Beginner Series: What Is A Web3 Wallet?
It’s time for another Beginner Series article. We’re going to continue explaining some of the key pieces of the web3 economy. This time, we’re going to explain what is a web3 wallet.
What Is A Web3 Wallet?
I assume you’ve heard about decentralized finance (DeFi) and NFTs if you’re reading this blog. And maybe you’re a bit intrigued because you’ve heard that people are making a lot of money in DeFI and investing or trading NFTs. Crypto is a very exciting universe.
But in order to take part in that web3 economy, you need a web3 wallet. Web3 wallet is your gateway to the crypto economy.
A web3 wallet enables you to self-custody your crypto assets and use decentralised applications (dApps) like Clip Finance, Uniswap, Sushiswap, etc.
Once you’ve added a web3 wallet to your browser, it’s very easy to connect to dApps. Usually, you’ll find a button like the one below in the top corner of the page, or the dApp automatically activates the request to connect your wallet.
The most popular web3 wallet is Metamask.
Despite the poor user interface design, it’s fairly easy to use Metamask or any other web3 wallet. There are plenty of options to choose from (selection at Sushiswap):
And many of them now support a variety of different blockchains depending on the application you want to connect to:
Each web3 wallet has its own unique address. You can use that address to buy, sell, and mint NFTs on Opensea and other NFT platforms. You can receive funds, send funds, and if the wallet enables, swap tokens within the wallet. You can earn a yield on Clip Finance, and be a liquidity provider (market maker) on DEXes like Curve and Uniswap. Some wallets like Keplr also have a staking function built into the app (you can earn fees while locking your tokens into a protocol).
The Benefits Of Web3 Wallets
While web3 wallets are necessary to access crypto applications, there are wider implications for why they’re so important for the future of finance.
Ownership
There’s a saying in crypto: not your keys, not your coins. The reference is aimed at storing your tokens with centralized service providers, like centralized exchanges (CEX). If you’re using a third-party service to store your crypto, they’re in control of it. Like the banks are in control of your money in the bank. They can block transactions, freeze assets, ask why you’re sending money to your grandmother, etc.
However, there are upsides to centralized service providers, mainly the fact that you’re accustomed to how they work, and things like resetting your password or calling customer support if you can’t access your account for any reason. Some centralized services have insurance guarantees if they get hacked (or you get hacked), and you may receive some funds back.
With web3 wallets, you’re controlling your private keys and your assets. No one can block your transactions or freeze your crypto. The downside is that if you lose your private keys, don’t have the seed phrase, or send tokens to the wrong address, you’re likely not going to get them back. With real ownership comes responsibility. There are decentralized insurance protocols like Nexus Mutual that are working on these issues, but these are the risks you need to be aware of.
Privacy
There’s no need to explain why privacy and controlling our data are important. We all know that we, the users, are the products in web2 (Google, Facebook, etc).
Protection of your assets
We’ve seen how democratic states are freezing the bank accounts of the citizens without proper legal proceedings to enforce obedience. Or how countries can confiscate the assets of the people as Cyprus did in 2013. At a time of war, with growing polarization and increasing chances of conflict, no measure will be taboo for the authorities. Self-custody wallets help you to protect your assets.
Financial Inclusion
With truly decentralized web3 wallets, it’s very easy for citizens from developing countries to take part in the crypto ecosystem, especially as they often don’t have proper access to the traditional banking system. At Clip Finance, we believe in true financial inclusion, and that ordinary people everywhere should be able to access financial opportunities like the rest of us.
Web3 wallets are here to stay
Wallets like Metamask are an integral part of the crypto space. To participate in token offerings, buy NFTs on Opensea, farm yield, swap tokens, or any other transaction that you’d like to do, a web3 wallet will be needed.
It’s not easy to make the shift in your thinking that web3 wallets are better and safer than using centralised services, because we’re so used to particular user experiences. We’re used to using email and passwords to log in to our accounts, etc.
But it’s important for us to make that shift. Your ability to think independently, to have freedom of thought and freedom of speech, is directly dependent on your ability to be independent of the system. Otherwise, if you don’t control your finances and don’t have the freedom to transact, you can’t really be free.
