Web3 wallets have become essential for anyone dealing with cryptocurrencies or blockchain-based applications. They allow users to store, manage, and transfer digital assets securely. With the rise of decentralized applications (dApps), the need for Web3 wallets has increased. In this guide, we will explore what Web3 wallets are, the different types available, and how to keep them secure.
What are Web3 Wallets?
Web3 wallets are digital wallets designed for interacting with Web3 applications, which are decentralized applications built on blockchain technology. They enable users to store and manage their digital assets, such as cryptocurrencies, NFTs, and other digital tokens.
Types of Web3 Wallets
There are three main types of Web3 wallets: non-custodial, custodial, and smart contract wallets.
Non-custodial Wallets
Non-custodial (aka, self-custody) wallets, also known as self-custody wallets, rely on a public and private key pair to provide users with full control over their assets. A public key is a unique identifier used to receive cryptocurrency or other assets on the network. It is generated from a corresponding private key, which is a long and complex number the user should keep secret. The private key is used to sign transactions sent on the blockchain, ensuring that only the private key owner can access and control the associated assets.
It is crucial to keep the private key safe and secure because losing access to it will result in the loss of access to the assets. Non-custodial wallets can be stored in browser extensions or mobile apps and are classified as hot wallets since they are connected to the internet. However, non-custodial wallets can also be stored in physical devices (e.g., Ledger, Trezor) and would then be considered a cold wallet since it has no tech connectivity and stays offline.
Custodial Wallets
Custodial wallets, on the other hand, are wallets where a third party, such as an exchange (e.g., Coinbase), manages the private keys on behalf of the user. These wallets generally require KYC (know-your-customer) and use the same type of recoverability features similar to your email provider. However, this comes with the requirement of trusting the third party with their private keys and assets. Additionally, these wallets may offer the same features that non-custodial wallets provide (i.e., interacting with smart contracts).
For more information on custodial and non-custodial wallets, check out this QuickNode guide.
Smart Contract Wallets
Smart contract wallets are managed by a smart contract on a blockchain network. On Solana, these smart contracts are referred to as programs so we’ll be using these terms interchangeably. These wallets are controlled by the logic outlined in the smart contract, which could require multiple signatures, effectively increasing security by providing a level of redundancy. Recoverability is another feature smart contract wallets offer. Users can use any arbitrary logic in the smart contract wallet to allow the recoverability of funds (e.g., two-factor authentication). Smart contract wallets also support batching transactions together (e.g., approve and transfer a token). These wallets are ideal for all entities, including individual users, businesses, or organizations that require multiple parties to approve transactions.
If you want to learn more about smart contract wallet security and how to keep it secure, check out this QuickNode guide.
Web3 Wallets: Which fits you?
The type of Web3 wallet that fits you depends on your level of expertise, the amount of control you want over your assets, and your trust in third parties. Non-custodial wallets are recommended for users who want complete control over their assets. Custodial wallets, on the other hand, are better suited for users who are new to the space and want a simple way to manage their assets. Smart contract wallets are ideal for businesses or organizations that require multiple parties to approve transactions.
Different Web3 Wallets Available
There are many Web3 wallets available today, each with its own features and functionalities. Here are some of the most popular Web3 wallets:
- MetaMask: A popular non-custodial wallet that allows users to interact with dApps on EVM-compatible blockchains (e.g., Ethereum, Polygon, Optimism, Avalanche, etc.)
- Phantom: A popular non-custodial wallet that makes it safe & easy for users to store, buy, send, receive, swap tokens, and collect NFTs on multiple blockchains (e.g., Solana, Ethereum, Polygon).
- MyEtherWallet: A non-custodial wallet that allows users to store and manage their assets on EVM-compatible blockchains.
- Trust Wallet: A non-custodial wallet that allows users to store and manage their cryptocurrencies on mobile devices.
- Torus: A non-custodial wallet that offers a simple and user-friendly interface for managing cryptocurrencies and digital assets. It uses a unique login system that allows users to sign in with their Google, Facebook, or other social media accounts, eliminating the need to remember complex private keys. Torus supports multiple EVM-compatible blockchains.
