.

2PC-MPC - the First Noncollusive and Massively Decentralized Protocol

Multi Party Computation (MPC) was a natural solution for the creation of dWallets, since it allows generating signatures without relying on a single private key. However, The existing MPC signature protocols in Web3 suffer from several limitations, including issues with decentralization, scalability, and security. Traditional approaches often do not scale well with the increase in participants, struggle to support a high number of users and signatures per second, and have a rigid structure that when used in a network setting, allows for collusion and theft of user assets.

Since being noncollusive and massively decentralized were requirements of a dWallet, we needed to address these issues by implementing a nested MPC structure that requires participation from both a user and a network, with the network component requiring a two-thirds consensus among its validators. This structure not only prevents collusion and stealing of assets, but also supports a permissionless and flexible network model, overcoming the challenges faced by permissionless networks in implementing MPC.

The research breakthrough came in the form of the 2PC-MPC protocol, a pioneering MPC protocol designed to facilitate the generation of ECDSA signatures in a secure and noncollusive manner. The 2PC-MPC protocol ensures that ECDSA signatures, and in the future EdDSA and Schnorr too, cannot be produced without the participation of both the user and a threshold of the network's nodes. The network part of the dWallet can include hundreds or thousands of nodes, finally making noncollsuive and massively decentralized MPC a reality.

In order to do that, the 2PC-MPC protocol introduces significant technological advancements, such as moving from unicast to broadcast communication within the network's MPC. This shift enables the dWallet Network to accommodate a vast number of participants and handle a substantial volume of signature requests per second, vastly improving upon the limitations of existing algorithms that are restricted to a small number of participants and are inefficient in processing signature requests. The protocol's unique structure and use of techniques like batching, aggregation, and amortized decryption facilitate a scalable, decentralized, and noncollusive signing mechanism, positioning the dWallet Network as a groundbreaking solution for managing asset and enforcing logic across a multi-chain Web3 world.

Composable Modularity - Bringing dWallets to Web3 at Scale

The concept of "Composable Modularity" in the blockchain realm represents a significant evolution beyond the traditional debate between monolithic and modular blockchain designs. This innovative approach suggests a future where blockchain networks are not just categorized by their foundational architecture but are enhanced by specialized networks that add specific capabilities to both monolithic and modular systems. Composable modularity allows for the integration of various functionalities such as oracle services, privacy solutions, and more, into existing blockchain ecosystems in a decentralized and flexible manner. This marks a shift towards a more scalable, efficient, and interconnected blockchain infrastructure, capable of supporting a wide range of applications and use cases.

At the heart of this transformative shift is the dWallet Network, a standout example of how composable modularity can revolutionize blockchain functionality and access control. A dWallet on the dWallet Network can be controlled by a smart contract on another network and used as a building block by builders on other L1s or L2s to add noncollusive and massively decentralized signature capabilities to their protocols. This composable modularity of the dWallet Network expands the capabilities of existing smart contract network, allowing protocols to manage assets and enforce logic across all Web3.

Composable modularity in the dWallet Network is implemented through light clients running on the dWallet Network, that can be used to prove that a smart contract (for example on Ethereum) controlling a dWallet approved a signature. For a signature to be generated by a specific dWallet, both the user and the dWallet Network must both participate, and the dWallet Network will participate based on the logic of the smart contract controlling that dWallet.

So for example, if a Bitcoin transaction was approved by an Ethereum smart contract controlling a dWallet, the Ethereum light client on the dWallet Network can be used to prove it was approved, leading the dWallet Network validators to sign the partial signature for the dWallet Network share, which combined with the user's partial signature will provide a fully signed Bitcoin transaction controlled by an Ethereum smart contract. The dWallet Network is expected to launch with an Ethereum light client implementation, with other light clients of other networks to follow.

