What is a web3 wallet and which one is best for me?
A web3 wallet offers an interface, allowing you to trade, transfer and manage digital assets, and interact with blockchain apps and services.
Web3 wallets are a user’s key to the blockchain — letting you access and interact with decentralized applications, store digital assets (like cryptocurrencies and NFTs), and much more.
In this blog post, we’re going to dive into everything you need to know about web3 wallets. We’ll cover what a web3 wallet is, what the different types of wallets are, and why they are all important in enabling accessibility to the blockchain. We will also briefly go over how to get started with whichever option suits your needs (or those of your users) best.
What is a web3 wallet?
A web3 wallet (or crypto wallet) is a digital or physical store of your private keys. The private key of each account grants the owner access to manage cryptocurrency and blockchain-based assets, like NFTs at a specific blockchain address. A web3 wallet also typically offers an interface, allowing you to interact with blockchain apps and services—but not necessarily!
What are web3 wallets for?
Web3 wallets can be for many things, but some of the most popular use cases include:
Interacting with DeFi apps
web3 wallets are your key to interacting with defi apps, allowing you to swap, stake and lend crypto through decentralized exchanges and protocols.
Accessing blockchain games
Many blockchain games will need you to create a web3 wallet to access their in-game currencies, tokenized items and creator economies. In other games, such as virtual worlds and metaverses, you may even have the chance to own a piece of the game’s map as an NFT!
Staking cryptocurrencies
Without a web3 wallet, you won’t be able to stake cryptocurrencies , either through native staking or other mechanisms such as pooled or liquid staking. By staking crypto, you can grow your holdings simply by locking up your tokens—something which is impossible to do without a web3 wallet.
Buying and selling NFTs
To access most NFT marketplaces, you will need a web3 wallet. Most NFT marketplaces are compatible with a range of web3 wallets including hot wallets, hardware wallets, and often smart contract wallets too.
Participating in DAOs
To take part in a decentralized autonomous organization (DAO) you will need to have a web3 wallet. Your web3 wallet will be the key to managing your governance tokens, deciding when and where to cast your votes to influence the future of the organization.
Amassing cryptocurrencies and digital assets
Whether you want to hold ETH, collect NFTs or buy into the latest memecoin, you’ll need a web3 wallet
Launching a crypto token
If you want to launch a crypto token, you’ll definitely need a web3 wallet. And with thirdweb, you can launch an ERC-20 token or organize an NFT drop with ease!
Now you know all of the things web3 wallets are used for, let’s dive into how they work
How do web3 wallets work?
When a user creates a web3 wallet, they typically receive a seed phrase. This is like the master key to that wallet. From the seed phrase, they can generate a new public and private key pair for each account. Each time the user signs a transaction, they must do so with their private key. This proves to the system that they own the assets stored at the address with the corresponding public key.
What are “private keys” and “public keys” in web3 wallets?
A private key is a unique code that is generated for each account in your wallet. Without a private key, it is not possible to access or transfer the digital assets stored in that account. It is used to sign transactions that are sent to the blockchain, and it is only known to the owner of the digital assets.
Each private key has a corresponding public key, with which it keeps a cryptographic link. This allows other users on the network to find your account and send you money, without worrying about potentially revealing your private key. Your public key is also used to create your blockchain address, a user-friendly identifier for your crypto account in your web3 wallet.
What are wallet addresses for web3 wallets?
This wallet address can also be tied to a decentralized name service — making it easier for others to remember and interact with your web3 wallet’s public key. For the Ethereum blockchain, for example, you can register an .eth domain to your wallet through the Ethereum Name Service (ENS). In this way, someone is able to send a digital asset to your wallet by “addressing” it to your .eth domain, rather than your public key — a hard-t0-record string of randomized numbers and letters.
What are the different types of web3 wallets?
Web3 wallets are not all built the same, and nowadays, there are more options than ever for users to access and interact with the blockchain depending on their needs.
To understand this further, let’s look at the different types of web3 wallets, what their use cases are, and why they’re important:
Custodial Wallets
A custodial wallet is a type of web3 wallet in which a third-party, such as an exchange, holds and controls the private keys on behalf of the user. This means that the user does not have full control over their funds. The third-party, such as the exchange, retains the full rights to the account. This also means that the user is not solely responsible for the security of their funds, but also the third party.
Email Wallets
Email wallets are a subsection of custodial wallets, and they have gained significant traction recently due to the frictionless user onboarding and adoption that they enable for web3 products.
Email wallets allow users to sign up for, log into, and create web3 wallets using their email addresses — making it very easy for users to use blockchain-based apps without any prior crypto experience. Because of this, many companies opt for custodial email wallets, taking care of security and the blockchain complexity for users that are unfamiliar with, or do not have, a traditional web3 wallet.
