Explaining Web3 Wallets

Web3 is going to bring many exciting benefits for users – and central to that is web3 wallets. Learn how wallets work and why you’re going to need one.

Web3 promises greater security, privacy, and autonomy for users. We're moving towards a world where individuals will own their identity – and big tech companies will have a much harder time collecting and selling our data.

But the set up required to access this new landscape can feel overwhelming. One of the things you will need to get started is a Web3 wallet, which is your all-access pass to the new landscape. Digital wallets help you take back control and secure your digital assets.

What is a web3 wallet?

A web3 wallet is a digital wallet used to store virtual assets, which may include non-fungible tokens (NFTs) and cryptocurrency. As with most web3 initiatives, web3 wallets give you direct control over your assets; there are no middlemen involved, and external parties cannot access your tokens. 

So, web3 wallets are quite different from, say, banks. Beyond storing your assets, these digital wallets can also be used to make transactions, including swapping or sending digital tokens.

Why you need a web3 wallet

In web3, wallets help users manage their digital assets, both digital currency (fungible) and NFTs (non-fungible). If you're looking to store or swap NFTs, purchase cryptocurrency, or navigate the web3 world in general, you'll need a web3 wallet. They're necessary to access various blockchains and manage assets.

Web3 wallets are designed to offer greater security and privacy. Not only do you have complete control over the wallet, but any blockchain transactions you make require authentication, so the chances of fraud are significantly reduced. It’s important to note that fraud still exists, so only interact with sites you trust and avoid signing any messages you don’t understand.

You'll also need a web3 wallet to access and use decentralized apps (dApps) and decentralized finance (DeFi). DApps operate on the blockchain, and DeFi is an emerging, secure financial technology that also leverages blockchain technology.

How a web3 wallet works

Web3 wallets are secure, decentralized digital wallets that leverage private key protocols.

Many web3 wallets are non-custodial

Non-custodial means that users have complete control and do not rely on third parties to store their digital assets securely. This means you don't have to give up your privacy and instead you remain anonymous. However, because no third parties are involved, you're also responsible for protecting your own assets.

Web3 wallets use a recovery seed

A recovery seed is exactly what it sounds like - it helps you recover digital assets if you lose direct access to your wallet's account. Non-custodial wallets like MetaMask can be set up from your browser directly, and during the setup process, you'll be asked to input a 'seed phrase.' If you ever lose access to your computer or web browser, this is the phrase you can use to get access to all your assets.

It's important to keep your recovery phrase secured offline. Storing it on your computer puts you at risk of hackers/malware acquiring it and using it to steal your assets.

Web3 wallets can be used to swap & send tokens

The traditional way of swapping tokens involves decentralized exchanges (DEXs), which facilitate secure transfers through non-custodial wallets. However, these exchanges don't guarantee the best prices, so people would refer to different decentralized exchanges to find the best deal. 

Wallets like MetaMask simplified this problem by allowing users to compare prices across DEXs directly from the platform, and make swaps for the best deals.

Web3 wallets provide access to various blockchains

Another reason why web3 wallets are gaining traction is that they are access-passes to blockchain technology, including decentralized applications (dApps). DApps are typically blockchain-based applications free from the constraints of centralized systems. 

Some of the most popular dApps are NFT marketplaces and exchanges, defi (or decentralized finance) applications (essentially financial products and services), and games. You'll need a web3 wallet because crypto assets are necessary to interact with most dApps. Users are asked to verify their identity via their wallets before proceeding to transactions.

Examples of web3 wallets

Some web3 wallets cater exclusively to specific blockchains, like Ethereum or Coinbase. But, there are blockchain agnostic digital wallet apps that let you store more diverse assets.

For Beginners: Rainbow

Rainbow is a beautiful mobile wallet designed for the Ethereum blockchain - the largest decentralized blockchain. It’s an incredibly user friendly option for beginners, with iCloud backup and an easy to use UI. Rainbow is supported on the web using WalletConnect, where you can easily scan a QR code to connect to dApps.

Since Ethereum is the largest blockchain, Rainbow users get access to a range of diverse dApps. Rainbow has recently added support for some of Ethereum’s most popular Layer2 networks like Polygon and Optimism. Rainbow wallet also comes with swap and send features that help users discover the best prices. You can buy cryptocurrency like Ethereum directly inside of Rainbow using Apple Pay.

Most Popular: MetaMask

MetaMask is one of the most well-known crypto wallets and is used to store crypto assets and tokens. MetaMask is a browser plugin that works with both desktop browsers; the extension is compatible with Google Chrome, Firefox, and any Chromium-based browsers. MetaMask also offers a mobile app for iOS and Android.

You can buy cryptocurrency like Ethereum directly inside of MetaMask, and the wallet comes with swap and send features that help users swap cryptocurrencies for the best prices.

Trusted Name: Coinbase Wallet

Coinbase is a leading cryptocurrency platform that launched its own web3 wallet, the Coinbase Wallet. The Coinbase Wallet is separate from Coinbase's crypto platform; the web3 wallet is non-custodial and can thus be used to access dApps. 

While most web3 wallets only let you send or receive crypto assets via addresses, Coinbase Wallet lets you send them via username. This lessens the likelihood of mistakes - as addresses are complicated and difficult to keep track of. Moreover, since Coinbase Wallet is associated with such an established platform, it supports credit and debit cards in over 90 countries, making it easy to purchase crypto assets and store NFTs.

Multi-chain: Trust Wallet

Trust Wallet is one of the most well-known web3 wallets and boasts over 10 million users. As one of the most developed platforms in this space, Trust Wallet caters to tokens of almost every kind, making it compatible with most blockchains. For this reason, it's referred to as 'blockchain agnostic.' 

Trust Wallet is a great option if you're looking for a wallet that supports diverse assets, to get the most out of the new decentralized web.

Honorable Mention: Phantom

Phantom is a user-friendly wallet for the Solana blockchain. Phantom makes it easy to buy SOL, trade tokens, and view your Solana NFTs. Similar to Metamask, Phantom has both mobile apps and browser extensions to access your wallet on the web and on the go.

Honorable Mention: Blocto

Blocto is an easy way to get started with Flow, an NFT focused blockchain which is great for beginners. With Blocto’s easy to setup email sign in, you can fund your Flow wallet and buy NFTs on Flow in minutes. Download their mobile app for access to your Flow wallet on the go, or when prompted on a Flow dApp click Sign in with Blocto, enter your email, then click the link sent to your inbox to connect. That’s it!

Conclusion

If you're interested in navigating the decentralized world of web3, you'll inevitably need a web3 wallet. It's not just necessary to store crypto assets and NFTs, but also to access decentralized apps (dApps). DApps present many exciting opportunities for innovation.

If you're torn between web3 wallets, Rainbow and MetaMask are great options to navigate the Ethereum network. 

The idea of only accessing one blockchain may seem restrictive, but Ethereum is highly developed, so you'll have plenty of opportunities to trade assets and use dApps. However, if you want to have limitless access to blockchains, then Trust Wallet might be a better choice.

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