Crypto Academy Week 3 Homework Post for @sapwood: Blockchain Wallet Chapter 3

Steemit Crypto Academy

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The Homework Task by @sapwood

(1) Have you ever used a Hardware/software wallet? Which one is having a better security advantage?
(2) What are the important points to consider when you deal with an Exchange(centralized) Wallet & Decentralized wallet. How do you secure/restore both types?
(3) Give an example of a Web 3.0 wallet and what are the distinct uses of a web 3.0 wallet? Have you ever used any Web 3.0 crypto Wallet? Examples?


Hardware vs Software Wallets

Generally, cryptocurrency wallets can be separated into 2: Software Wallets & Hardware Wallets.

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Source: Metamask Extension

Software Wallets

Software wallets are mostly always connected to the Internet. Some examples of this kind of wallet are Coinbase, or mobile wallet applications (like Abra and Coins.ph in the Philippines). These kind of wallets are still vulnerable to hacks, also you don't control your personal private keys.

Another form of hot wallets is called a desktop wallet. This is a wallet that can be installed on your computer or other devices such as phones where you still keep your private keys, hence the possibility of encrypting it. Although much safer from being hacked, in cases of hardware failure - you will lose your assets.

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Source: Bitcoin WIki

Hardware Wallets

If you have a huge amount of cryptocurrency - this kind of wallet might be one of the best option for you to store them.

Harware wallets are physical offline devices which you plug into your computer when you need to make a transaction. It kinda looks like a flash drive. Trezor and Ledger are 2 brands that are very popular among cyprocurrency enthusiasts and investors.

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Source: PicPedia

Hardware vs Software Wallet Security

If you'd ask me, I'd say hardware wallets are more secure than software wallets. PRIVATE KEYS. Most software wallet private keys are not with you while hardware wallets are invulnerable to offline hacks, are popular because of the extra security they provide.


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CEX Wallets vs DEX Wallets

Exchanges, can be divided into 2 primary categories:

  • Centralized Exchanges
  • Decentralized Exchanges

Wallets in Centralized Exchanges

Centralized exchanges are platforms where there's a third party to monitor the transaction & secure the assets on behalf of the buyers and the sellers. Transactions on this exchanges are not tracked or readily available on the blockchain. Most centralized exchanges, if not all, will require you to do a KYC before you can transact or before you can do bigger transaction. In general, there are different levels and limits depending on what and how many information you have submitted.

Centralized exchanges generally has protections in place to secure and restore your account in case something unfortunate happens. The process is not per wallet/crypto but rather, for the whole account. Like password, 2FA, etc.

Wallets in Decentralized Exchanges

Decenralized exchanges are similar to centralized ones with a few major differences. In the DEx, all transactions and cryptocurrency are on the blockchain. P2P and other features are common in these exchanges. In the DEx, you also control your own account.

Wallets in DEXs are usually based on one cryptocurrency platform, like Uniswap is for ETH and JustSwap is for TRX. Securing these wallets is as simple as keeping your private keys for your main address safe and sound, restoring will simply mean importing your account onto the exchange again. Usually you'd be using wallets like Trust or Metamask or TronLink for these kind of wallets.

More info about Centralized vs Decentralized exchanges here: https://www.upgrad.com/blog/centralized-vs-decentralized-cryptocurrency/


Web 3.0 Crypto Wallets

Here's a quick table showing the comparison between web 1.0, 2.0, and 3.0 wallets:

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Source: Unstoppable Domains

The wallets are able to execute transactions on the internet including setting token addresses for blockchain domains or making online crypto payments.
Unlike a fiat wallet that may contain coins, a Web 3.0 wallet doesn’t actually hold coins (Bitcoin, Litecoin, ERC20 and ERC721 tokens). It merely gives you control over tokens located on a blockchain and allows you to pass control to other wallets e.g. transfer a blockchain domain 9.

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Source: Metamask Extension

In general, web 3.0 wallets are wallets you used to use a certain currency that's connected to a certain dapp or platform. Like these following wallets:

  • Metamask
  • TronLink
  • Trust Wallet

Personally, I have used all 3 wallets given above as an example. I've used MetaMask and Trust wallet a lot because I did transaction on ETH and ERC20 coins, for TronLink I haven't used it that much because I haven't tried the TRX platform that much. With the changes in Steemit being able to get TRX coins, I guess I'll delve deeper into the Tron platform starting soon.


Thanks a lot for reading!


Images with no source were made by me. Thanks @sapwood, @steemitblog, @steemcurator01, @steemcurator02.