Overview of web3 wallets

Web3 Wallets

Your gateway to web3, dapps, tokens, and more

Intro to Web3 Wallets

Web3 Wallets have set a new industry standard in creating new ways to own and monetize our content, identity, and assets as we move on towards the next generation of the internet. Simply put, Web3 wallets are a way to use hardware or software not only to access funds, but to effortlessly allow you to interact with decentralized applications, serve as a gateway to bankless financial services, collect NFTs, create on-chain identity, collaborate with communities, and provide substantially more use cases beyond the scope of the traditional wallets we have today. 

Just like how people have a physical wallet to store paper money, these wallets help store access to your digital currency instead. In addition, Web3 wallets are capable of storing digital assets such as NFTs and enable users to interact with Decentralized Apps (dApps). This is done all without the necessity of a middleman involved. 

Wallets don’t actually store the cryptocurrency, but they store the information required for access to your funds which are digital cryptocurrencies. 

A crypto wallet has three main components:

  • Public Key: This links to an address where you can send and receive transactions. 
  • Private Key: Must be kept secret and undisclosed. This is used for signing new transactions and enables access to funds.
  • Seed Phrase: Used to generate multiple private keys. Act as a root key, giving access to the rest of the keys and addresses in a user’s wallet. This can also create new private keys.

In Web3, several types of wallets exist within the space. Each has its favorable use cases and may be useful depending on your intention of managing your data and funds. It’s ideal to try and see which type of wallet works best for you. 

Hot wallets and cold wallets

Hot Wallets

Hot Wallets are generally referred to as software wallets because they are hosted on devices that have access to the internet and cryptocurrency network. They are more convenient than other types of wallets due to their ability to store, send, receive, and view tokens. Hot wallets are considered the highest in utility when it comes to Web3 wallets.

Since hot wallets are connected to the web, they’re open to more hacks compared to cold wallets. 

Desktop Wallets

Desktop wallets simply are downloaded as an application to our laptop or desktop. That means it is executed locally in the machine. They are considered the safest type of hot wallets available.

Web Wallets

Web wallets are installed on someone else’s computer or server. It allows people to interact via a browser interface. Therefore, it isn’t necessary to download or install anything on a device. It consists of the exact same features as desktop wallets, using the same blockchains and block explorer to search blocks and transactions. 

Mobile Wallets

These are very similar and work much like desktop wallets, except are designed specifically as mobile apps for smartphones. 

This gives users access convenient access to their funds at the palm of their hands. Mobile wallets tend to be more primitive compared to desktop apps due to limited space and the use case for simplicity.

Cold Wallets

Cold wallets tend to be a safer alternative to store cryptocurrencies because of no connection to the internet. This is because there is a physical medium to store the keys offline. This method makes cold wallets increasingly resistant to hackers, which is known as cold storage. This is specifically useful for long-term investors.

Hardware Wallets

Hardware wallets are physical electronic devices (often resembling a USB device) that use a Random number generator (RNG) to generate public and private keys. This is considered one of the safest alternatives because of its ability to hold public and private keys in the device without any connection to the internet. Therefore, access to your cryptocurrencies will be offline. Using hardware wallets for cold storage enables users to have more security and prevents hackers from accessing their funds.

As such, hardware wallets are most suitable for long-term investing and storage because they tend to be less accessible. Its main use case is for ensuring a high amount of security for large sums of money not allocated for constant usage.

Paper Wallets

A paper wallet is a piece of paper consisting of which a blockchain address and private key are physically printed out. These keys are printed out as QR codes. People can send funds by scanning QR codes.

Usage for paper wallets isn’t commonly used today and is often discouraged due to its fundamental flaws. One of these flaws is that paper wallets can’t send partial funds and can only send the entire balance all at once.

Web3 Wallets on Centralized Exchange (CEX) vs. Decentralized Exchange (DEX)

Centralized and decentralized exchanges have operated in parallel and occupy an important role throughout digital currencies. Although Decentralized Exchanges have not had their popularity until recently, they have played an increasing role today. With the rise of Defi enabling a new breed of financial products, it’s crucial to know how wallets play a role within the ecosystem.

Standard Crypto Exchanges

Within an exchange, your wallet is likely to be a hot wallet and custodial for facilitating faster trades. A benefit is that it’s easier to access and trade seamlessly with the traditional username and password configuration. You also have the option to withdraw crypto using your exchange-hosted private keys. 

However, that also means relying your assets on a centralized entity as they have control over your private keys. More reputable crypto exchanges store the majority of funds outside of transactions in cold hardware wallets to ensure these funds are secured and offline. Some exchanges go beyond and insure potential losses against hacks.

Decentralized Exchanges

Decentralized exchanges enable non-custodial wallets to be used. This allows the user to maintain full custody of your private keys and funds. Many people are shifting to a non-custodial wallet because it eliminates the need for a third-party intermediary. Being non-custodial mean that there are no limits or restrictions set by fees, withdrawals, and more.

Having no reliance on a third party means more responsibility for the user to manage their own keys and wallet. If you haven’t taken any precautions to regenerate your wallet, you could lose your funds.

