The cryptocurrency ecosystem has opened up a gateway for new opportunities and products. An essential component to access the ecosystem is a crypto wallet. There are numerous types of crypto wallets. Each has different attributes with certain advantages and disadvantages. In this article, we explore seven pros and cons of crypto wallets as a whole.
Pros of crypto wallets
Crypto wallets provide the highest level of security when transacting in the crypto ecosystem. Exchanges are prone to hacks. Centralized institutions and their database have shown compromise after compromise. Crypto wallet users own their private keys to access cryptocurrencies and other digital assets. It is similar to having a safe in your house owning the only key to open it.
2. Novel technology
Everyone wants to own the latest Apple iPhone. There is an appeal in owning a piece of novel technology. Crypto wallets are evolving fast. They come in different forms like hardware, software extensions, and mobile apps. Early adopters were able to test public and private key utilization. Novel technology opens doors to new opportunities.
Crypto wallets provide opportunities for the latest trends like NFT acquisition, Axie Infinity, and decentralized finance (DeFi) offerings. These opportunities open doors for creators, gamers, and investors. Crypto wallets are literally the private key to the future.
Cons of crypto wallets
The opportunities in using crypto wallets come with their own set of challenges. The complexity of crypto wallets stands as a key barrier to adoption. Even early movers in the crypto space struggle with a prominent wallet provider, MetaMask.
MetaMask allows users to interact with the Ethereum blockchain. Now, it can access the Binance chain. Users must be careful when connecting to the right platform. They must hold adequate gas or Binance tokens to transact. There are times when the funds do not appear on the front-end of the software, despite it being logged in the blockchain.
2. Malicious actors
Novel technology and opportunities attract malicious actors. The underlying technology for crypto wallets provides more security than centralized accounts. However, there will be malicious actors designing new ways to scam or hack users.
Ledger is a reputable hardware provider. However, their database was hacked, which resulted in leaked user information. Email scams sent to Ledger users attempted to compromise their crypto wallets. It is crucial to stay diligent when using crypto wallets in the earlier phases of adoption.
There is no other way to say it. Using crypto wallets is hard. You have to make sure you have your seed phrase stored somewhere extremely safe, despite it being just a piece of paper. Hardware wallets require extra care for the physical device. There are numerous steps involved when confirming transactions. It is necessary to double-check long alphanumeric addresses. There is the underlying worry that you are doing everything correctly. The simple aspect of difficulty deters many from using crypto wallets.
Self-custody (pro and con?)
The trending word associated with crypto wallets is self-custody. Self-custody is associated as a pro of crypto wallets. Is this entirely true?
If you are technologically savvy and care a lot about privacy and ownership, then self-custody of your funds and other digital assets makes sense.
If you are an average consumer who generally gives consent to websites using your data, prefers the convenience of having someone else hold your funds so you don’t have to worry, and uses apps and software without checking the SHA sum, then having self-custody may not be the best option.
The adoption of crypto wallets and the whole ecosystem will remain in this tension between convenience and ownership. We will give up some aspects of ownership for greater convenience. We can choose to give up convenience to have true ownership of our digital assets.