- Coinbase Wallet: A non-custodial wallet that allows users to store and manage their cryptocurrencies, including those not supported by Coinbase. Coinbase Wallet supports EVM-compatible blockchains such as Ethereum, Polygon, and non-EVM blockchains such as Solana.
- Coinbase: A custodial cryptocurrency exchange platform that allows users to buy, sell, and trade various cryptocurrencies.
- Binance: A custodial cryptocurrency exchange platform (one of the largest) that allows users to buy, sell, and trade various cryptocurrencies with low trading fees and advanced trading features.
- Safe(previously Gnosis Safe): A smart contract wallet that allows users to set up multi-sig wallets for added security. Safe has grown to support several EVM blockchains.
- Argent: A smart contract wallet that offers an easy-to-use interface and unique features, such as guardian accounts, allowing users to add trusted friends or family members to help recover their wallets in emergencies.
- Squads: A multi-signature wallet that helps teams manage various on-chain assets intuitively, securely, and in a decentralized way. Supported on Solana.
These are just a few of the many Web3 wallets available. It’s important to do your research and choose a wallet that meets your needs and provides the level of security and functionality you require.
Keeping your Wallet Secure
Web3 wallets hold valuable digital assets and are a target for hackers. To keep your wallet secure, here are some best practices to follow:
- Keep your private keys safe: Your private keys are the key to your wallet. Store them in a secure location and never share them with anyone.
- Use two-factor authentication (2FA): 2FA adds an extra layer of security to your wallet. Enable it whenever possible. Note this is mostly geared toward Custodial wallets.
- Keep your software up to date: Ensure your wallet software is always up to date, as updates often include security fixes.
- Use a hardware wallet: Hardware wallets are physical devices that store your private keys offline. They are considered the most secure way to store your digital assets.
- Beware of phishing attacks: Be wary of unsolicited emails or messages asking for your private keys or personal information.
By following these best practices, you can significantly reduce the risk of losing your digital assets to hackers. We also highly recommend reading this QuickNode guide – An Introduction to Crypto Wallets and How to Keep Them Secure for additional tips on keeping your wallet secure.
QuickNode and Web3 Wallets
QuickNode provides reliable and fast blockchain infrastructure for Web3 wallets, enabling them to interact with the blockchain quickly and efficiently. QuickNode offers API access on over 18 blockchains (and counting) and provides fast and reliable service for sending a transaction. Additionally, QuickNode provides data analytics and monitoring services, allowing you to analyze your Web3 wallet transaction data in real-time.
Final Thoughts
Web3 wallets are an essential tool for anyone interacting with blockchain-based applications. They provide a secure way to store, manage, and transfer digital assets while giving users control over their private keys. When choosing a Web3 wallet, consider your level of expertise, the amount of control you want over your assets, and your trust in third parties. By following best practices, you can keep your Web3 wallet secure and your digital assets safe.
FAQs
Q: What are Web3 wallets?
A: Web3 wallets are digital wallets designed for interacting with decentralized applications built on blockchain technology. They enable users to store and manage digital assets securely.
Q: What are the different types of Web3 wallets?
A: The three main types of Web3 wallets are non-custodial wallets, custodial wallets, and smart contract wallets.
Q: Which Web3 wallet should I choose?
A: The choice of a Web3 wallet depends on your level of expertise, the amount of control you want over your assets, and your trust in third parties.
Q: How can I keep my Web3 wallet secure?
A: To keep your Web3 wallet secure, follow best practices such as keeping your private keys safe, using two-factor authentication, and keeping your software up to date.
Conclusion
Web3 wallets play a crucial role in the world of cryptocurrencies and decentralized applications. They provide users with the ability to securely store and manage their digital assets. By understanding the different types of Web3 wallets and following best security practices, you can ensure the safety of your digital assets and have peace of mind while navigating the blockchain world.