The need for a safe crypto space has never been greater. We’ve all seen how Bitcoin and other forms of digital cash are widely circulating across investment funds, accumulating astonishing profits in the newly-opened crypto business. Given the fact that the crypto capital resides in a virtual vacuum, all the efforts are being put forth to improve its security.
Even though there has already been a variety of so-called digital wallets, the crypto storage industry doesn’t feel over-saturated. So, if you’re an enthusiastic entrepreneur, launching a crypto wallet can be a feasible business plan.
Knowing that there is a bright business climate for developing such a product, let’s move on to the subject matter — what are users looking for in a crypto wallet? Believe it or not, you’ll get half of the answers once you wrap your head around the idea behind blockchain wallets and the other half when you learn how to distinguish between different wallet types.
What Is a Bitcoin Wallet?
Lesson number one — crypto wallets don’t store your crypto assets simply because cryptocurrencies never leave their “birthplace,” known as the blockchain. That is to say, what happens on the blockchain, stays there.
Now, you might say, but I do own some Bitcoin! Well, what you own is a file containing information that gives you the right to manage the designated “coins.” In this setup, crypto wallets play an essential role. They establish the interaction between you and the blockchain. More precisely, crypto wallets are specialized software platforms or apps or devices with their own software that has the exclusive right to generate blockchain data.
This data comes in the form of a unique set of keys: a public key (and its compressed version a public Bitcoin address) and a private key, which serves as a password. Thus, when you open or set up a wallet, the wallet will generate this key set just for you.
While the relation between public and private keys corresponds with a username and a password, blockchain keys are created randomly. The public key is generated first, as an extremely long 256-bit alphanumeric string that appears in the hexadecimal format of 64 characters and a size of 32 bytes. Then the private key makes a signature to verify the wallet’s owner and serves as a base for creating a public key. The public key is also a 256-bit long string, mathematically derived from the private key.
And, that’s the configuration of crypto wallets in a nutshell. Now let’s see what other functions they can do.
The Role of Crypto Wallets
Generating public and private keys is the original role of crypto wallets in order to establish a connection between the blockchain and the user. That’s why creating a wallet is a prerequisite you have to meet before buying digital currency. It’s also the reason why these programs are called wallets — they store the info labelled to your newly-acquired coins or tokens.
However, with the development of the crypto industry, modern wallets started providing a range of extra built-in functionalities. Depending on the type, you can use a crypto wallet to:
- Send and receive cryptocurrency to another wallet address or crypto exchange;
- Check the balance of all your wallet addresses generated under that wallet;
- Have an overview of market trends and other information about the crypto you own;
- Buy crypto with your local currency through a wallet-integrated intermediary;
- Store NFT collectibles;
- Swap tokens with another user;
- Approach crypto browsers and get access to various DeFi platforms.
Certainly, no wallet delivers a full package of all listed features. First, wallets can differ on numerous grounds. Some wallets support only a single currency, so swap options are off the table. Other wallets are oriented towards the Ethereum-based tokens as representatives of the DeFi community, and their connection with DeFi platforms comes naturally. Finally, wallets can be a product of a large cryptocurrency exchange (Coinbase or Bitbuy), in which case, their role is to simplify your connection with that exchange and give your faster access to its trading services.
Types of Cryptocurrency Wallets
However, the core distinction among crypto wallets revolves around their method for storing private keys. In this respect, there are only three or four (if we count the nearly extinct paper wallets) types.
Web or Online Wallets
You can approach web crypto wallets from any device, and such high accessibility makes them the most user-friendly solution for storing and managing your crypto. Most frequently, web wallets are custodial wallets. They come as an in-platform product of centralized crypto exchanges in the same welcome package as your exchange account. Despite their amicable design, web wallets aren’t the most desired scenario for safe crypto storage since your private keys stay exposed online in the hands of the crypto exchange.
However, there are a couple of online wallets operating independently, and you can install them with one click as a browser extension. In both cases, the level of security can be concerning, especially for placing large crypto amounts.
The crypto industry also offers a range of options for storing your crypto in a mobile app or a desktop wallet app. Apps are as convenient as online wallets — particularly mobile wallets since they allow you to keep your holdings in your pocket and make seamless on-the-go transactions from your iOS and Android mobile device.
On the other hand, desktop wallets are the most sophisticated form of crypto storage in terms of functionality because of their capacity to display numerous market insights and price charts for a real trading experience.
When it comes to the security of your private keys, cryptocurrency wallet apps are much safer than web platforms since your private keys stay in the device. In other words, your keys will be as safe as you can do in your power to protect them. Don’t forget that internet-connected devices are also vulnerable to hackers, malware scams, and physical damage.
