Many of you reading this article have probably heard of the term 'wallet,' and for those who haven't, don't worry, because we'll explain it shortly. But what exactly is a wallet? Are crypto assets stored in a wallet? What are the main types of wallets available and how are they managed? What is a smart wallet? What is Metamask and how do we set up our wallet?
Let's get started!
The literal translation into Spanish would be 'cartera' or 'monedero' (wallet or purse), referring to a virtual wallet that allows us to manage our crypto assets. However, this term can be misleading, as it inevitably makes us imagine these crypto assets being physically present inside it.
Essentially, a wallet is a gateway, or, in other words, an access point to the blockchain. Therefore, this 'wallet' doesn't literally store anything (except for the keys). Crypto assets reside within the blockchain as digital ledger entries, and the wallet grants us the privilege to use them.
Now, a wallet is an externally owned account (EOA), controlled by two keys:
– Private key, usually represented as a 12-word seed phrase, which is like a bank's electronic signature that we use to unlock our funds and make transactions on our behalf. The holder of this private key will have total control over the funds associated with it. Thus, the loss or theft of the private key could result in a permanent loss of our crypto assets.
– Public key, which, following the analogy, would be like the IBAN of our bank account—a unique identifier known to everyone that is used to send and receive funds. This public key allows for the generation of different associated addresses, enabling transactions through them.
Therefore, conceptually, we can say that a wallet is the conversion of our real-world identity into the digital world, allowing us to identify ourselves and interact within the blockchain.
If you're thinking of delving into the blockchain ecosystem and taking advantage of the opportunities this technology offers through projects like Domoblock, the first thing you should know is that you'll need a wallet if you want to have full control over your crypto assets without relying on a third party to custody them for you, with all the risks that this can entail.
In this regard, the first thing you should know is that there are several types of wallets, and as we can imagine, each has specific characteristics that present advantages or disadvantages compared to others.
Broadly speaking, we can say that there are two types of wallets: hot wallets and cold wallets.
These are wallets that are continuously online, allowing for quick and easy trading of crypto assets. This means your keys are stored in locations always connected to the internet, which is a practical advantage as it allows you to comfortably perform all on-chain transactions from any device.
However, this characteristic also comes with an associated security disadvantage: because the keys are continuously exposed, they are more vulnerable to hacking and theft. If a hacker can breach the device where the keys are stored, they can steal the funds. This doesn't mean they are insecure, but as we will see, cold wallets offer greater security guarantees due to their operational design.
Web wallets, mobile wallets, and desktop wallets are some of the most popular examples of hot wallets.
This type of wallet is characterized by being more secure as it does not expose keys on the blockchain and therefore not on the internet either. But how do they work then?
Cold wallets are generally hardware devices that store keys without them ever leaving the device. Transactions are signed internally and then sent, already signed, to the corresponding blockchain to assign ownership of the crypto assets to the intended recipient, without compromising the wallet's keys.
Some of the most popular cold wallets are commercial hardware devices from brands like Trezor or Ledger, which provide extra security through a PIN or password to access the device. On the other hand, there are paper wallets, which predate hardware wallets. These wallets basically consist of handwritten notes of keys generated by a specialized website.
The main drawback of this type of wallet, is the potential issues that can arise from deterioration or the safekeeping of the noted keys. Some of the most used websites for generating paper wallets are Bitaddrees and MyEtherWallet.
As mentioned, cold wallets are generally highly secure against malware and other malicious software attacks. However, this security-focused design makes them more complex to use, especially if we are not familiar with the crypto world, and they are rigid in terms of usability. We would need to continuously connect our hardware device and go through a tedious security process every time we need to make a transaction. Therefore, depending on the value of crypto assets we hold and how frequently we use them, we should choose between a hot or cold wallet. A good option, however, would be to combine both types of wallets, achieving a balance between the accessibility and convenience provided by hot wallets and the high security offered by cold wallets. For clarification, we could use a cold wallet to securely protect most of our crypto assets and use a hot wallet to manage a smaller portion of our portfolio, sufficient to cover our daily transaction needs.
It's important to remember that, as with any decision related to protecting valuable assets, the user must make the choice based on their personal knowledge and needs to achieve a balance between security and functionality.
Finally, it's worth noting that hot wallets are typically free and have significantly enhanced their security in recent years, becoming a safe way to store our crypto assets. Similarly, cold wallets are increasingly popular due to their ease of use and improved functionality, but unlike hot wallets, they come with a cost ranging from 50 to 200 euros.
The concept of a smart wallet merges the term "wallet" with "smart contract," representing a significant advancement for the security and usability of crypto assets. This is because it relies on smart contracts that function as a wallet, allowing for the expansion of new functionalities, as it involves programmable code. Among these functionalities, we could find:
Currently, one of the main barriers to the adoption of the crypto world and blockchain technology in general, whether for personal or professional use, is the difficulty many users face when trying to use this technology. Smart wallets significantly improve usability and user experience, creating a familiar and trustworthy environment for interaction, while also providing optimized access to decentralized applications, thereby enhancing the experience and attracting a greater number of global users to the ecosystem.
