An In-depth Study Of Crypto Wallet: From Concept To Creation
- September 26, 2023
- 320 views
- 18 minutes
The craze around cryptocurrencies shows no signs of dying down, and the reasons are quite apparent. Decentralization, global accessibility, lower transaction fees, faster transactions, and reliability, to name a few.
Besides, the rapidly evolving landscape of the crypto market has resulted in the advent of an elementary tool to facilitate transactions of digital assets and cryptocurrencies – the crypto wallet.
With more and more crypto investors, businesses, and stakeholders dealing with leading cryptocurrencies daily like Bitcoin, Ethereum, etc. the need for crypto wallets is more relevant than ever.
The surge in demand for a secure, feature-packed, and user-friendly digital wallet is the reason why crypto wallet development is now of paramount importance.
This blog post will serve as your one-stop comprehensive guide to crypto wallets, their types, benefits, functions, process of development, security considerations, and lastly, the future trends.
1. Introduction to Crypto Wallets: Definition
A crypto wallet is a digital wallet that allows users to send and receive payments in the form of cryptocurrencies. Besides facilitating crypto transactions, users can store virtual assets in their crypto wallet which include digital currencies, NFTs, gaming tokens, governance tokens, etc.
It is referred to as a “wallet” because its primary function is similar to that of a physical wallet that you use to stash your cards and cash in.
Crypto wallets are commonly called blockchain wallet because it is a type of application powered by blockchain technology. So, it is also considered a safe and reliable option for making transactions because all the transactions are stored safely on the network.
The highlighting features of blockchain or crypto wallet are –
- Helps in the exchange of digital currencies, assets, and tokens
- Accessible from the web, desktop, mobile, and hardware devices
- Transactions are secure
- The privacy of users is maintained
2. How Crypto Wallets Work: Key Concepts and Technology
Before we dig deeper into the mechanism of a crypto wallet, we need to understand the meaning of private and public keys because these two are integral components of blockchain wallets.
2.1 What is a Public Key?
In order to transact currencies from the wallet, a user needs a wallet address, known as the public key, which has to be shared with other users wishing to transfer cryptos in the user’s wallet. That’s why it is known as a public key. It is similar to your bank account number which you need to share with other users to receive money.
2.2 What is a Private Key?
Upon creation of a crypto wallet, another key is also generated which is the private key. The private key can be compared to your ATM or debit card PIN or a bank account password, which is confidential and only known to you. With the help of this private key, you will be able to access the stored cryptocurrencies in your wallet and also make transactions.
2.3 The Mechanism Behind Crypto Wallet
To get started, you have to install and download the wallet and create an account. After the account creation process is done, you will be provided with the public and private keys, as we mentioned earlier.
You need both keys to initiate a transaction or receive any payments. However, rest assured, that your private key remains completely encrypted.
When someone wants to send you crypto money, you have to share the public key with the crypto sender. The sender, by using the public key or wallet address, transfers funds to your account.
Similarly, if you want to send crypto to someone, you will have to use your private key and the receiver’s public key to process the transaction.
[Point to Note: The private key should remain private to you. Disclosing or sharing your private key with others will grant them access to your account and crypto coins. Make sure to store your private key safely and securely.]
3. Types of Crypto Wallets and Their Features
The crypto wallet can be divided into two broad categories – hot wallets and cold wallets, based on whether it works online or offline. Both types are further broken down into subcategories like mobile, desktop, web wallet, hardware, and paper wallet.
There are myriad options for crypto wallets that a user can choose from based on their needs. For instance, long-term investors who intend to hold their wallets for a longer span of time need to choose a blockchain wallet with high-security features, while those who are actively involved in trading cryptocurrencies go for wallets that offer speed and convenience.
Every type of wallet has its own set of unique features, pros, and cons, which will be discussed in this section.
3.1 Hot Wallets
These types of wallets are software-based and need to be downloaded by the user on their desktop or mobile to access and make transactions. Hot wallets need a steady internet connection to function.
Although less secure than cold wallets, hot wallets are more user-friendly and are advantageous for those who send and receive cryptocurrencies frequently. The easiness and simplicity of these wallets make transactions happen in no time.