Top Picks for Cryptocurrency Wallets

There are a wide variety of Web3 wallets currently out in the market. Most of them are free to download and set up. Although the entire DeFi and Web3 ecosystem is fairly new, the popular and best-used wallets have set a great foundation for creating a fair and open internet.

1. MetaMask

Without a doubt, MetaMask is the most popular wallet currently used in Web3. With ~21 million monthly active users, its user-friendly interface enables the ability to interact with the blockchain while having account back-up with a seed phrase. Metamask allows users to purchase ERC-20 tokens directly through the application itself and gives you control of your private key, therefore being non-custodial. It’s also open-source and supports trading on other custom chains like Binance Smart Chain or layer 2 solutions like Polygon. Metamask gives its users more control over their public and private keys. Finally, Metamask can connect to most decentralized apps today due to its popularity and large development community. 

Since Metamask is an online wallet, there is a greater risk of being hacked compared to cold wallets due to its functionality online. While Metamask does not track your information, the browser you use could be collecting user information about how much you interact with the Metamask extension while compromising your privacy. In addition, Metamask only supports Ethereum and other ETH-based tokens.

2. Coinbase Wallet

If you were ever curious about cryptocurrencies, chances are you’ve heard or been introduced to Coinbase. A good reason behind the popularity of Coinbase Wallet is because of Coinbase, the largest U.S.-based cryptocurrency exchange. The non-custodial wallet is not used as a centralized exchange but used to transfer assets from accounts. Keep in mind that Coinbase Wallet is a separate product from the wallet users typically use for interacting with Coinbase. Lastly, it has a proven assurance of security and leverages features like biometric security or a PIN for safeguarding your assets.

The wallet only supports a limited number of digital assets like Ethereum ERC-20 tokens, Bitcoin, Dogecoin, Litecoin, DAI, Ripple, XRP, and more. In addition, Coinbase Wallet supports a variety of ETH Layer-2 solutions including Arbitrum, Avalanche C-Chain, Binance Smart Chain, Optimism, and Polygon. The wallet does come with high compliance features such as KYC rules due to the company’s policies. Just like Metamask, it isn’t the safest alternative out that because your crypto is online.

3. Trust Wallet

A multi-asset mobile wallet, it’s one of the mobile wallets that supports a wide range of cryptocurrencies and assets. It has become a single platform that allows multiple different chains, making it by definition blockchain agnostic. Trust wallet allows staking and returns from earning held digital assets while being non-custodial. Despite the offering in a wide array of features, the wallet doesn’t charge any wallet, swapping, or dApp fees.

As of now, there isn’t a desktop or web wallet available for users. Users have expressed concerns about cashing out their money and no documentation was provided alongside the wallet itself. Trust wallet is also considered a “hot wallet”, making it still vulnerable to hacks.

4. Zerion

Zerion is an intuitive mobile-first web3 social wallet and investing tool that enables anyone to manage their DeFi and NFT portfolios. Zerion stands out in the ecosystem because it allows users to connect their non-Zerion wallets (including Ledger hardware wallets) and manage their portfolios – making it a must-have web3 wallet.

Zerion’s built-in trading and bridging aggregator across every major blockchain also helps users find the best deals across all their devices, be it using their web-app, mobile-apps, or iPad app. Additionally, Zerion's social features enable users to follow other people's wallets, receive push notifications on NFT drops, and track their favorite assets.

Zerion shares many of its tools to help other builders. Zerion's Websocket API, which is built on Alchemy, lets developers integrate the whole of DeFi into their applications without running their own node infrastructure, and is used by wallets like Rainbow Wallet. Zerion’s DeFi SDK, a set of open-source smart contracts, makes it easier to trade across networks, query assets, and interact with major DeFi protocols.

Zerion has processed over $1.5B in transaction volume, seeing $5M traded per day on average with a median trade size of $1,000!

5. Argent

Argent comes in with a mobile-first and user-friendly approach when it comes to the Defi landscape. They provide layers of security compared to other wallets currently in the market. Argent also gives out interest on assets lent by users through decentralized finance. It serves as a great wallet for Ethereum and ERC-20 users while providing slick UI that makes sense within the Ethereum ecosystem. Lastly, they natively integrate dApps and protocols into their app to enable capabilities such as lending and borrowing directly. 

Argent doesn’t have a platform for desktop and computer users. It only supports mobile apps for iOS and Android for now. It only serves Ethereum based applications and tokens and there is an upfront network fee to pay when you first create a wallet. This could be a deal-breaker when trying out crypto wallets for the first time.

6. Rainbow

Rainbow is another non-custodial wallet solely for Ethereum. Just like Argent, Rainbow can support dApps on the Ethereum network to provide capabilities like executing swaps straight from the application. Rainbow does not hold assets on behalf of its users, making it non-custodial for users to control. A neat feature is that Rainbow allows users to display their NFTs and other digital assets in the application. Rainbow wallets have the slickest user interface and experience when it comes to Ethereum wallets.

Rainbow wallet is considered a hot wallet, which means there is a higher risk of being hacked compared to cold wallets in general. Therefore, it should be a priority to ensure you have backed up the wallet data file and seed phrases regularly. 

