Web 3.0 or web3 promises to bring in a new way of creating and consuming content on the internet, and you must have come across this term being used in several circles already. The decentralized Web, powered by blockchain and cryptocurrencies, ushers in greater transparency, privacy, security, and innovative monetization opportunities. And the entry into the world of web3 begins with a web3 wallet.
What Is a Web3 Wallet?
A web3 wallet is a digital wallet - either as hardware or software, that lets you store your digital assets in a non-custodial or self-custodial manner. The most important role of a web3 wallet (especially an offline hardware wallet) is to manage your private keys. The wallet holds your crypto assets in the account corresponding to your private key.
A web3 wallet, short for "web3-enabled wallet," is a digital wallet designed specifically for interacting with web3 applications, and decentralized applications (dApps) built on blockchain technology. Unlike traditional cryptocurrency wallets that primarily store cryptocurrencies like Bitcoin or Ethereum, web3 wallets offer broader functionalities.
Like your email address in the web2 space, your web3 wallet serves as your identity in the web3 area. In addition to managing your private keys, you can use your web3 wallet to access web3 products and services.
Web3 wallets function in a non-custodial manner, meaning you enjoy complete control and ownership over the digital assets you store in them. The private keys of your non-custodial wallet are your responsibility. Losing them could mean losing access to all digital assets stored in your web3 wallet.
The following are the essential concepts involved in a web3 wallet:
This long alphanumeric string is your wallet address. You can share your public key with others to receive crypto payments or deposits into your web3 wallet.
Think of the private key as a password. You need a private key to confirm all transactions from your web3 wallet. In addition, your private key is essential to access the crypto assets in your wallet.
The encrypted private key establishes ownership over your digital assets. This is why it is vital that you store your private keys and never share them with anyone else.
Seed Phrase or Mnemonic Phrase
If you ever lose your private key, the seed phrase (or mnemonic code) is a backup option to help you retrieve access to your web3 wallet and its assets. It is a randomized set of 12 or 24 words you must write down and store securely.
The seed phrase helps record the words of your private key. Therefore, it offers the same level of security as your private key. If locked out, your seed phrase can help you regain access to your web3 wallet.
Learn more about how to securely backup your crypto wallet's private keys.
What Can I Do with a Web3 Wallet?
Unlike crypto wallets, which primarily serve as a safe space to store or hold crypto assets, web3 wallets have many additional functions. Here's a sneak peek at the top use cases for web3 wallets:
Store and Manage Cryptocurrencies
Web3 wallets allow non-custodial storage of digital assets, giving you full ownership of your cryptos and their private keys. This method offers enhanced security, but storing your private keys and seed phrase is crucial to avoid losing access to your wallet.
Web3 wallets enable token swapping within their dApp interface, eliminating the need for an exchange intermediary. Some wallet dApps like MetaMask also allow you to purchase tokens directly using fiat or crypto, simplifying the process of buying and holding cryptocurrencies.
Earn Passive Income
Web3 wallets can help you earn passive income through various mechanisms, including staking and yield farming, NFT ownership, DeFi, and participating reward programs such as Browse-and-Earn, and Learn-and-Earn. They can also help you monetize and control your data in a decentralized and trustless manner and earn rewards by participating in DAOs.
Some proof-of-stake blockchains allow you to stake their native tokens directly through web3 wallets, e.g., Keplr, to participate in their consensus mechanism, offering an attractive way to earn passive income and support your preferred blockchain by making it more resilient.
Buy, Sell, and Store NFTs
One of the key differences between cryptocurrency and web3 wallets is the ability to store and manage NFTs. In addition to storing and managing your cryptocurrencies, Web 3.0 wallets also support NFTs. You can use your web3 wallet to buy or sell NFTs and securely store your NFTs and digital collectibles. You also need a web3 wallet to mint and sell NFTs as a creator.
Play Blockchain Games
Entering the lucrative world of Play-to-Earn (P2E) also requires you to open a web3 wallet account first. You can spend your cryptocurrencies to begin gameplay, purchase in-game NFTs, level up, and more from your web3 wallet. The earnings you enjoy through the gameplay will also be transferred and stored in the connected wallet.