In this context, the use of multi-signature processes within the wallet itself is great news for business owners, who often forgo using this technology in their business operations due to a lack of trust in their employees. This means that thanks to the emergence and increasing popularity of these types of wallets, companies can rest assured about the security of their funds, as no single individual can compromise them when managed by a team.
Argent is one of the leading and most popular smart wallets for personal use, specifically designed for interacting with DeFi platforms and NFTs.
In the professional sphere, one of the most prominent is Gnosis Safe, which bases its main value proposition on the use of multi-signature transactions.
Metamask is one of the most widely used wallets globally, enabling interoperability between decentralized applications (Dapps) and web browsers.
Its popularity stems from its ease of use; as a browser extension, it allows for quick and simple wallet creation and usage. Furthermore, it was one of the first wallets in the Ethereum ecosystem with these features, providing a better user experience by enabling connection and interaction with countless Dapps, while also offering a hot wallet for safeguarding crypto assets.
Once the Metamask extension is installed in your browser, you can comfortably interact with the Ethereum network and all blockchains compatible with its virtual machine (EVM), such as Binance Smart Chain, Avalanche, xDai, Polygon, or Fantom. This makes it possible to "store" cryptocurrencies and tokens from different networks under a single wallet and thus under a single custody.
Now that we know what Metamask is, we'll look at how to create a wallet and configure the Avalanche network within it.
The first thing you need to do is download the extension to your browser. You'll need one of the following browsers: Google Chrome, Opera, Firefox, or Brave.
Step-by-step guide:
1. Go to the official page for Metamask, where you'll find the "Download now" button. Click on it.
2. Next, the "Install Metamask" option will appear for your chosen browser. Proceed with the installation, and it will be ready in a few seconds.
3. Then, select the "Add to Chrome" option, and in the pop-up window, click "Add extension."
4. Once the previous step is complete, another pop-up window should appear, confirming that Metamask has been successfully added.
5. We recommend that once it has been added to your browser, you pin the extension to the top right of your address bar for easier access to your wallet.
1. If you open the Metamask extension, it will show you the 'Get Started' option. Click it, and two options will appear: 'Import wallet' and 'Create a wallet'.
2. If you don't already have a Metamask wallet, click on 'Create a wallet' to proceed with the creation.
3. The first thing you need to do is create a password. Aim for a strong password by combining lowercase and uppercase letters, numbers, and special characters. This password will be used to access your Metamask account from the device you are currently using for setup, but it will never be the key you use to trade your crypto assets.
4. Once you've created the password, a short video will appear explaining briefly what the recovery phrase is and how to keep your wallet secure. We recommend watching it.
5. Finally, on the next screen, the seed phrase will appear, which you can use to access your wallet from any other device. It is very important to remember that this seed phrase represents your private key in another format, and therefore, anyone who possesses this phrase will have absolute control over the funds linked to the wallet. You must write down this phrase and store it securely, and under no circumstances should you share it publicly.
6. To ensure you have correctly noted down the seed phrase, Metamask will ask you to re-enter it.
Once your account is created, you can now add, send, and receive cryptocurrencies in your wallet on any of the main networks compatible with the Ethereum Virtual Machine.
If you look closely at the main page, at the top you'll see text that says 'Ethereum Mainnet', as, by default, Ethereum will be the only network added.
Let's see how to add another network:
1. Select 'Ethereum Mainnet', and then 'Add network'.
2. A new window will appear, requesting some information. Simply fill it in with the following details:
Network Name: Avalanche Network
New RPC URL: https://api.avax.network/ext/bc/C/rpc
Chain ID: 0xa86a
Symbol: AVAX
Explorer: https://cchain.explorer.avax.network/
3. Once the details are filled in, click save. Avalanche will be added to your wallet, and you'll be able to transact on the network.
4. If you now click the Avalanche Network button at the top of the main page, you will see all the networks you have added, and you can select which one you want to use.
Another way to quickly add a new Ethereum-compatible network without having to fill in all the previous details is by accessing Chainlist.
1. On this page, search for the name of the network you want to add, for example, Binance Smart Chain.
2. Choose the main network (“Binance Smart Chain Mainnet”) and click “Connect wallet.”
3. Then, your Metamask wallet will open and ask you to connect your wallet and confirm the operation by clicking “Next,” and then “Connect.”
4. In this way, you will have added the Binance Smart Chain network in a few simple steps.
Congratulations! From now on, you'll be able to operate with your wallet on different blockchains, having control over your crypto assets.
Let's embark on this exciting journey together!
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598.506,15 €
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