Hot wallets are sub-classified into –
- Mobile Wallets – Mobile wallets are decentralized applications (dApps) installed on smartphones and tablets whose interface is very simple and easy to use. To make payments or receive funds in the wallet, users use a QR code that is generated after downloading the wallet. For crypto investors, mobile wallets are the number-one preferred choice because they are easily accessible on the go. Coinbase and Mycelium are two noteworthy examples of mobile wallets.
- Desktop Wallets – Desktop wallets are installed on the desktop just like an application or software is installed on a computer. These too have a user-friendly interface along with high-grade security features. Desktop wallets are most suitable for storing cryptos as long as you have proper antivirus software installed on your desktop.
- Web Wallets – The wallets are accessible through a web browser anywhere from any desktop or mobile. They basically operate on the cloud and are very easy to use as the private keys are stored online. Web wallets can be used in a hosted or non-hosted way. The latter is considered a safer option because you have full control over your cryptocurrency.
Pros of Hot Wallets
- User-friendly interface, making it convenient to use
- They are online wallets, thus very easy to access from anywhere
- Ideal for quick online transactions of smaller amounts of investments
- Best suited for regular traders or beginners
Cons of Hot Wallets
- Vulnerable to hacking attacks and malware threats
- Third-party control over your private keys
- Need a steady internet connection to access and manage cryptocurrencies
- Loss of funds if your desktop crashes or is stolen or misplaced.
3.2 Cold Wallets
When it comes to security, cold wallets always have an upper hand over hot wallets because you do not need an internet connection to access the wallet unless you need to make a transaction.
Most crypto investors are of the opinion that cold wallets provide them with great peace of mind because their private keys are not stored online and they can access their accounts offline.
The two types of Cold Wallets crypto investors need to be familiar with –
- Hardware Wallets – This is a micro version of the flash drive that securely stores the private keys of the users offline or in “cold” format. It comes with an OLED screen and side buttons to operate the device. One can make any transaction from this hardware or physical device by connecting it to the internet. Once the transaction is complete, you can disconnect the internet. This is why wallet infiltration by hackers is impossible in a hardware wallet.
The Ledger online store is the one-stop shop for all types of hardware wallets and their related accessories.
- Paper Wallets – Paper wallets came before hardware wallets and were quite famous among investors. Although functions similar to hardware wallets, the public and private keys of the users are printed and stored in a sealed manner like in cold storage. The crypto senders are handed over the paper wallet having QR codes that are scanned on mobile devices to make transactions. All this might make accessing crypto difficult but offers great security because hackers cannot access the information.
Pros Of Cold Wallets
- Cold wallets are offline wallets that offer greater security for your private keys
- Funds are stored offline making them immune from online attacks
- Most cold wallets, particularly hardware wallets, have easy to use interface
- Considered ideal for storing large amounts of cryptocurrencies over a long period of time
Cons of Cold Wallets
- They are less convenient to use and slightly expensive
- Not suitable for beginners or regular crypto traders
- Paper wallets are subjected to damage or loss
4. Benefits of Crypto Wallets for Investors and Traders
Blockchain wallets are increasingly becoming popular among crypto traders and investors because they have made the process of crypto transactions straightforward.
With a wide range of wallet types available on the market, crypto wallets solve conventional online payment problems, giving traders some incredibly valid reasons to start using crypto wallets. Let’s take a closer look at those underlying benefits:
- User-friendly Interface – The interface of crypto wallets is very easy to understand and navigate which makes the transfer of currencies easier and hassle-free.
- Less complicated – Crypto wallets, particularly mobile wallets, have less complicated functionalities, thus making them easy to operate by investors and traders for day-to-day transactions.
- Lower transaction costs – One of the most outstanding benefits of using a crypto wallet is that the transaction fees are lowered to a great extent compared to traditional banks. You can make payments worldwide with nominal charges.
- Easy Portfolio management – Crypto wallets offer users a practical way to store and manage multiple portfolios and investments from one place.
- Abundant storage space – Blockchain wallets, particularly hot wallets, never run out of storage space because information is stored on the internet or cloud. It allows you to access multiple cryptocurrencies from a single place.
- Nifty Balance Checker – You can easily check your account balance and details of every transaction received and sent from your wallet.
To conclude, with the growing interest in investments in cryptocurrency by investors, the need for a reliable, secure, user-friendly, and feature-rich crypto wallet has become more relevant.
