Introduction to Cryptocurrency Wallet'Security
Wallets are gateways to cryptocurrencies and, as the blockchain space has grown, the variety of wallets available has also grown. Most people who want to dabble with a small amount of crypto, start off their crypto journey by setting up hot wallets in the form of phone, desktop, or web application. Hot wallets focus primarily on convenience and are great for making coin transfers on the go.
While hot wallets may be convenient, they force users to sacrifice security and the underlying basis of crypto: having complete control of one’s wealth. Thus, as people get a stronger grasp of blockchain technology and understand how to improve security of their Crypto assets, they either opt for hardware wallets, or even brain wallets.
User Experience is Important
Given that wallets are gateways to cryptocurrencies, the user experience they provide to new market entrants is of critical importance with respect to the growth of crypto adoption. This piece will take a look at the user experience of several popular wallets. Each section below will cover two main user experiences of a wallet: set-up and performing transactions.
Here’s a summary:
Brain Wallets: To securely setup a wallet, users must download a brain wallet application from GitHub or use an online tool. Once they’re offline, user can enter a salt and passphrase to generate a wallet (private key). The private key will be exposed and must be immediately stored securely. Brain wallets provide a one-type transactional facility as transacting will expose the private key to some web front. Therefore, any time coins are sent from a brain wallet, a new one has to be made. Brain wallets can be challenging to (securely) set up for those who lack technical know-how and provide close to zero positive UX features in terms of transactions. In addition, for each coin and for each public address of that coin you need to have a separate brain wallet.
Hardware Wallets: Hardware wallets, like Ledger, can be setup by connecting the wallet to a computer device that has downloaded the supporting software of the hardware wallet (like Ledger Live). After that, a pin is set on the hardware device to initiate its functionality. Next, users move along the steps presented in the supporting software till they are prompted to create a 24-word seed phrase that is typically written down somewhere. Once the seed phrase is approved, private keys are created and stored in the hardware wallet.
Next, applications, one for each blockchain, are downloaded on the wallet in order to receive and send transactions. Transactions are initiated on the supporting software, like Ledger Live, and are approved through the hardware wallets’ button-initiated commands. Hardware wallets have a lengthy set-up process, but the process is well-explained by their supporting software. Receiving and sending funds for the first time requires a lengthy process as support for each coin has to be individually set-up.