Summary
- Seed phrase–based self-custody remains the only trust-minimized and protocol-native model with deterministic key control across chains.
- MPC and TEE custody architectures on the other hand introduce opaque trust surfaces, legal entanglements, and systemic failure modes incompatible with Bitcoin’s (and most other cryptocurrencies) threat model.
- Seed phrases enable air-gapped security, human-verifiable recovery, and sovereignty by design, while outsourced key management centralizes risk.
- TEE + SSO custody relies on external infrastructure (e.g., Google, AWS) and is vulnerable to state and insider compromise, firmware downgrade, and deplatforming.
- Businesses, individuals and enterprises should prioritize native seed phrase control to meet regulatory requirements, support advanced user workflows, and uphold the ethos of decentralized finance.
Seed‑phrase superiority
Seed phrases, as defined inBIP‑39 and used within the BIP‑32 deterministic wallet framework offer:
Security
Offline generation — Seeds can be securely generated on an air-gapped hardware wallet or entropy source, removing exposure to internet-based attack vectors. Air-gapped signing — Seed-derived keys can sign transactions on cold devices (e.g., QR-based workflows) without ever exposing private material to online systems. No trusted third parties — No reliance on custodians, key shares, or cloud infrastructure; the user retains full cryptographic control end-to-end. Minimal attack surface — A seed phrase stored offline has no open network interface, in contrast to online MPC or cloud-based TEEs.Sovereignty
Censorship resistance — Seed holders can sign arbitrary transactions, including sanctioned or politically sensitive ones, without API intermediaries or account freezes. Permissionless access — Keys can be imported into any standards-compliant wallet without vendor approval, identity checks, or software dependencies.Recoverability
Human-readable backup — 12 or 24 words can be written on paper, etched in metal, or committed to memory; no proprietary storage scheme or quorum mapping is required. Deterministic derivation — All wallet addresses (legacy, SegWit, Taproot) derive from the same seed via BIP‑44, BIP‑84, or BIP‑86—removing the need to back up individual keys.Interoperability
Cross-chain compatibility — One seed can control assets on Bitcoin, Ethereum (EIP‑2333), Solana (via derivation adapters), and others. Open standards ecosystem — Supported by virtually every major hardware wallet, software wallet, and protocol-native recovery tool.Limitations of MPC & TEE Custody
| Criteria | Seed Phrase | MPC | TEE (3rd‑Party SSO) |
|---|---|---|---|
| Single Point of Compromise | Yes (user error) | No, but quorum leakage risk | Yes (enclave + SSO account) |
| Recovery Complexity | Simple (12/24 words) | High (quorum restoration, device sync) | Extreme (SSO reset = key loss) |
| Air-Gapped Signing | Fully supported | Not possible | Not possible |
| Transparency of Trust Model | Open-source standards | Opaque (vendor-defined quorum logic) | Opaque (firmware blobs, proprietary APIs) |
| Latency / Performance | Instant (local sign) | Moderate (network round-trips) | Low (but centralized bottleneck) |
| Cross-Chain Support | Universal (BIP‑32, EIP‑2333, etc.) | Limited per-chain support | Minimal outside Bitcoin |
| Legal Attack Surface | Minimal (user-controlled) | High (custodial responsibilities, OFAC pressure) | High (cloud subpoena + SSO terms of service) |
| Regulatory Implications | Often non-custodial (FinCEN, MiCA) | Frequently custodial (key control shared) | Custodial under most frameworks |
| Interoperability | Open standards | Vendor-specific protocols | Cloud-platform specific |
| Resilience to Vendor Failure | Fully portable | Depends on quorum vendor uptime | Google/AWS deplatforming = asset loss |
Threat Analysis: TEE + SSO
TEE + SSO custody relies on external infrastructure (e.g., Google Login) and inherits their systemic threat surface:- Insider Risk: SSO account compromise (via SIM swap, phishing, or rogue admin) grants access to the TEE session and key material.
- Firmware Supply Chain: TEEs are not immutable; vendors can deploy signed firmware updates that exfiltrate secrets under duress (e.g. Intel SGX attacks).
- TEE maintenance TEEs are not easy to maintain, update and upkeep. They are prone to irreparable CPU bugs fixable only by changing them.
- Rollback Attacks: TEEs can be downgraded to vulnerable firmware versions unless strict anti-rollback protections (e.g., eFuse fuses) are enforced, which is rarely audited externally.
- Cloud Deplatforming: SSO-linked key access can be suspended or deleted unilaterally; deleting user access to assets (see: Google account terminations without recourse).
- Opaque Auditability: Users cannot inspect the internal behavior of TEE modules or validate key residency, breaking the “Don’t trust—verify” ethos. Even if remote attestation is available, it’s difficult to prove that the user receives the actual correct one.