Further, the statistics below on the global crypto wallet market size confirm the fact that it is the gateway to endless opportunities for investors.
5. Core Features to Include in Your Crypto Wallet App
If you are interested in building your own crypto wallet app, you first need to get familiar with the type of wallets most commonly used by crypto enthusiasts these days and then, consider the necessary features to include in your application.
Even better, you can hire a professional and experienced blockchain app development company whose expertise and profound knowledge will ensure you get a top-notch wallet for users.
Here are some must-have features or main requirements of your crypto wallet application.
5.1 User Authorization
Given the rising craze and increase in the value of digital currencies, wallet apps have become more prone to hacking threats. In such a scenario, enhancing the user authorization method with 2-factor authentication (2FA) or multi-factor authentication (MFA) offers an extra layer of security which most conventional wallets fail to provide.
Apart from the password protection or 2FA feature, the users should be provided with a unique private and public key to make the wallet more secure.
5.2 QR Code Scanner
The QR code feature streamlines the process of crypto transactions or transfer of assets from and to your wallet address. The QR code scanning feature makes transactions happen with speed, simplicity, and convenience.
Crypto wallets that are integrated with QR code scanners facilitate quicker payments with automatic scanning of the public keys or wallet addresses. It makes processing of transactions in just a single click.
Rather than typing long characters of public keys, the user simply scans the QR code, and all the information is collected automatically through the scanner for the user which helps them proceed forward with the transaction.
5.3 Multiple Cryptocurrencies
Another feature that is a must-have in your crypto wallet is the integration of multi-currency support. A wallet that does not support more than one cryptocurrency is a major downside for investors.
Your crypto wallet should support transactions in multiple currencies because users prefer to trade in different cryptos. New currencies emerge in the market from time to time and also, the values of the currencies keep on changing.
Integrating multiple currency support into your crypto wallet assures that your users don’t go anywhere else to store their currencies.
5.4 Paper Wallet Import
You can never predict what your users prefer and why. Some may be inclined towards hot wallets that are readily accessible and easy to use, while some would want to use paper wallets to ensure a higher level of security.
So, it is important to allow them to scan their paper wallet with the help of a QR code for seamless sending and receiving of cryptocurrencies.
5.5 Push Notifications
This is an integral feature that needs to be incorporated into your wallet application because users must be always informed and notified about their transactions and other wallet activities.
The push notification can be either in the form of a one-time code (OTP) for confirming transactions or any notification alert regarding the successful debiting and crediting of funds.
In addition to this, the app notification feature also holds significant importance in terms of security. It makes the users alert and aware of any transactions or activities that may occur without the user’s consent.
5.6 Updates of the conversion rates
Needless to say, the crypto market is highly volatile in nature where exchange rates keep on fluctuating constantly. Since in a crypto wallet users can transfer currencies in various modes such as converting from one currency (say Bitcoin) to another (say Altcoin), staying updated about the conversion rate is imperative.
Hence, when you create a crypto wallet, you need to ensure that it synchronizes well with the blockchain network and provides you with up-to-date information about conversion rates in real-time.
5.7 iOS and Android Compatibility
Your users might be using Android phones or iPhones. If you don’t want to lose out on a large number of genuine crypto investors, make sure to launch your wallet app simultaneously on both iOS and Android operating systems.
For a class-apart mobile app development for the two leading operating systems, you can leverage React Native for cross-platform compatibility. By using a single code base, the developer can build and deploy your wallet app in both iOS and Android systems.
5.8 Payment Gateways
The payment gateway is a tool facilitating smoother and faster crypto payments to merchants. Offering users multiple payment services ensures they have an enriched experience while trading currencies and converting digital assets into fiat money.
5.9 Optional Logout from the current session
This is an amazing feature to strengthen the security of your crypto wallet. With this feature integrated and operational in place, you can make sure that you will be automatically logged out if you remain inactive in the ongoing session for a certain period of time.
This way you are assured security as your current session ceases, protecting it from hackers and cyber threats. You need to re-login if you want to use your wallet again.
6. Tech stack for crypto wallet development
As discussed above, a crypto wallet can be of various types and for various devices, like a web browser, desktop, or mobile. So, it is critical to have a profound understanding and deep knowledge of the latest technologies and tools used for the development of every type of blockchain wallet.