Experience the Metaverse
Enjoy a truly immersive experience in the virtual worlds of the metaverse by connecting your web3 wallet to a metaverse platform of your choice. You can use the funds stored in your Web 3.0 wallet to sign up for and participate in various virtual events, shop, play games, buy virtual land, and develop it in the metaverse.
Create, Manage, and Join DAOs
Decentralized autonomous organizations (DAOs) are one of the most popular applications of web3 technology, harnessing the power of a collective community in making critical decisions. DAOs can be established for various purposes, bringing together like-minded people and empowering them with voting rights for making decisions. You need a web3 wallet to start your journey within a DAO - be it to form a new one, join an existing one, or participate in its voting mechanism.
Develop Blockchain Projects
Web3 wallets are essential for executing smart contracts as they hold the cryptocurrency asset used to pay gas fees or transaction fees on a blockchain network. As a result, developing a blockchain-based project such as a dApp needs you to have an active web3 wallet funded with cryptocurrencies. You can earn revenues for your work in the web3 wallet while also paying to execute smart contracts and operate your dApp or blockchain-based project.
Best Web3 Wallets
Now that you know all the applications of a web3 wallet, it's time to pick the right option you need to start your journey into the web3 world. Here are some of the top web3 wallets you can consider:
Undoubtedly the biggest name in the market, MetaMask stands out as one of the most popular Web3 wallets, renowned for its user-friendliness, extensive adoption, and its role as a bridge between users and the Ethereum ecosystem. As of September 2023, it is used by over 30 million users globally and connects thousands of dApps across Ethereum, Optimism, BNB Chain, Polygon, Fantom, Arbitrum, and Avalanche.
You can use your MetaMask wallet to swap ETH and ERC tokens, access DeFi services on platforms like Uniswap and Aave, buy, trade, and collect NFTs on leading NFT marketplaces like OpenSea, play blockchain games like Axie Infinity, and more. You can add an extra layer of security to your MetaMask hot wallet by connecting your hardware wallet with it and storing your cryptos offline.
MetaMask is accessible as a web app (browser extension) and a mobile app. It is a software wallet and follows the non-custodial approach.
Halo Wallet, formerly KuCoin Wallet, is a user-friendly and secure cryptocurrency wallet that offers multi-chain support, making it a versatile option for web3 users. This wallet has recently rebranded to become Halo Wallet, aiming to provide a more efficient experience for crypto enthusiasts. A gateway to the decentralized web, the Halo Wallet is a safe and easy-to-use platform to store your cryptocurrencies and NFTs.
Although a recent entrant in the web3 space, it has already seen its user base cross 10 million in the short period since its launch. Use your Halo Wallet to access dApps across the KCC and KuCoin ecosystems, Ethereum, Polygon, BNB Chain, and leading blockchain networks. Its user-friendly interface lets you trade crypto assets easily, play blockchain games, publish content on decentralized platforms, and trade NFTs. A key feature of Halo Wallet is that its penetration testing has been audited by Hacken, guaranteeing the security of your digital assets stored in this wallet.
Halo Wallet is accessible as a mobile app and is available for download on platforms like Google Play. This software wallet lets users carry their cryptocurrency holdings and access web3 features on the go. It follows a non-custodial approach, emphasizing user control and ownership of private keys and assets.
Trust Wallet is a highly regarded cryptocurrency wallet known for its versatility, security, and support for a wide range of cryptocurrencies and blockchains. It supports over 4.5 million crypto assets, including NFTs, across 65 different blockchains.
As of September 2023, more than 60 million users use Trust Wallet to manage their digital assets and access web3 services. It is available as a mobile app for iOS and Android devices and can also be downloaded as a web app on Chrome browser.
Trust Wallet is a software wallet functioning as a mobile application that users can install on their smartphones. It follows a non-custodial approach, where users have complete control over their private keys and funds. It also lets you buy cryptocurrency directly using your credit card. In addition, you can earn interest on holding cryptos in Trust Wallet, growing your crypto portfolio risk-free. Trust Wallet also supports NFTs on Ethereum and BNB Chain.
