Crypto wallets — why consider looking into it?
The crypto & NFT boom has led to the adoption of crypto wallets for a variety of purposes. What is this new kind of “plastic cards”, what are they used for, and most importantly how promising are they in times of the crypto mainstream?
Crypto wallet: the concept and types
In general, a cryptocurrency wallet is a place (app or device) to store cryptocurrency. But unlike a physical wallet where the cash is stored, crypto wallets do not store the cryptocurrency itself — to be more precise, they store the user’s public and private keys to manage his or her digital money in the blockchain. While a public key is comparable to a bank account (you share it with other people to transfer currency), a private key is comparable to a PIN to your plastic card (you shouldn’t share it with anyone).
So, crypto wallets allow you to store keys, send and receive cryptocurrencies and some of them provide more features like buying and selling crypto and interaction with decentralized applications (DApps).
Note: Cryptocurrency transactions do not imply “sending” tokens from one phone to another. When you send tokens, you use your private key to sign the transaction and send it to the blockchain network. The network will then incorporate that transaction to display an updated balance on your and the recipient’s address. So, it is important to remember that cryptocurrency is stored in the blockchain, not a wallet. A wallet is just a way to store a confidential key to access your crypto.
Types of crypto wallets
- Hot wallets
Hot wallets, unlike cold wallets, are connected to the Internet. This in turn makes them both more accessible but at the same time vulnerable to hacker attacks. There are different kinds of hot wallets:
This is a traditional application that requires installation on a phone. This wallet is very reliable and convenient for storing private keys while providing a simple user experience.
- Web (i.e. browser extension)
This is a type of online wallet without the need to install an app. Through the browser access, web wallets provide users with the possibility of reaching crypto assets from anywhere, with only keys and a device.
One of the perks of using these wallets is key reset and therefore easy access to your digital funds.
This is an example of a wallet that requires installation on the desktop. Unlike a web wallet, these give you full control over your keys and therefore your assets.
Сold wallets do not require online access and thus they are considered safe and resistant to online attacks by hackers.
A paper wallet is a physical place with printed or written keys. On the one hand, it is one of the best ways to protect your funds from theft, but on the other hand, the loss of this paper can lead to the non-recovery of your assets.
It is an external device such as a USB that stores keys. You need to press a button on the device to approve (sign) the transaction.
Note: In terms of security for storing crypto, it is better to use cold wallets. But by choosing them, you are fully responsible for the security and availability of your keys. If you lose them, it will be impossible to get your savings back.
In general, crypto wallets provide their users with the following perks:
- Security (the level depends on a specific wallet type)
- A long-run option for crypto storage
- Crypto portfolio management
- Extra useful features in addition to the usual transfer and storage
- Various cryptocurrencies transfer
- No intermediary (in comparison with a bank account).
Crypto wallets market state
According to a Statista report, the number of cryptocurrency app users in January 2021 increased to a level that surpassed the numbers achieved in December 2017. Coinbase, Blockchain Wallet, Crypto.com, BRD, Trust, Luno, Binance, Bitcoin Wallet, Bitcoin Wallet by Bitcoin.com, and Coinbase Wallet were (and continue to be) the most widely used wallets. According to the same report, in December 2020, the most popular cryptocurrency wallets registered approximately 2.2 million downloads, and a month later that number boomed to more than 5.6 million.
The activity of using wallets was especially observed in 2017 when the topic of crypto began to gain particular popularity, and in 2020 at the dawn of the Covid-19 pandemic.
According to Finances online, the number of blockchain wallet users reached 68.42 million in February 2021, with a gradual increase in users since 2015.
In turn, large-scale adoption of cryptocurrency wallets is only at the beginning of its evolution, despite the boom in users in 2017. Today, there are many BUTs about this way of storing currency (i.e., keys). Some users find hot wallets unreliable, others fear permanently losing access to assets with cold wallets, and others find it difficult to operate their digital money due to the complexity of the interface that most online wallets offer.
Some challenges users face with today’s crypto wallets
- They are not designed for the average user
Even though there are many wallet options, ordinary non-technically savvy users prefer to use app-driven wallets with swap features instead of, for example, exchanges. The point is that the continuing hype on NFT from 2021 has caused a large increase in crypto-enthusiasts, most of whom are artists who are diving into the world of NFT and crypto. So NFT mainstream has brought a new segment of users, most of which are more “casual” than tech DeFi users, for example.
- Lack of user experience
What comes out of the above problem is the following: a painless user experience is what every cryptocurrency user wants.
The mass adoption of Web3 has led to many newcomers to crypto finding the use of crypto wallets very insecure. Quality experience in various crypto wallets can lead to better Web3 adoption and make users feel safe, secure, and well understood. On the way to acceptance, well-thought-out interfaces and comprehensible features can make the user experience unique and, thus, the transition to Web3 more seamless.
Note: In order to achieve mass adoption, some changes in the architecture of crypto wallets are required. It is very likely that these changes can be very dramatic, such as removing the need to store a private key or memorize a seed phrase, but using simple authentication. And that’s what we, at OneArt, are aiming for and trying to achieve.
- Lack of wallet identity
Demanding users are looking for a solution that is not only easy from a technical point of view but also customizable. The more tech-enhanced crypto wallet will be equipped with personalized options and customizable features, the more interesting will be such a common activity as currency transfer and storage.
- Transferring tokens from the exchange is troublesome
Honestly, this process was popular two years ago, but now it is a thing of the past. The thing is, people prefer to buy cryptocurrency directly from their wallets using a credit card.
Why OneArt NFT & Crypto Wallet?
- Quality matters
Perhaps quality with regards to financial matters is one of the main points that need to be adhered to. Given the volatility of the crypto market, quality in terms of storing, transferring, and saving crypto assets is the most important. Being able to manage your crypto finances and NFT makes it easier for both common and tech-oriented users to adapt to Web3.
In this matter, a well-thought-out UX can prove to be a driver for a new user flow. Ease of navigation in a feature-rich solution is one of the key factors determining the continued use of a product. Bringing just a wallet to the crypto market will not be enough for the large-scale Web3 adoption, as you need to make it tailored to the customers’ needs with the option of a simple in-app surfing.
- Consumer focus
Cryptocurrency between 2017 and 2020 was largely created by developers for the same tech-savvy audience. That’s why previous wallets were geared more toward developers. Today, the crypto and NFT industry has long since moved beyond its former influence, targeting a mostly broad-minded audience. To attract users and keep them adapting easily to the new environment, a user-centric interface can play a pivotal role.
Indeed, over the past two years, the demand for NFTs has become insane.
According to the Financial Times and Chainalysis, there were about 360,000 NFT holders in 2021 who owned about 2.7m NFTs.
Moreover, net sales in the NFT market are expected to reach $35 billion in 2022 and could reach $80 billion by 2025.
Given the growing number of NFT enthusiasts with celebrities, brands and artists on the forefront, the popularity of tokens can very likely expect to increase the number of users, the number of collectibles and the volume of sales. Thus, there will be more and more token holders, which means the need for wallets will only rise.
- More than just a wallet
In addition to storing crypto, you can also keep your NFTs in one place. Manage collections or share and mint collectibles, explore NFTs on supported marketplaces, or store and manage your cryptocurrencies and NFTs most securely.
Today’s users appreciate usability, so an all-in-one wallet with built-in features may be just right for their needs.