In this article, I will dive into web3 wallets. What are they? How they are related to web3? What are their types? and so on. Let’s get started.

What are Web3 Wallets?

Web3 wallets store cryptocurrencies. They are like the wallets we use to store fiat currency. But they are more than just for storing currency.

A single wallet can login into many dApps, unlike in Web2 where for each website we have a separate login system.
It can be used to buy/sell/trade cryptos.

When we create a wallet, a recovery phrase is generated, and an account is created. The recovery phrase cryptographically derives the private key and public address of the account. We can add further accounts, their private key and public address also get derived through the recover phrase.

⚠️ So your RECOVERY PHRASE is access to all your cryptos in your accounts.

☠️ NEVER SHARE YOUR PRIVATE KEY or RECOVERY PHRASE ( SEED PHRASE) WITH ANYONE. ☠️

The public address is something you can share to send/receive crypto. It is like a bank number that people write on their check to send you money. ~~Thus the name is public~~.

Wallet Terms

We discussed a few terms related to wallets like public address, private key, recovery phrase, etc. But be super careful as a little negligence could drain all your cryptos.

Recovery Phrase / Secret Phrase / Seed Phrase
- It is a series of 12, 24 long human readable words in order. It serves as a backup of your private key, in case you lost your wallet. It is the ultimate master key of your wallet.
- NEVER SHARE IT WITH ANYONE
- The below seed phrase was taken from an online site, hence invalid. just for visualization of how it looks like.
Private key
- It is generated cryptographically from the seed phrase.
- It is a string of letters and numbers.
- NEVER SHARE IT WITH ANYONE
- Having the private key makes you the owner of the wallet and the crypto inside.
Public Address / Wallet address
- It is also a string of letters and numbers, but you can share it to send/receive cryptos, and NFTs.

Note: On Etherscan, you can see transactions, and the address is the public address of the sender and receiver, so all transactions are transparent. In the next blog, I will uncover all the terms of a transaction. In this, From and To are the public address.

A wallet can log into multiple dApps on different chains. One of the most favorite things I like about a wallet is we don’t have to prove our ownership of anything online in Web2 where when we log into a bank site, book tickets, make any transaction, or just sign, we have to give away and share our personal information with them.

But in web3, we can log into a dApp or make transactions by connecting our wallet and approving the site to access out tokens during transactions. Internally our wallet proves our identity/authority and ownership of our crypto, of our money.

Types of Web3 Wallets

Custodial v/s Non-custodial
- Custodial Wallets
  - We don’t have full control over our crypto.
  - The central exchanges like Coinbase, Binance, Kraken, etc manage our crypto, they have the private key of our wallet.
  - So this system is kind of like web2 banks.
  - Even if we lose our private key, our account can still be restored.
- Non-Custodial Wallets
  - We have full control of all cryptos in this type of wallet.
  - Our money is our responsibility.
  - If we lose the private key/ recovery phrase of this wallet, our account can never be restored.
  - Here, with great power (full ownership of our crypto), comes great responsibility (keep wallet and private key safe)

Hot v/s Cold Wallets

Cold Wallet
- These are offline/hardware wallets.
- They are less prone to online scams/phishing attacks.
- But as we have to press on the cold wallet to type out 12-word recovery phrases like in early 2000s mobiles, it is less convenient for regular usage.
- They can be used to store our savings and large amount of crypto which we don’t need for DeFi or trade.
- Eg. Trezor, Ledger, etc
Hot Wallets
- They are online/software or browser wallets
- They are more prone to scam tokens, and phishing attacks as they are always online.
- But they are user-friendly and easy to use for fast transactions.
- Eg. Zerion, Family, Metamask, SheFi wallet, etc

Pieces of ADVICE

Never share your PRIVATE KEY or SEED PHRASE with anyone. As the authority of the wallet is with the one holding the private key/seed phrase.
Don’t store a large amount of crypto in hot wallets, store it safely in cold wallets.
Try not to connect your wallet to unknown or untrusty websites, you can get airdropped scam tokens.
Don’t make transactions on unknown websites, website phishing is very common in crypto because wallet security and blockchain transactions are extra secure. So scammers use phishing sites to scam people.

Trust the web3, not the airdropped tokens, or unknown links.
Keep your seed phrase stored offline, never store it in a password manager or note-taking application online or in any software on your mobile/laptop. Keep 3-4 backups offline of seed phrase. It’s your responsibility to keep your wallet safe.

Wrapping up!

Web3 wallets give you full ownership of your cryptos - financial freedom. But with great power comes great responsibilities and risks.

NEVER SHARE YOUR SEED PHRASE WITH ANYONE. It’s your top secret.

Last Note

If you made it here, congratulations!! Have a nice day, stay healthy, and stay curious.

Thanks to #SheFi for their amazing sessions and for spreading the word about web3 and blockchain and getting me so excited about what new technologies could bring.

Until next time!

Web3 Wallet = Ownership