7. Trezor Model T

Often known for developing the first hardware wallet for cryptocurrencies, an LED display is used as an easy-to-use interface in addition to a PIN to access the wallet. Even more, security is added when the device prompts the user to 2-factor authentication to verify purchases. The wallet aims to implement every official cryptocurrency in the system and has implemented 1600 cryptocurrencies so far.

A drawback to the secure wallet would be that it doesn’t have a beginner-friendly interface compared to other hardware wallets. Although it is user-friendly, Ledger has the upper hand when it comes to the user experience, especially if users first purchase a hardware wallet. The Trezor Model T is also quite expensive which could be a downside.

8. Ledger Nano S

The Ledger Nano S, an affordable cold wallet, is a great way to get your feet into hardware wallets to ensure your private keys never leave the device and stay safe offline. In addition, it supports more than 1,100 tokens and has an easy setup and installation process, making it quick and easy to have a foundation established to keep your crypto secure.

Although the wallet supports a wide variety of tokens, the Ledger Nano S has limited storage space for crypto apps. The small display on the wallet isn’t touchscreen and is controlled by manual buttons. The wallet overall isn’t as mobile-friendly as the other options out in the market.

9. Ledger Nano X

Ledger Nano X is among one of the most popular hardware wallets out in the market alongside Trezor. Its best paired with the smartphone app called Ledger Live. The app allows you to view your balance with or without the device at your convenience. Not only does the Nano X provide Bluetooth, but you aren’t required to use a USB cable to confirm transactions, which eliminates another roadblock towards simplicity. 

This hardware wallet provides a sleek, modern look that supports more than 1,800 tokens, including Ethereum and ERC-20 tokens. With its compatibility with a variety of tokens and well-established security, the only downside would be that it is still relatively expensive compared to other wallets.

10. Exodus

Exodus has created the space when it comes to desktop wallets. Exodus is a software-based hot wallet that has a few distinct features, like having a built-in exchange. You can buy and sell assets straight from your wallet without transferring funds to an exchange or brokerage. Exodus wallets also provide a wide variety of cryptocurrencies, including niche tokens as well. Overall, it is one of the best desktop wallets out there.

Security isn’t the greatest in Exodus due to the fact it doesn’t have two-factor authentication, which is now standard practice in the industry, but still provides a recovery phrase and a built-in backup feature. Fees tend to be higher than other wallets because the Exodus wallet is designed to process transactions as quickly as possible.

11. Phantom

Phantom currency holds the best Solana Wallet in its current ecosystem. In a Phantom wallet, you can manage crypto and NFTs, stake, swap tokens, and have access to your private keys. Since it is lightweight and non-custodial, it also is available on several browsers with a beginner-friendly interface. Phantom is also currently in development on an Ethereum wallet containing the same features. Like Metamask, you can connect it to your Ledger if you do have a hardware wallet. 

Instead of paying fees in Ethereum like the other wallets we’ve talked about, as of now, you’ll need to pay transaction costs or gas fees in SOL. Although the wallet is limited to the Solana ecosystem, the fees will be extremely low because of the Solana blockchain and its capabilities to perform many more transactions. Phantom is still a relatively new wallet and will need to be more tested against its competitors. 

12. Frame

Frame is an Ethereum wallet optimized to focus on macOS, Windows, and Linux. It provides a hot wallet that serves as a desktop and web wallet. Frame has some unique perks like verifying names on Twitter using the extension or displaying gas on the menu bar. With its simple user experience and seamless design, it's easier to send assets across active chains.

As of right now, Frame is only in beta which means you could encounter bugs and errors over time. Frame also does not have a mobile wallet as of now. With improved functionality, we’ll likely see Frame become more relevant in the upcoming future.

13. Glow

Glow wallet is one of the most simple mobile wallets to use. Throughout the app, you can send, receive, and swap directly on the Solana blockchain. Glow wallet clearly renders your transactions so that you can see exactly what’s happening. Just like the Rainbow wallet, you can explore and browse NFTs conveniently as well. Coming soon, you’ll be able to pay at in-person retailers with Solana pay, a unique feature that recently came out from Solana Labs. Overall, the wallet removes complexity and serves to be secure and joyful.

The wallet currently does not serve as a web wallet or desktop wallet. It’s also new in the wallet space compared to existing players in the market. However, it has huge potential to do well as it continues to innovate the experience.

14. Apex

The Apex wallet is a new Ethereum wallet that offers in-app, wallet-to-wallet messaging. Potential use cases for in-wallet messaging are securely sending messages to friends, speaking with specific NFT holders, or communicating to members of a shared DAO.

In addition to in-app web3 messaging, Apex also provides security features to blur your wallet's contents, a simple user interface, and colorful sections for viewing NFTs.

Final Thoughts

Regardless of which wallet you choose, it’s important to back the wallet data file and seed phrases regularly as loading access to your crypto can be detrimental. Overall, software wallets tend to be more convenient and we’ll continue to see a majority of crypto wallets innovate over time. Hardware wallets are the most secure alternative to provide safe and offline access to funds.

Supernode footer