For desktop wallets, Electron.js is used by blockchain developers which is an exclusive and open-source software framework embedded with leading web technologies like Node.js and Chromium.
With stunning features like automatic updates, profiling, crash reporting, and debugging, Electron.js has occupied a dominant position in the list of tech stacks for desktop apps.
For back-end development and server-side proxy, Node.js is preferred by developers as it allows the development of web apps with greater scalability, interoperability, and high performance.
React Native is a leading JS-based framework suitable for building native-rendered apps for both iOS and Android operating systems. Developers’ workload gets reduced when they choose to build apps using React Native because the same codebase is used in both OS.
For quicker iOS and Android app development and deployment with an engaging user interface, the React Native framework is what you need the most.
7. How to Build a Crypto Wallet: Step-by-Step Guide
Now that you know the essential features and components that are an absolute must for your blockchain-based crypto wallet, let’s proceed to the stages of its development in detail.
Step 1: Analyzing requirements
To jumpstart your wallet development project, the first and foremost thing you need to do is share your idea and explain the concept to the blockchain development team you have hired for the project.
You need to define your target audience, select the app features, and calculate a budget and timeframes to make the job of the developers easy.
Step 2: Create the wallet UI/UX design
The wallet interface must be very easy to understand and use. Crafting a user-friendly UI is a prerequisite for every crypto wallet development, otherwise, the users won’t use your app for long.
A simple and minimalistic design is what you need to make your user comfortable using your app. You need to convey your requirements clearly to the UI/UX designer to ensure the end result meets the expectations of your customers.
Step 3: Using Standard Crypto Open-source libraries
Most of the crypto coins have open-source libraries which implies they are freely available to anyone. By utilizing the tools of well-known crypto libraries like Coinbase SDK and BitcoinJ SDK, the wallet developers can start building the wallet seamlessly.
If you choose Coinbase SDK, you have access to a cross-platform Java library that comes with popular programming languages like JS, Python, and Ruby.
Step 4: Selecting the tech stack
Your app’s success is determined by the technology stack and development frameworks you are using for its development. For instance, if you decide to build a web wallet app, Node.js and Angular.js are the two most popular picks in this case.
However, when you go for native Android apps, either Java or Kotlin will be your ideal choice. Again, for iOS app development, Swift or Objective C can be leveraged by the app developers for your crypto wallet.
Step 5: Develop the wallet app
At this stage, the developers work on the app interface and app architecture to craft a one-of-a-kind crypto wallet with salient features and advanced functionalities.
They work simultaneously on both the client and server side of the application to get the app up and running in the least possible time.
The factors to keep in mind in this app development phase –
- Finalizing all the features of the app
- Writing the application code
- Integrating the codes with the app database
Step 6: Use Of APIs
If you want a feature-rich wallet application that enhances the user’s transaction experience, API integration is the right way to achieve this. Using popular and distributed ledger APIs like Coinbase and Bitcore allows your crypto wallet to synchronize with the blockchain ecosystem efficiently.
Most importantly, the use of APIs speeds up the process of app development by allowing the developers to use existing and well-tested functionalities, without requiring to build everything from scratch.
Step 7: Selecting the cloud
This step involves choosing the right cloud platform for your crypto wallet application and for this, you need to avail of BaaS (Blockchain as a Service) from reputed cloud service providers. Globally, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform are the top renowned providers.
Step 8: Implementing Security Measures
Accentuating security while developing your first crypto wallet app ensures that your users feel safe while using the app. Considering additional security layers with face ID, fingerprint, and 2FA authentication in your app guarantees top-notch security.
In addition to this, the developers must keep up with the latest security updates constantly as they impact your app security and help in quickly identifying bugs and fixing them instantly.
Step 9: Testing the wallet app
Rigorous performance and usability testing of your crypto wallet application before the final launch is essential because it helps you identify the loopholes and possible technical glitches beforehand and implement measures to resolve them.
Having experienced QA testers by your side helps you to gain full control over all aspects of your application and assess its performance. You can finally have an error-free and foolproof wallet for your users.
Step 10: Releasing the app in the market
Now it’s time to finally publish your app in the leading app stores – Google Play and the App Store, and get genuine feedback from first-time users.
