Web3 wallets

A web3 wallet is a digital wallet made for interacting with decentralized applications, Web3 dApps. To securel store private keys for blockchain network access, and for managing digital assets like NFTs, smart contract tokens, and cryptocurrencies.

Users create an account and receive a private key or seed phrase. You need this key or phrase to access the account on the blockchain. Write down the private key or secret phrase, and store it securely offline.

Web3 wallets usually aim at self-custody. You have  full control over your assets with minimal restrictions. 

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A selection of Web3 wallets

In your day to day use of Web3, you can use any Web3 wallet you want. Here are some of the main Web3 wallets in use :

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Hot and cold wallets

When we talk about wallets, we often disgtinguish between hot and cold wallets, and custodial or non-custodial.

Online is hot, offline is cold,

Hot Wallet

A hot wallet (usually associated with software wallets) is always connected to the internet, making it less secure than cold wallets. Active traders often use them.

Hot wallets come in a few types: 

  • Desktop Wallets – For downloading and installing on your machine.  

  • Online Wallets – Online wallets operate in the cloud.  

  • Mobile Wallet – Mobile wallets are designed to run on smartphones.  

Cold wallet

Cold wallets are a secure way to store digital assets offline when you’re not actively using them. Many experienced crypto vets recommend using a cold wallet for long-term asset storage. Because they are offline, they are far less vulnerable to scams and theft.

Cold wallets come in two main types: 

  • Hardware Wallets – Trezor, Ledger. 

  • Paper Wallets – Paper wallets let you print and store your private key and public keys, usually in the form of QR codes. The private key is nowhere reachable through the web, so any funds stored on the account address are safe.

Custodial and non-custodial wallets

The famous crypto creed “Not your keys, not your coins” applies here.

With custodiality it is about who can control the funds. If you are the only one that can access and control the assets, the wallet is custodial. 

Custodial wallets are for instance exchange wallets. If you create a wallet on the exchange, they have the private key. And you don’t get that key. The exchange can shut down your account access and effectively take the funds from you.

With all exchange hacks and fraud and collapses, there are increasing regulations for custodial wallet sites.