Web3 wallets are an integral part of the blockchain ecosystem that allows users to interact with various decentralised applications (DApps), store cryptocurrencies and manage digital assets. Unlike traditional financial instruments, Web3 wallets provide an increased level of security, transparency and autonomy for their users.
Custodial and non-custodial Web3 wallets
Web3 distinguishes between two main types of wallets: custodial and non-custodial. These terms refer to the level of control a user has over their private keys, and therefore their assets. Understanding the differences between these types of wallets is important for choosing the right option for storing cryptocurrencies and other digital assets.
Custodial wallets
Custodial wallets are wallets whose private keys are managed by a third party, such as an exchange platform or storage service. Users do not control their keys directly, which means that they also do not have full control over their assets.
Benefits:
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Ease of Use: Custodial wallets often offer a simpler and easier to understand interface, making them accessible to novice users.
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Customer Support: Users can contact customer support if there are any problems with account access or transactions.
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Restoring access: In case of loss of access to the account, for example, when the password is lost, there is a possibility to restore it through the service.
Disadvantages:
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Security Risk: Storing keys with a third party increases security risks such as hacker attacks and insider threats.
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Dependence on third-party services: The presence of an intermediary increases the risks associated with bankruptcy or closure of the service.
Non-custodial wallets
Non-custodial wallets give users full control over their private keys and thus their assets. This means that the keys are stored directly on the user's device or in the user's personal software.
Benefits:
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Full control over assets: Users manage their funds and can initiate transactions themselves without intermediaries.
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Increased security: No centralised key storage reduces the risk of hacker attacks.
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Independence: Users are not subject to the policies or terms and conditions of third-party services.
Disadvantages:
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Security responsibility: All responsibility for keeping the keys safe rests with the user, which can be difficult for beginners.
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Recovery Difficulty: If keys are lost, it is virtually impossible to regain access to assets.
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Types of Web3 wallets
Web3 wallets are various solutions for storing and managing cryptocurrencies and other digital assets. They are categorised based on their functionality, level of security and ease of use. Let's take a closer look at each type:
Hardware wallets
Hardware wallets are physical devices that provide storage of private keys in a secure, isolated environment. These wallets are highly secure, as the keys never leave the device and are not at risk of online attacks.
Software wallets
Software wallets are installed on computers or smartphones and provide an interface for asset management. They may be susceptible to cyberattacks, but offer ease of use and quick access to assets.
Paper wallets
Paper wallets are the simplest way to store cryptocurrencies. Private and public keys are printed on paper and stored in a safe place. This method is considered one of the safest, but is inconvenient for frequent transactions.
Web wallets
Web wallets are accessible through a browser, making them convenient for quick transactions. However, they can also be vulnerable to online attacks because private keys are stored on a server or managed by a third party.
Mobile wallets
Mobile wallets are smartphone applications that allow you to manage your assets on the go. They are convenient, support various features such as QR code scanning, and offer an acceptable level of security.
Smart contract wallets
Smart contract wallets use smart contract code to manage transactions, which may include multi-factor authorisation mechanisms or conditions that must be met for a transaction to take place. They offer advanced security and customisation features.
Desktop wallets
Desktop wallets are programmes that are downloaded and installed on personal computers. They offer a high level of security and convenience, especially if they are not connected to the internet (cold storage).
Main features and functionality of Web3 wallets
Self-management
One of the key features of Web3 wallets is that they give the user full control over their private keys and, consequently, over their assets. Unlike traditional banking systems, where asset management is often in the hands of third parties, Web3 wallets function without intermediaries. This means that only the wallet owner has access to their funds and the authority to use them, ensuring a high level of security and privacy.
Integration with DApps
Integration with decentralised applications (DApps) is another important aspect of Web3 wallets. Users can interact directly with a variety of blockchain-based applications through their wallet. This includes games, financial platforms, decentralised exchanges and more. Integration with DApps extends the functionality of wallets, allowing users to not only store assets but also actively participate in the blockchain economy.
Support for multiple assets
Most Web3 wallets offer support for a wide range of cryptocurrencies and tokens. These include not only major currencies such as Bitcoin and Ethereum, but also many other altcoins, as well as tokens of ERC-20, ERC-721 (NFT) and other standards. This multi-asset support makes Web3 wallets versatile tools for managing and trading different types of digital assets. Users can easily switch between different assets and use them according to their needs in different DApps.
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How to choose the right Web3 wallet
When choosing a Web3 wallet, it is important to consider the following aspects:
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Security: Evaluate security mechanisms such as two-factor authentication and support for hardware wallets.
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Supported Assets: Make sure the wallet supports all the cryptocurrencies and tokens you plan to use.
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User Interface: Look for wallets with an intuitive interface that simplifies asset management.
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Reputation and Reviews: Explore user reviews and the history of the wallet company.
Popular Web3 wallets
Web3 wallets are an important tool for managing cryptocurrencies and interacting with blockchain platforms. Below is a list of the most popular and reliable Web3 wallets, each with its own unique features and advantages:
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Metamask: Known for its versatility and broad support for various blockchains. MetaMask offers a user-friendly browser extension and mobile app to easily interact with Ethereum and other compatible blockchains.
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Ledger: A hardware wallet that has earned the trust of users due to its high level of security. Ledger supports multiple cryptocurrencies and allows you to safely store keys offline.
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Trezor: This is a hardware wallet that is also known for its strict security measures. Trezor allows users to store keys in a physically isolated environment, making it one of the most secure options on the market.
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Trust Wallet: A mobile wallet that supports a wide range of cryptocurrencies and tokens. Trust Wallet is also integrated with various blockchains and provides access to DApps via an inbuilt web browser.
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Coinbase Wallet: An exchange-independent wallet from Coinbase that allows users to manage their private keys and store not only cryptocurrencies, but also digital collectibles (NFTs). It also supports multiple blockchains and provides direct access to decentralised finance (DeFi).
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Argent: This is a mobile wallet specialising in Ethereum and optimised for decentralised applications. Argent is characterised by the convenience of account recovery without the traditional seed-phrase and offers features such as limited withdrawals and automatic recovery through trusted contacts.
Web3 wallets play a key role in managing digital assets in the blockchain space. Choosing the right wallet and following security guidelines can help you manage your assets efficiently and securely. Investing in understanding and using these tools opens up new opportunities to participate in the decentralised economy and contributes to the digital age.