You can also seek guidance and help from an established digital marketing company to advertise your wallet app across all social media platforms and make your target audience aware of the app.
8. Best Practices for Crypto Wallet Security
The harsh reality of using crypto wallet apps and desktop software is that they are vulnerable to inherent security risks and malware threats from hackers.
Therefore, to safeguard your wallet from malicious attackers and keep your funds and digital assets safe, you need to follow these security practices.
Backing up your wallet regularly
You should refrain from keeping large quantities of crypto money or digital assets in your hot wallet because they are more exposed to hackers. They try to gain unauthorized access to your private keys and steal your funds. To prevent this, regularly back up your wallet by using Reliable software like Ledger Nano.
Reinforce your wallet security
To strengthen the security of your wallet, you need to be extra cautious while setting passwords and account authentication methods. The use of complex and lengthy passwords containing uppercase, lowercase, numbers, and special characters, is effective in securing your wallet.
Timely upgrade of wallet app or software
Another important practice that ensures your wallet is least exposed to online threats is upgrading the app or software features on a regular basis. Timely updating your wallet gives you the advantage of using advanced security features that have just been introduced.
9. Multi-Currency Crypto Wallet Development
Now that you have understood the concept and process of crypto wallet development, the next question that might pop up in your mind is – single or multiple currency wallets?
Well, before we wrap up, let’s make this point clear and straightforward: multiple-currency wallets are way better than single-currency wallets. No one wants to shuffle between wallets to make transactions in more than one currency.
There are several strong reasons to use multiple currency wallets which are mentioned below.
- It keeps numerous currencies in the user’s account neatly organized in separate currency accounts.
- It is convenient to use because users do not need to remember numerous private keys for each single wallet.
- Users can have a quick glance at their funds in their various cryptocurrency accounts from one place.
- Security is improved in a multi-currency wallet with consolidated security measures, unified backup & recovery, enhanced encryption, and a single point of entry.
Although it is true that a multi-currency wallet offers greater security compared to a single wallet, proper security practices must be implemented by users to be on the safer side. This includes updating your wallet regularly, keeping strong passwords, and staying informed about potential threats.
10. Integration of Crypto Wallets with Crypto Exchanges
Besides building crypto wallets, the integration of these blockchain wallets with crypto exchanges or trading platforms is equally important. This streamlines the user experience by offering them a seamless way to transfer funds to the wallet integrated into the exchange.
Crypto wallet integration allows users to directly trade cryptos, manage their funds, and monitor market activities – all from within the wallet interface. Further, this integration boosts the users’ control over holdings as they can now quickly respond to market changes and execute trades at the right time.
Crypto exchange platforms integrated with blockchain wallets promote efficiency in transactions by reducing transaction time and processing payments faster. It is a comprehensive platform that lets crypto investors indulge in secure and easy crypto asset trading.
11. Future of Crypto Wallet Development: Trends and Predictions
The crypto landscape is ever-evolving and here are some notable trends that you need to be watchful to stay ahead of the curve.
Decentralized Wallets – Decentralized wallets empower users by removing intermediaries, granting greater asset control.
DeFi Platform Integration – Wallets seamlessly integrate with Decentralized Finance (DeFi) solutions and grant access to diverse financial services.
Privacy Feature Upgrades – Robust privacy features are being introduced to address growing data security concerns effectively.
Biometric Security Advancements – Biometric authentication is rising in prevalence, thus, accentuating wallet security further.
The Bottom Line
In the crypto realm, having a reliable, advanced, and top-grade crypto wallet is essential. Advancements in crypto wallet tech will significantly influence the future of digital finance as technology progresses.
In closing, choosing the right crypto wallet helps you move ahead of the game by enhancing your trading experience. But how to choose the right crypto wallet? With so many options and types of wallets out there, the question is understandable.
But as a matter of fact, you need not necessarily confine yourself to one wallet. Every wallet has different purposes, strengths, and weaknesses. Just weigh their tradeoffs and find out which suits your needs best. And most importantly, any user can have more than one wallet for the purpose of crypto trading.
Also, you need to educate yourself about every wallet type and its features. Hope this article has been successful in providing you with all the information you need regarding crypto wallets.
Also, if you are thinking of developing a crypto wallet app, you can simply reach out to our team of blockchain experts. Let’s talk!