One of the tremendous benefits of the new web3 internet phase you’ve heard so much about is the decentralization of finance (DeFi)- this wasn’t available in past internet generations (web 1.0 and web 2.0). As you well know, web3 promises a far much better Web experience and in the cryptoverse, it has brought about the launch of the web3 wallet.
This type of wallet comes with new ways to profit from your digital assets, protect your identity, and also to move beyond the regular crypto wallets that merely stores crypto tokens. Web3 wallet offer much more- multiple decentralized applications (DApps), lending, token exchange, and staking.
However, for newbies, venturing into the cryptoverse may seem like an uphill task given the technicalities it always involved. But with the development of the web3 internet age, these complexities are gradually diminishing- beginners may not have much to worry about anymore as the web3 wallet offers a simpler way of transacting and storing digital assets.
Web3 wallets are quite fitting for the new internet generation. In this article, we’ll discuss why you need a web3 wallet, but first we shall explore the different types of web3 wallet available.
TYPES OF WEB3 WALLET
Hot Wallets: Hot wallets can only be accessed online. Given their ease of use, they are commonplace. It earned the name, “hot” wallet because digital assets are electronically stored on it. With hot wallets, you can easily transact assets on this wallet.
Hot wallets are further categorized into two:
- Mobile wallets
- Web-based wallets
- Desktop wallets
Mobile wallets- As the name suggests, they are best wallet for nft designed for mobile devices. They are very handy, and you can easily transact digital assets with a QR code- you can use them on the go. However, they are vulnerable to malware infection and can be disrupted by viruses.
Examples of mobile wallets include Coinomi, and Mycelium.
Web-based wallets- The name tells it all. These wallets can only be accessed online. The private keys that guarantee the safety of the wallet are kept on the web. This makes it susceptible to cyber-attacks. In terms of wallet security, they are the least.
They are ideal for fast transactions and making little investments. Examples of web-based wallets include Coinbase and MetaMask.
Desktop wallets- These wallets are software installed into PCs used to hold crypto tokens. Having an anti-virus also installed is a necessity as connection to the internet poses a security risk. It’s safer to store your digital assets on a desktop wallet than on an exchange.
Desktop wallets are one of the best ways of storing digital assets as they ensure anonymity, privacy, and no intermediary. However, regularly backing up your computer’s data is necessary to ensure your assets’ safety.
Examples of desktop wallets include Bitcoin core, Electrum, and the likes.
Cold Wallets: As opposed to the hot wallet, these wallets store digital assets offline. It’s also a hardware wallet. Given its offline feature, it stays secure from online breaches and hacks. However, it could be less convenient to keep the hardware safe given being physical.
More so, unlike the hot wallet, it’ll be difficult for you to transact or make purchases on the cold wallet given its hardware feature. You’ll need to connect it to a computer, and send the required amount to a hot wallet before making payment- these are the major downsides of this wallet.
An example of a cold wallet is Ledger Nano X.
WHY YOU NEED A WEB3 WALLET
Unlike traditional crypto wallets, the web3 wallet stores and transacts Non-Fungible Tokens (NFTs), offers access to multiple DApps and it also allow users interact with different blockchains. Also, users can explore the web3 space via an in-built browser.
The web3 wallet also has an improved security and anonymity system. Given the required authentication before access is granted, it guarantees users are the only ones able to make changes in their wallets. This helps curtail fraud by a considerable amount.
Web3 wallet options offer safe and decentralized banking as there are multiple DApps running on a blockchain that provides a safe and stable financial system.
WEB3 WALLETS: CENTRALIZED EXCHANGE (CEX) VS DECENTRALIZED EXCHANGE (DEX)
FYI, you must make a distinction when creating a web3 wallet. Why? Because it could either be centralized (CEX) or decentralized (DEX).
CEX Wallets: These wallets are built on centralized exchanges such as Kraken. And users can store, send and receive crypto tokens. However, the tokens featured on each wallet depend on whether or not the exchange supports them.
DEX Wallets: These wallets are built on decentralized exchanges such as IDEX or EtherDelta. They also grant users access to send, store and receive tokens. Their feature tokens also depend on the exchange.
CEX VS DEX
You have to choose between the CEX wallet and DEX wallet.
Centralized exchanges typically host hot, non-custodial wallets. This means the private keys and seed phrases are kept on the exchange. Though it’s still for you, but you don’t have total control over your wallet.
Once an exchange gets hacked, many people lose their digital assets due to the centralization system. Centralization demands you entrust the security of your assets with just one entity which could be considerably risky.
To minimize the potential risks involved, many crypto exchanges keep the bulk of their funds in cold hardware wallets. This ensures its safety to some extent.
Unlike centralized exchanges, decentralized ones typically use non-custodial and cold wallet- meaning your private keys and seed phrase are yours to keep, you are in total control of your assets, and you are the only one with access to your private keys.
As much as this ensures you are in full control of your wallet, it also means you alone are responsible for your assets’ safety. So, being super-careful is a MUST.
Web3 wallet options are the best crypto wallets to own right now. They hold numerous opportunities for crypto enthusiasts and traders in the cryptoverse. Web3 has made transacting digital assets less technical and at its core is the web3 wallet.
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