Unlock smart wallets for your app with thirdweb Connect →
Non-custodial Wallets
A non-custodial wallet is a type of web3 wallet in which the user holds the private keys and has full control over their funds. This means that the user is solely responsible for the security of their funds and no third-party, including the wallet provider, has access to them.
Non-custodial wallets are considered to be more secure than custodial wallets, as they eliminate the risk of the funds being compromised or lost due to the actions or security breaches of a third-party. Non-custodial web3 wallets can be software (desktop, mobile, and web) or hardware wallets.
Hot Wallets
A hot wallet is a type of web3 wallet that is connected to the internet. This allows for easy access and management of the funds stored on the wallet, but also makes it more susceptible to hacking and other security threats. Hot wallets are typically used for the storage of small amounts of cryptocurrency that are frequently traded or spent. There’s also a distinction to be made between browser wallets, desktop wallets and mobile wallets (though some can be accessed on both).
Browser wallets
A browser wallet is a type of web3 wallet that operates as a browser extension using a browser such as Chrome or Safari. These hot wallets allow users to store, manage, and trade their cryptocurrency directly from your browser.
These web3 wallets are very convenient but considered less secure than hardware wallets as they are connected to the internet and can be vulnerable to hacking, malware or phishing attacks.
Mobile Wallets
A mobile wallet is a type of web3 wallet that is designed for use on a mobile device, such as a smartphone or tablet. These hot wallets allow users to store, manage, and trade their cryptocurrency directly from their mobile device.
Mobile wallets are convenient to use as they allow the user to access their funds at any time and place, but they are considered less secure than hardware wallets as they are connected to the internet and can be vulnerable to hacking, malware or phishing attacks.
Desktop Wallets
A desktop wallet is a type of web3 wallet that is installed on a computer or laptop. These hot wallets allow users to store, manage, and trade their cryptocurrency directly from their desktop or laptop computer. Typically you’ll have to download the wallet application and install it on your device.. Desktop wallets are considered to be more secure than online wallets, but less secure than hardware wallets as they are connected to the internet and can be vulnerable to hacking, malware or phishing attacks.
Cold Wallets
Cold wallets are web3 wallets which store private keys offline. Typically when people use the term “cold wallet” they are referring to a hardware wallet, but they aren’t the only cold web3 wallets.
Printed Private Keys
Paper wallets, which are simply printed private keys, were popular in the early days of crypto. These cold wallets keep your private keys safe from online threats, but are less convenient for long term storage since they are susceptible to loss and damage.
Hardware wallets
A hardware wallet is a type of cold web3 wallet that stores private keys in a physical device. This offline storage method provides a high level of security for the funds stored on the wallet, as it is much more difficult for hackers to access the funds. Of course, as they are physical devices, you will also want to choose a trusted manufacturer, as a hardware wallet without the appropriate security measures may be vulnerable to physical hacking.
Smart Contract Wallets
Most conventional web3 wallets are Externally Owned Accounts (EOAs), meaning they are controlled by a private key (which you can think of as a password). Smart contract wallets, on the other hand, are built on top of smart contracts, which enables security functionality that EOA wallets do not have. This is made possible by a concept called account abstraction.
If a web3 wallet is controlled by a smart contract, then it is programmed by that smart contract’s code. This makes it possible to program features into the wallet like social recovery, transfer limits, and account freezing for added usability and security.
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Multi-Sig (aka Multi-Signature) Wallets
Multisig wallets are smart contract wallets that require more than one signature to authorize a transaction, enabling added security for the funds or assets stored within a wallet. Multisig wallets are managed by trusted third parties — like friends, family, or coworkers — that need to approve a transaction for it to go through.
This makes it harder for a bad actor to hack the assets in your wallet, since they would need to have access to each party’s wallet address (or the majority, if the multisig wallet requires a majority amount of signatures).
Pros include an added layer of security, but cons include the need for multiple parties to sign off on transactions, which can slow down the process.
Examples of smart contract and multisig wallets
MPC Wallets
Multi-Party Computation, or MPC, allows two or more parties to compute without revealing any private information to one another.
In web3, MPC wallets replace a wallet’s private key with multiple, independently-created “secret shares.” This allows a safe self-custodial option for users since you do not need to worry about losing your private key or seed phrase.
