What are crypto wallets? Basics of MetaMask, Trust Wallet, Ledger, and Trezor explained
A crypto wallet is a tool or application for users to directly interact and transact with blockchain networks. Crypto wallets such as MetaMask, Trust Wallet, Ledger, and Trezor can be based on software or hardware. Here’s more:
In 2021, the global market cap of cryptocurrency touched $3 trillion and many leading coins such as Bitcoin (BTC), Ethereum (ETH), and others posted all-time-highs.
With the world increasingly investing in crypto, the need to store tokens safely in crypto wallets such as MetaMask, Trust Wallet, Ledger, and Trezor, has only increased.
These wallets provide self-custody, which means users can hold crypto in a way where they have access only to the assets.
This is unlike storing coins in accounts on centralised exchanges like , Binance, , , etc, where the exchange is holding their user’s assets.
Any centralised, third-party holding user funds is generally seen as less safe in comparison to users managing their own wallets and private keys personally. Losing access to crypto assets due to exchanges being hacked can prove costly.
Basics of crypto wallets
A crypto wallet is a tool or application for users to directly interact and transact with blockchain networks. Crypto wallets can be based on software or hardware.
As software wallets are usually connected to the Internet, they’re referred to as hot wallets. Hardware wallets have no connection to the Internet, and are generally referred to as cold wallets.
MetaMask and Trust Wallet are examples of software-based hot wallets, while Trezor and Ledger are examples of hardware-based cold wallets.
Hot and cold wallets offer varying degrees of security. As hot wallets connect to the Internet, they’re considered less safe compared to cold wallets that are always offline. However, hot wallets are still safer than storing crypto on centralised exchanges.
There are also wallets based on paper, where crypto addresses are printed on documents.
Crypto wallet information comprises one or more pairs of public and private keys, and an alphanumeric address generated based on the keys.
Users may share their address with others to receive funds, but they must never disclose their private key, which can be used to access crypto funds across wallets.
Here’s more about some of the world’s most popular hot and cold crypto wallets:
Software/mobile wallets
MetaMask
MetaMask is a free-to-use crypto wallet built by ConsenSys Software. MetaMask is a software wallet used to interact with various blockchains, and allows users to transact in crypto through a browser extension or mobile app.
The wallet is used to store and manage keys, initiate transactions, transact in cryptocurrency and tokens, connect and interact with decentralised web apps, and more.
As it works as a plugin browser extension and an app connecting to other decentralised web services, MetaMask is considered a hot wallet.
Its web connectivity and ease of use has made it one of the most-popular crypto wallets in the world, with over 10 million monthly active users as of September 2021.
Trust Wallet
Started by Viktor Radchenko, Trust Wallet is a free-to-use app that allows users to store crypto and transact with decentralised applications. In 2018, it was acquired by crypto exchange Binance.
Although Trust Wallet is considered a hot wallet, it allows users to store personal information on their devices - away from the Internet and any third parties or developers.
Trust Wallet is similar to MetaMask, but it is generally considered simpler and more intuitive to use. Over the years, Trust Wallet has built a reputation for security by never requesting user data or private information.
Trust Wallet reportedly has 10 million users. Like MetaMask, it is a preferred option for users who trade crypto actively.
Hardware/cold wallets
Ledger
Ledger wallets are made by Ledger, a French company focussed on building secure solutions for blockchain applications. The wallets are physical devices that are used to store various cryptocurrencies and private keys in an offline manner.
Ledger uses offline storage mechanisms such as USB drives to store private keys, thereby making it difficult for any third party to access user’s private keys through the Internet.
Besides offering safe storage, these cold wallets enable users to send and receive crypto safely through secure elements and proprietary operating systems designed to protect users’ crypto assets.
In June 2021, Ledger had reportedly sold over three million of its hardware wallets. Users who hold a large amount of crypto and do not wish to trade actively prefer to use cold wallets like Ledger to store their crypto assets.
Trezor
Like Ledger, Trezor is a cold wallet used to store crypto assets and sign transactions in a secure manner. Trezor is part of SatoshiLabs, which is headquartered in Czech Republic.
It connects to user’s computers with a USB cable, and stores crypto assets and private keys offline.
Trezor also allows users to use two-factor authentication to secure their accounts and protect their assets and identity offline, with no counterparty risks such as leaks or identity theft.
Although it has emerged as one of the most popular hardware wallets around, Trezor does not share official numbers related to its sales. Like Ledger, users who own large crypto assets and do not trade frequently utilise Trezor wallets to secure their funds.
Edited by Megha Reddy