A Complete Guide to Web3 Wallets, Part I: How To Choose The Right Wallet
Storing your digital assets (i.e., tokens, stablecoins, and NFTs) using a wallet is the only way for Web3 users to truly ‘own’ their assets. This means that a seamless user experience (UX) is essential when interacting with wallets and one of the key deciding factors when it comes to onboarding the next billion users.
In the following three-part guide, we outline the different types of wallets that exist in the Web3 space, curate a hand-picked selection of some of the top wallets in the NEAR and Aurora ecosystem, and ultimately help you find the right wallet that suits your needs and preferences.
Readers may be familiar with the notion that storing digital assets in a Web3 wallet comes in contrast to keeping them on a centralised exchange (CEX), like Coinbase or Kraken, where a third party does it on your behalf. However, the significance of this distinction cannot be understated and was recently highlighted in the market crash of May, where centralised entities that were previously thought to be reliable and secure — for instance, Voyager and Celcius — encountered severe solvency issues and found themselves forced to file for bankruptcy. As a consequence, users of these centralised platforms lost access to most (and in many cases, all) the funds that they had been told they would always be able to withdraw.
The irony of this is inescapable. Trustless and open-source blockchain technology (like that underlying Bitcoin, Ethereum and NEAR), as well as public and audited smart contracts and bridges (like that of Aurora and the Rainbow Bridge), were purposely created to prevent these types of systemic centralised failures from happening. In the end, as convenient as it may be, the problem that arises with storing large amounts of digital assets on centralised services is that when push-comes-to-shove you almost always don’t own the assets you thought you did.
So, what can Web3 users do to prevent this from happening? Well, the easiest option is to use a wallet directly and cut out the middleman. There are two types of wallets out there: Hot Wallets and Cold Wallets. Below is an overview of the pros and cons of each:
In the case of a smart-contract heavy platform like NEAR and Aurora, you will likely find yourself using a hot wallet most of the time. Hot wallets are the typical web-based wallets, mobile wallets, and desktop wallets you usually encounter. A major benefit of using hot wallets is their ease-of-use, as they are always online and easily accessible. Moreover, you can use them for everyday Web3 related features like signing transactions and making DAO proposals (which become significantly harder with cold wallets.) For these reasons, all the top wallets featured in the next two parts of our guide will be hot wallets.
Web3 users who hold a large amount of digital assets typically won’t keep all of it in hot wallets. And though all wallets are prone to attacks of some form (which is why it’s always important to guard your private seed-phrase), cold wallets (also sometimes hardware wallets or cold storage) are generally considered a more secure solution. The reason for this is that, unlike with hot wallets, cold wallets aren’t always online and connected.
An example of a cold storage solution working with NEAR would be Ledger Wallet (pictured below), which comes in the form of a physical USB that you need to connect to a supported device when interacting with the wallet, this makes sure that your private keys and assets remain safe and secure when not in use.
In this article we touched upon the importance of using self-custody solutions when compared to CEXs; we also examined the differences between the two types of wallets that exist, and looked at some of the pros and cons of each. Whenever users decide to self-custody their digital assets, they have to decide which of the two storage solutions they are going to use: hot wallets or cold wallets. And while you will most likely use a hot wallet when interacting with NEAR and Aurora, it is important to recognise all the options that are available.
If you decide that a hot wallet is the right fit for you, make sure to look out for the next two parts of our guide, as we explore some of the top Web3 wallets available on NEAR, and follow it by introducing a different set of picks for NEAR’s Layer-2 scaling solution, Aurora.
Written by Johan (@achildhoohero)
NEAR is a sharded, proof-of-stake, layer one blockchain that is built for usability and scalability. NEAR combines the power of both PoS and sharding in a technology called Nightshade, making the chain infinitely scalable without compromising security and decentralisation.
Aurora is an EVM, (Ethereum Virtual Machine) created by the team at the NEAR Protocol, delivering a turn-key solution for developers to operate their apps on an Ethereum-compatible, high-throughput, scalable and future-safe platform, with low transaction costs for their users.