When new technology first emerges into the mainstream, it can take a while to establish a set of terms that will stick and become widely used. By now, it seems that the term ‘web3’ has made a sufficient impact in the media to be known by a wider audience.
Web3 is the vision of an improved internet of the future – one where privacy is better protected and users get back the value they create on the web with their content. It’s an internet that doesn’t collect or sell personal information for marketing, allows users to only share their data selectively, and supports an expanding digital economy that rewards active communities and quality content.
Crypto wallets have also become more familiar to the public over the last couple of years, but a lot of confusion persists about their use and security. In any case, what do cryptocurrencies and crypto wallets have to do with improving the internet?
Crypto wallets and the new internet
Quite simply, a decentralized web3 – the way it’s envisioned by the crypto community and internet data privacy advocates – can not exist without wallets. The cryptocurrency wallet holds everything that a decentralized app needs to know about the user, without having to collect any personal data like name, email, or phone number. How does this work?
The address of the wallet is the user’s identity ‘document’, providing information about transaction history with a particular web3 application. A web3 site ‘knows’ how to interact with the user based on things like the wallet’s asset balances, history of DeFi interactions, and NFTs that represent membership or exclusive access. The app doesn’t need to know anything about the user beyond their web3 experience.
That being said, a user can interact with the same application using multiple addresses/accounts, both from the same wallet and from different mobile and browser wallets. Web3 wallets that support multiple accounts and multiple networks in the same interface are created to make this kind of interaction easy.
Non-custodial, client-side, open-source
At this point, there are hundreds of ways to hold crypto – Robinhood and Coinbase, PayPal and Venmo, and even traditional banks are getting in on the action. But for a truly decentralized internet, web3 wallets need to be non-custodial, client-side, and open-source.
Crypto exchanges like Robinhood, Coinbase, and Binance provide crypto wallets, but they are actually very similar to traditional banks – custodial and centralized. This means they hold all the users’ assets and can freeze accounts and block transactions at any time.
Another concern is the lack of transparency in the way such platforms manage and protect users’ funds and data. Non-custodial web3 wallets are often (though not always) open-source. In other words, their code is open for anyone to audit, find bugs, suggest improvements, and borrow from. Even if you don’t have the knowledge to audit a wallet’s code yourself, open-source code makes wallet developers accountable to other members of the community and thereby raises the standard of trust and security.
Browser wallet security
So what makes a wallet secure, especially when it’s specifically designed to constantly interact with the internet? How can users protect themselves when using web3 wallets?
Non-custodial, client-side wallets don’t collect personal information and don’t store it on centralized servers, so wallet keys are generated directly on the user’s device and always remain only in the user’s possession.
Many extension wallets will alert the user when they are about to visit a dangerous site – one that has been blacklisted, lacks a current digital certificate, or fails to pass security standards in other ways. In addition, some browsers work together with extension wallets to provide additional layers of security to website interaction. With attractive and intuitive interfaces, and advanced safety protocols, wallets and browser extensions both have come a long way since the early days of crypto.
Of course, education and awareness of best practices remain essential for staying secure on the web, both the way it is now and as it develops into the web3 we are all building together. You can find help and guidance on using the Enkrypt wallet on this blog, as well as in the MEW Help Center.