Examples of MPC Wallets:
List of Top 10 Web3 Wallets
There are many web3 wallets that users can choose based on their needs, each with its own unique features. Some of the most popular examples by usage include:
Coinbase Wallet
Coinbase offers both a non-custodial hot wallet, called Coinbase wallet, and a custodial exchange wallet you automatically receive when using its exchange. Coinbase is one of the biggest crypto exchanges in the world, and thus offers plenty of options for on-ramping and accessing staking and yield services. It’s also very beginner-friendly.
MetaMask Wallet
Launched by ConsenSys, Metamask is one of the most popular non-custodial wallets of all time. It is a hot wallet that comes in two forms: as a browser extension and mobile app. It’s also the web3 wallet of choice for countless games, NFT marketplaces and DeFi apps in the EVM ecosystem.
Phantom Wallet
Phantom is also a non-custodial hot wallet with a big following available as a browser extension and mobile app. While it was designed as a Solana wallet, it now supports the Ethereum and Polygon networks.
Rainbow Wallet
Rainbow Wallet was created by Rainbow Labs Inc and is also a non-custodial hot wallet. However, it is only available as a mobile app. As an Ethereum-focused web3 wallet, it is specifically designed to provide a user-friendly interface to interact with EVM chains.
Trust Wallet
Trust Wallet, another non-custodial hot wallet, was acquired by Binance in 2018. It only comes as a mobile app version, but despite that is known for supporting a large range of networks and assets.
Rabby Wallet
Rabby wallet is one of the newer web3 wallets on the market that offers a security-focused alternative to Metamask. As a non-custodial hot wallet, it does store private keys while connected to the internet, but also displays risk details before a user signs each transaction. It’s also popular with DeFi users as it is also compatible with hardware wallets.
Safe (formerly Gnosis Safe)
Safe (formely gnosis safe) is a non-custodial multi-sig wallet. This means each authorized transaction with a Safe wallet will require multiple signatures Safe is a web3 wallet designed specifically for managing teams, DAOs, and large funds.
Argent Wallet
Argent wallet is another non-custodial web3 wallet, but it sets itself apart as a smart contract wallet. This means it can handle more complex functions than most web3 wallets, such as social recovery and gasless transactions. These types of web3 wallets don’t even require a seed phrase!
Ledger
Ledger is a hardware wallet manufacturer that makes web3 wallets in physical form. They have several different models the size of USB-drives, and some with a larger E ink screen they claim is the first secure touchscreen in existence. Ledger hardware wallets are some of the most popular physical wallets on the market.
Trezor
Trezor was created by SatoshiLabs and represents one of the first hardware wallets in the industry. Trezor is highly respected for its security features and straightforward interface. The company also has dedication to open sourcing in line with the web3 ethos.
Which web3 wallet is best?
The best web3 wallet for you will depend on your specific needs and preferences:
If you’re looking for maximum security and long-term storage for large amounts of cryptocurrency or valuable digital assets, a hardware wallet, such as those Ledger and Trezor offer, is likely the best option.
If you need a wallet that is convenient to use and accessible from anywhere, a hot wallet will be more suitable. Options include Coinbase Wallet, MetaMask, Phantom, and Rainbow Wallet.
For organizations and more technical use cases that require even further security, there are solutions like smart contract wallets and multisigs.
If you want to implement these kinds of web3 wallets in your app, get started with thirdweb Connect!
Web3 wallets: Your Key to Accessing the Blockchain
We hope this blog post has helped you understand what the different types of web3 wallets are, what they’re used for, and which ones may be the best for you depending on your needs. Now all that's left is to start exploring onchain!
FAQ
How do I get my money out of a web3 wallet?
To get money out of a web3 wallet, you will need to use an off-ramping service. Off-ramping platforms are most common on centralized exchanges, such as Binance or Coinbase. On-ramping and off-ramping services are also KYC-compliant entities with registered headquarters. This means you will likely need to verify your identity to withdraw your funds via these services.
How to keep your web3 wallet secure
Keeping your wallet secure depends on which type of wallet you use, but if you have a non-custodial wallet you must protect your seed phrase and your private keys. As long as you record your seed phrase in a safe, physical location, no one should be able to access it. But your private keys are more complicated. If you use a hot wallet, your private keys are vulnerable to online threats. That’s why crypto users with value to protect often choose a hardware wallet, as it protects from malware.
However, interacting with blockchain apps and services can pose risks for hot wallets and hardware wallets alike. That’s why creating multiple web3 accounts in your wallet, and controlling the apps and permissions you set is important. If you’re interacting with untrusted platforms, consider using a new account each time.
Can I share a web3 wallet with multiple people?
Yes, you can share a web3 wallet with multiple people: it’s called a multisig wallet. Multisig wallets allow you to create transactions which can only be authorized by a minimum number of people. This allows you to create treasuries and funds that can be shared.
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