Web3 – What’s in Your Wallet?
What’s a wallet? Why do I need one?
In Web3 a wallet is used to buy and sell magic internet money – Bitcoins, Etherium, etc – and of course to collect all the cool NFTs we’re gonna scoop up. 😎
We can also use it to login to Web3 apps and websites (sometimes referred to as decentralized apps or dApps).
Yes, the end of usernames and passwords is in sight.
If Web3 gives us nothing else…
Now a Web3 wallet is a little different
Your actual (real wallet? IRL wallet? 😂) wallet contains money, maybe a driver’s license, and even a stamp card for a free bagel on your next visit.
But a Web3 wallet?
It doesn’t have any of those things inside. In fact, it’s mostly empty.
It really just holds one thing – a private key. 🔑
All of our coins, NFTs, and other goodies actually live on the blockchain – that public ledger thing we’ll talk more in the future.
Now if we wanted to send some Bitcoins to a friend we’d actually just update the blockchain to indicate that they are now the proud new owner of said Bitcoins.
We wouldn’t send anything.
To update the blockchain though, we’d have to use our private key in our wallet to sign a transaction.
You can think of your private key like your signature on a contract.
Now I share this little non sequitur to illustrate two things:
- There’s no money in the
banana standa Web3 wallet. 😁
- A private key is super important and needs to be kept safe. If it fell into the wrong hands someone could take all our coins!
Okay – so where should I start?
Here’s three suggestions to get you going depending on how deep you want to go down the rabbit hole:
1 – If you don’t own any crypto at all
These apps are user friendly and are great if you just want to buy and sell crypto and learn the basics.
All three options are known as custodial wallets. That’s because they’re guarding your wallet, and thus private key.
2 – If you want to explore NFTs and dApps
If you’re ready to go a little deeper, a free wallet like MetaMask is a good place to start.
MetaMask is popular, supported by just about every dApp, and available as a simple browser extension (you can use it in Chrome, Firefox, etc) and as a iOS or Android app.
Unlike Coinbase, Venmo, or Cash App, MetaMask is a non-custodial wallet. That’s because your private key is stored on your device and guarded by you.
3 – If you own a good bit of crypto
When you really start to grow your crypto holdings or NFT collection you’ll want to consider adding an extra layer or two of security.
A hardware wallet, like those made by Ledger, is a great place to begin and starts at just $59.
A hardware wallet like Ledger is also non-custodial. It’s up to you to protect your wallet and private key. Many people keep their hardware wallet in a safe.
Finally, some wallet lingo
A few words you’ll come across as you go down the 🐰 🕳
- Seed phrase – a random phrase of 12-24 words. This will be automatically generated when you first create a wallet. Write it down and store it in a safe place. Never share this with anyone. Ever. With your seed phrase, someone could steal everything you have.
- Private key – automatically generated from your seed phrase when you first create a wallet. Your private key acts as your signature to approve transactions. Never share this with anyone. With your private key, someone could steal everything you have.
- Wallet password – a password used to open and access your wallet. Keep this secure like any other password.
- Custodial Wallet – a wallet (and private key) on your behalf by another institution or exchange. E.g. Coinbase.
- Non-custodial Wallet – a wallet (and private key) held directly by you. E.g. MetaMask or Ledger.
- Transaction – generally speaking, performing some action on the blockchain. E.g. to buy crypto.
- Signing – the act of authorizing a transaction using the private key from your wallet. How this is done – using your public key, private key, and cryptography – is for another day.
- Wallet Address – every wallet has a unique address that can be used to send and receive coins and NFTs to.
Here’s your takeaway:
A Web3 wallet lets you buy and sell crypto and sign into dApps and websites.
Oh and never ever share your wallet seed phrase or private key with anyone. 😅