Use Cases of dWallets

The advent of dWallets introduces a myriad of groundbreaking applications in the blockchain space, promising to redefine the paradigms of digital asset management, decentralized finance (DeFi), and secure multi-chain interoperability. These new Web3 building blocks leverage the unique capabilities of the dWallet Network's noncollusive and massively decentralized signing mechanism, enabling use cases that were previously unattainable. Here we mention only a few use cases that dWallets enable, and we can't wait to see what the dWallet Network community will come up with in the upcoming weeks and months:

Decentralized Noncollusive Custody. By utilizing 2PC-MPC and the first noncollusive massively decentralized MPC, dWallets provide the first infrastructure for secure multi-chain decentralized custody solutions. This approach eliminates the dependence on a single or a small number of third parties, which was a significant limitation of the first generation of MPC solutions. The result is a more robust and trustless system for managing digital assets.

Multi-Chain DAOs. With dWallets, decentralized autonomous organizations (DAOs) can now manage assets across multiple networks in a completely decentralized way, without being limited to the chain they are formed on. The access control mechanism of the DAO can now be applied across all of Web3, and will even include controlling other DAOs, or transferring entire DAOs, finally connecting DAOs to more real world scenarios.

Interoperable Lending Protocols. The dWallet Network takes the concept of lending and borrowing in DeFi to the next level. Through dWallets, assets like BTC can be used to secure loans across different networks, pioneering the concept of multi-chain asset collateralization. This opens up new avenues for liquidity and capital efficiency, allowing users to leverage their assets more effectively across the blockchain landscape.

Multi-Chain Order Books. With dWallets, order books on a specific blockchain are able to fulfill orders involving any asset on any blockchain, expanding the horizons of DeFi. Traders can engage in complex financial instruments across various blockchains, leveraging the inherent security and interoperability of dWallets to access a broader range of assets and markets.

Universal “Restaking” with BTC. This use case exemplifies the flexibility and power of dWallets in protocol security and network participation. Users can leverage BTC, or any other asset, to secure protocols on different chains - similar to Ethereum restaking - simplifying the process of bootstrapping new protocols with established assets. This not only enhances security but also fosters a more interconnected and resilient ecosystem of blockchain networks.

Gaming Digital Asset Sharing. dWallet open new economic models in the gaming industry. With dWallets, players can lend, borrow, and share access to digital assets under specific conditions, such as time-bound and value-constrained agreements. This capability introduces novel ways for players to interact with and benefit from in-game assets, enriching the gaming experience and creating new opportunities for monetization and engagement.

These and other applications of dWallets illustrate the transformative potential of this technology, promising to unlock new possibilities for digital asset management, decentralized finance, and securely connecting Web3 in a multi-chain world. By enabling secure, noncollusive, and efficient interactions across blockchain networks, dWallets pave the way for a more integrated, innovative, and inclusive Web3 ecosystem.

Conclusion

The introduction of the dWallet Network represents a seminal moment in the evolution of Web3, marking a significant departure from the limitations of the past towards a future rich with possibility and interoperability. With the unveiling of dWallets, the network not only addresses the pressing "Silo Problem" but also redefines the landscape of digital asset management, decentralized finance, and blockchain interoperability. Through the innovative 2PC-MPC, the first noncollusive and massively decentralized protocol, dWallets offer a scalable, secure, and user-centric approach to a multi-chain world. The concept of Composable Modularity, embodied by the dWallet Network, further enhances this vision, enabling to remove the barriers and expand the capabilities of existing smart contract network with an unprecedented level of integration, security, and flexibility across the Web3 ecosystem.

As we explore the vast potential applications of dWallets, from next-gen decentralized custody and natively interoperable DeFi to universal restaking and beyond, it's clear that the dWallet Network is poised to catalyze a new wave of innovation in Web3. These use cases not only showcase the technical prowess and versatility of dWallets but also highlight the network's commitment to upholding the foundational principles of decentralization and user ownership. As the dWallet Network moves through testnet and mainnet launches, it invites builders, innovators, and visionaries to join in shaping a more connected, secure, and decentralized digital world. The journey ahead is filled with opportunities to transform how we interact with blockchain technology, manage digital assets, and engage with the burgeoning Web3 space. The dWallet Network stands at the forefront of this new era, ready to unlock the full potential of Web3 and foster a truly interconnected digital future.