Phantom is a premier web3 wallet for the Solana blockchain, facilitating storage, transactions, swaps, and trades of tokens and NFTs. Phantom is primarily tailored for the Solana blockchain and is optimized for interacting with Solana-compatible decentralized applications (dApps). While it is specifically designed for Solana, it may support Solana-based assets and tokens.
By April 2023, Phantom had over 3 million registered users. The Phantom wallet extended its to the Ethereum and Polygon ecosystems in May 2023. It's accessible via a mobile app for iOS and Android and as a browser extension for Chrome, Brave, and other major web browsers.
Phantom falls into the category of software wallets and is a non-custodial wallet, which means users have complete control over their private keys and funds. Kudelski Security has audited Phantom, ensuring its robust security. Additionally, it runs a bug bounty program to detect and fix potential vulnerabilities, providing an extra layer of protection for your crypto assets on Solana.
Argent is a prominent web3 wallet facilitating seamless interactions with Ethereum and its dApps. Argent primarily focuses on Ethereum and its ecosystem. It supports a wide range of Ethereum-based assets, including cryptocurrencies, tokens, and NFTs. Ethereum's Layer-2 web3 wallet is powered by zkSync, offering 100 times lower transaction fees than Layer-1 Ethereum and extremely high transaction processing speeds.
Argent distinguishes itself with its user-friendly and security-focused design. It offers innovative features such as social recovery, making it easy to recover your wallet using trusted contacts in case of loss. Argent strongly emphasizes user security and offers biometric authentication and transaction confirmation features.
Argent is a software, non-custodial wallet available as a mobile app, making it convenient for users to manage their Ethereum assets on the go. Its mobile-centric approach aligns with the evolving mobile-first landscape of cryptocurrency management.
The Ethereum wallet has also partnered with leading DeFi protocols like Aave, Yearn, Lido, and Index Coop to offer up to 10% interest on your digital currencies. You can buy cryptocurrencies directly on its Layer-2 infrastructure using your card, bank transfer, or Apple Pay at low fees. Argent Wallet also lets you trade crypto tokens at low fees. Beyond DeFi, you can play games, participate in staking, trade NFTs, and interact with decentralized social networks with your Argent web3 wallet address.
Coinbase Wallet is a popular cryptocurrency wallet with secure storage for over 5,500 digital assets, including cryptocurrencies, tokens, and NFTs. It is compatible with multiple blockchain networks such as Avalanche, Fantom, Polygon, and Arbitrum.
As a software wallet, it enhances user experience in the crypto world by allowing secure storage, management, and exploration of various cryptocurrencies like Bitcoin, Ethereum, and Litecoin. It also features a built-in dApp browser for exploring the decentralized web, enabling interaction with decentralized applications directly from the wallet.
The wallet is accessible as a mobile app for iOS and Android devices and a web app on desktop browsers, offering flexibility in managing crypto assets. It is a non-custodial wallet, meaning users have complete control over their private keys and store their crypto assets directly on their devices, providing secure storage and management within their own wallets.
Ledger is a renowned web3 wallet offering a wide range of features for managing cryptocurrencies and NFTs. Available as a desktop, mobile, and web app, it provides flexible access to over 5,500 crypto assets, including Bitcoin and Ethereum.
Ledger's key advantage is its hardware wallet integration, offering enhanced security by keeping digital assets offline and safe from cyber threats. The Ledger Live app ensures user-controlled transactions and interactions with dApps when paired with a Ledger hardware wallet.
Beyond security, Ledger enhances user experience with real-time crypto price tracking, crypto trading, asset swapping, reward earning, access to over 500 coins and tokens, NFT collections, and essential DeFi services through Ledger Live.
The app also supports 15+ Web3 Apps, such as 1inch, Paraswap, Lido, and Zerion, facilitating portfolio expansion and interaction with various decentralized platforms. Trusted by over 4 million users, Ledger offers a secure, user-friendly, and comprehensive solution for digital asset management, making it a preferred choice among crypto enthusiasts.
Key Features to Consider When Selecting a Web3 Wallet
We have briefly introduced the best web3 wallets in the section above. And now, it's time for some decision-making by you. How do you know which is the right web3 wallet for you?