Hardware wallets are the total opposite of the previously listed crypto-wallet options. They are tangible devices with a USB-like appearance and cable-connection port to your desktop (some advanced models also offer BlueTooth connection and mobile-phone compatibility). Accordingly, when you store your crypto on a hardware device, you do need a software interface to establish contact with the blockchain and transfer funds, even though the wallet device comes with its own simple software and small display.
This computed part is reserved for storing your private keys. So, despite the extra-software intervention, hardware wallets don’t let your keys outside their space. Even if your computer is infected or attacked, there will be no trace of your private keys offline. As such, we can say that hardware wallets are a supremely safe approach to managing crypto.
However, since hardware wallets aren’t free and require additional setup, some users find this way rather rigid and inconvenient. The good thing is that market-dominant hardware wallets like Ledger Nano and Trezor offer integration with plenty of user-friendly apps and platforms, so you can have both security and convenience.
Factors to Consider When Making a Cryptocurrency Wallet
Now that you know in what direction your business plan can move let’s single out the viable investment options. Hardware wallets are out of the game as they require industry-level tech support, but web platforms and wallet apps are quite possible for an individual or a young fintech startup.
For that reason, we’ve listed all the necessary factors to consider in the creation of a new hot-wallet project:
- Robust security measures— dealing with valuable digital assets requires the highest security norms, such as 2FA (two-factor authentication), multi-signature withdrawal permissions (if custodial), seed phrase, face recognition, tier-based verification, whitelisting, etc. The options for activating these features should be enabled during the registration process.
- User account and profile — apart from the matching keys, this will enable users to enter their wallet with an added layer of protection and fill in or edit all necessary information concerning their fiat-currency payments (credit cards or debit cards, bank accounts, etc.).
- Sleek crypto transfers and an intuitive dashboard with options for sending and receiving crypto.
- QR code scanner as a method for faster transfers.
- Price alerts and personalized notifications that are based on users’ preferences in a certain market, including changes in the crypto price, new offers, and updates about the wallet itself.
- Transaction history for clear insight into all executed Bitcoin transactions.
- Charting tools that don’t clutter the interface but keep it informative enough. Basic market indicators are a must.
- Compact address book for a better user experience. Wallet holders will have a better user experience with a shortcut to their regular trading counterparts.
How to Create a Cryptocurrency Wallet?
The process of creating a crypto wallet app or platform doesn’t differ from traditional digital products. However, here you’re having an extra responsibility — to establish and maintain a relationship with the blockchain.
We’ve made a step-by-step guide so that you get the big picture in the process of creating a new wallet.
- Draft the Initial Design
For starters, you need to develop a scratch design of the wallet you’re planning to build. If you have substantial IT background, you can do this part by yourself if you have a substantial IT background. At this point, you can find easy-to-use templates on disposal online. You can use the regular open-source Chain-Java libraries and rely on free API.
However, if you aren’t a skilled developer yourself, you can only draw the basic timeline for the creative solution of your new project and ask for a team of professionals to materialize your idea. Even if you don’t get involved in the developing process, you should be aware of the latest trends in app development (UI minimalism, chatbox features, etc.).
- Find a Team of Developers
- Test the Prototype
Once the working draft is done, you’ll have to run different tests on its performance and conduct an in-depth UX survey for relevant feedback.
- Final Development
If the prototype tests went well, it’s time to move on to the final development stage. At this phase, you and your development team need to agree on a few key factors:
- A platform for launching your product
- The number of integrated blockchains (Ethereum (ETH), Litecoin (LTC), or it could be a Bitcoin-exclusive wallet) and a partnership with established crypto exchanges, other wallets and external fiat-to-crypto providers like Simplex or Moonpay.
- Custodial or non-custodial wallet solution.
- Launch and Maintenance
Your job doesn’t stop after launching the product. You should be aware that the servers of your newly-released wallet should be continuously monitored to ensure robust security and consistent functionality. Finally, in this fiercely-competitive industry, you need to be “the eyes and the ears” of all new trends in the crypto storage industry and implement them accordingly.
A Few Words Before You Go…
From a promising idea to a workable product — it can be a rocky road to apply the traditional tools for digital development on the blockchain. There are a few critical challenges you can face on your way to creating a crypto wallet brand.
First, the costs can exceed the initially estimated budget, and you can be unpleasantly surprised by the amount of energy the blockchain consumes to perform its basic functions. Second, there can be technical obstacles in the development stage or, more precisely, in the part of integrating blockchain networks. Blockchain technology is relatively new, so the market is still void of qualified professionals in the blockchain development field. Finally, after settling even the slightest tech detail, you’ll have another challenge ahead — to present your product among the picky crypto audiences.
However, in the current crypto market, there is always a place for a wallet that knows how to maintain a balance between security and ease of use. So, making a crypto wallet with a clearly defined goal and market awareness can be rewarding at the end of the day.