In the world of digital assets, a crypto wallet carves out a vital role as a safe haven for diverse holdings, including cryptocurrencies, NFTs, and tokens. The functionalities of a crypto wallet, however, are not confined to mere storage. They extend into transactional capabilities that allow users to send and receive digital assets between wallet addresses seamlessly. They also offer direct blockchain access or interaction with trading platforms, enabling users to expand their digital portfolios conveniently.
In this article, we outline different types of crypto wallets that are currently in the market, and share some easy-to-follow guides to help you build a feature-packed crypto wallet with confidence and ease.
Why Build a Crypto Wallet?
Crypto wallets serve as a comprehensive toolkit for digital asset management, and play a pivotal role in facilitating communication with decentralized applications (dApps) hosted on a variety of blockchains. Whether as a browser extension or a mobile app, these wallets offer a convenient, easily accessible avenue for buying, storing, transferring, and exchanging tokens.
Building a crypto wallet from the ground up allows you to maintain complete control over its security features and architecture, ensuring that there are no hidden backdoors or vulnerabilities that may compromise your digital assets. You can implement robust encryption algorithms, multi-factor authentication, and more.
Furthermore, you can also customize it based on your crypto needs, including integrating value-added features (e.g., transaction history, risk alerts, portfolio management) and choosing which cryptocurrencies to support. If you have a specific application that requires seamless integration with a crypto wallet, building it from scratch can provide you with the flexibility to design it in a way that fits into your services and systems.
It is important to note building a crypto wallet on your own requires a strong technical background, knowledge of blockchain technologies, and an understanding of secure coding practices. Alternatively, you may also consider using existing, well-established wallet solutions that have undergone rigorous security testing and have a proven track record of reliability.
What Are Different Types of Crypto Wallets?
Crypto wallets come in various forms, each catering to different user needs and levels of security. Broadly speaking, there are currently three main categories — non-custodial wallets, custodial wallets, and smart contract wallets.
Non-custodial wallets are a type of cryptocurrency wallet that allows individuals to have complete control over their digital assets without relying on a third party. The private keys, which are cryptographic codes that grant access to the digital assets stored on the blockchain, are generated and stored locally on the user's device, whether it's a computer, a smartphone, or a hardware wallet. Non-custodial wallets are often associated with decentralized finance (DeFi) and the principles of blockchain technology, where trust is placed in the cryptographic protocols and users' control over their digial assets.
With non-custodial wallets, however, users are solely responsible for the security of their digital assets. If they lose their private keys or if their device is compromised, they may permanently lose access to their digital assets. This places an added responsibility on users to properly secure their wallets and back up their private keys.
Custodial wallets assign the task of managing the private key to a trusted third party, such as an exchange (e.g., Coinbase) or a crypto custodian. These wallets generally involve KYC procedures and provide recovery mechanisms similar to those found in email providers. This arrangement demands confidence in the third party to safeguard both the private keys and digital assets. Nonetheless, custodial wallets frequently exhibit characteristics comparable to non-custodial wallets, including the ability to interact with smart contracts.
Smart Contract Wallets
Smart contract wallets operate under the governance of codes instead of private keys. The operational dynamics of the wallet are determined by the programmable logics and automation mechanism embedded in the smart contracts.
The smart contracts make it possible to program features into the wallet, including batch transactions, customizable recovery options, transfer limits, the ability to pay gas fees in different tokens, multisig security and more. These wallets serve a broad range of users, encompassing individuals, businesses, and organization that require multisig functionalities.
How to Build a Feature-packed Crypto Wallet?
Building a feature-packed crypto wallet from scratch requires careful planning and a focus on security. By defining your goals, choosing the right set of developer's toolkits, and implementing robust security measures, you can create a powerful and secure crypto wallet tailored to your needs.
Cobo Wallet-as-a-Service (WaaS) offers unparalleled advantages in terms of customization, security, integration, and future-proofing for building your first crypto wallet. With a standardized set of APIs and SDKs, Cobo WaaS supports over 1,800+ tokens across 70+ chains (and counting!). It allows you to focus on scaling your core products, without worrying about the engineering costs and underlying technical complexities of creating a crypto wallet.
Building your own crypto wallet infrastructure with Cobo WaaS is fast and easy. Ready to get started or have any questions? Our team is here for you!