We've prepared a checklist that could help you pick the right option to suit your needs. Here are some critical factors to consider when finding a good web3 wallet:
The first key feature you need to consider is the wide range of features or functions you need your web3 wallet to offer. For this, you must prioritize your areas of interest in web3, including trading and swapping crypto tokens, earning passive income, investing in NFTs, playing games, and more.
Select a web3 wallet that integrates with the leading dApps in the categories you are most interested in and offers the most competitive features to enhance your experience. For instance, if you are interested in DeFi's bankless financial services, select a web3 wallet that supports low-fee token swaps, multiple blockchain networks, and integrates with leading DeFi platforms.
Another essential thing to decide is whether you want to explore the dApp ecosystem on only one blockchain network or if you wish to explore web3 services across multiple blockchains. If you want the latter, you must pick a good web3 wallet that supports more than one blockchain network.
A web3 wallet with multi-chain support is a good idea, especially as blockchain interoperability will become the next big thing to drive scalability in web3 technologies. Suppose you are comfortable with sticking only with Ethereum's ecosystem. You have more options, as most crypto wallets are designed to support Ethereum and its Layer-2 networks.
When selecting a web3 wallet, prioritizing privacy is essential. A trustworthy web3 wallet should employ robust measures to safeguard your confidential information. This includes the protection of your private keys, which are crucial for accessing and managing your assets. Ensure that your wallet offers state-of-the-art encryption and security protocols to protect your private keys from unauthorized access or theft.
Moreover, opt for a non-custodial wallet, meaning you retain complete control and ownership of your data and assets. Non-custodial wallets do not store your private keys on centralized servers, reducing the risk of data breaches.
Security is paramount when it comes to web3 wallets. To enhance security, consider wallets that have undergone third-party security audits by reputable organizations. Such audits provide an additional assurance that your assets and data are protected from potential threats and malicious attacks.
Furthermore, some software wallets offer biometric security features, like fingerprint or facial recognition, which add extra protection against unauthorized access. These biometric measures make it significantly more challenging for unauthorized individuals to gain access to your wallet and assets.
Learn more about the safest way to store your cryptos.
How to Create a Web3 Wallet
Creating a Web3 wallet is essential for accessing and managing cryptocurrencies and decentralized applications. Here's a general guide on how to create a Web3 wallet, with a specific example using MetaMask:
Example: Creating a MetaMask Wallet
Download and Configure Your Wallet: Start by visiting the MetaMask website and download the MetaMask extension for your web browser or smartphone app. Once installed, open the extension or app.
Create a New Account and Get a Seed Phrase: When you open MetaMask for the first time, it will guide you through the setup process. Click on "Get Started" and create a new account. You will be provided with a unique seed phrase, which is a series of words. This seed phrase is crucial for recovering your wallet if you ever lose access to it. Make sure to store it securely and never share it with anyone.
Obtain and Store Your Seed Phrase Securely: After completing the setup, you will receive your seed phrase again as a security measure. Write down this seed phrase and store it in a secure, offline location. Additionally, MetaMask allows you to create a secret backup phrase that can be used for account recovery. Confirm your seed phrase during this step.
Add Crypto Funds to Your Wallet: With your MetaMask wallet now set up and secured, you can start adding cryptocurrency funds. You can transfer existing cryptocurrencies to your MetaMask address or purchase them directly within the wallet, if supported.
Your web3 wallet, in this case, MetaMask, is now ready for use. You can explore dApps, manage your digital assets, and engage in the exciting world of blockchain technology.
Remember that these steps may vary slightly depending on the web3 wallet you choose, but the general principles of securing your seed phrase and setting up a strong password apply universally.
A web3 wallet serves as a critical gateway for anyone venturing into the decentralized realm of web3. It empowers you to engage with dApps, manage cryptocurrencies, and participate in various blockchain activities.
However, it's paramount to recognize that the choice of a web3 wallet should not solely revolve around features and privacy; security is of utmost importance. Emphasizing security is not merely a precaution; it's necessary in the web3 landscape, where threats can lurk in various forms. Protecting your private keys and seed phrases ensures that your journey into the innovative and transparent world of web3 remains smooth and free from the risks posed by malicious actors. Remember, the true potential of web3 can only be fully realized when underpinned by uncompromising security measures.