Crypto wallets have always been considered the gateway to Web3.

Whether you are a high net worth investor or an individual player, as long as you need to trade virtual currency or mobilize smart contracts, you need a crypto wallet as a tool to open the channel - it is not only a place where you store digital assets, but also your entry point to various platforms, trading markets and applications.

But when you start to understand, you will find that there are so many wallet options that it’s a headache: hot wallet, cold wallet, single signature, multi-signature, AA... Which one should I choose? !

In this article, Portal Labs will take you to understand the characteristics and uses of different common types of wallets, and combine them with specific usage scenarios to help you choose the most suitable wallet combination.

Hot Wallets vs Cold Wallets: Online vs Offline

Choosing a hot wallet or a cold wallet is similar to whether you keep your money in your pocket for easy access or lock it up in a safe for safety.

Hot wallet: your portable payment tool

Hot wallets are the most common type of crypto wallets. Every player will have at least one hot wallet. Common hot wallets include MetaMask, Rainbow Wallet, Trust Wallet, etc.

Hot wallets are always connected to the Internet and are used in a similar way to Alipay, meaning they can be accessed and operated at any time via a mobile phone or computer (some wallets have also developed browser plug-ins to facilitate web use). It only takes a few steps to complete a transaction or sign a smart contract, making it very suitable for daily transactions or short-term investments.

However, being connected to the internet also brings risks. Hot wallets are vulnerable to hacker attacks, such as malicious links, fake websites, and phishing emails. At the same time, hot wallets require frequent authorization transactions, and careless operation may leave authorization loopholes, resulting in theft of funds. In addition, hot wallets rely on users to manage mnemonics. If the backup is not done properly or leaked, the assets will be difficult to recover.

Cold wallet: your digital safe

A cold wallet is like a safe for storing valuables - it is extremely secure, but the access process is slightly complicated. Its biggest feature is that it is stored offline and is not connected to the Internet, which makes it almost immune to remote attacks by hackers. It is the preferred tool for protecting large assets and long-term holding in the crypto world.

Common cold wallets include Ledger Nano X, Trezor Model T and Ellipal Titan, which are usually in the form of hardware devices, similar in size to USB flash drives or bank cards, and easy to carry and store. In addition, there is a more extreme form of cold wallet - paper wallet, which directly prints the private key or mnemonic on paper for storage.

However, in pursuit of high security, cold wallets are designed to be complex in operation. Whether it is the generation and storage of mnemonics or the need to manually connect to the device for authorization for each transaction, the cumbersome operation requires more time and learning costs for users. In addition, because of the physical equipment, the price of cold wallets is relatively high. If the device is lost or damaged, the process of recovering assets may be stressful for users.

Single-signature wallet vs multi-signature wallet: for individuals or teams?

Generally speaking, we personally often use single-signature wallets unless they need to be managed by multiple people.

Single Signature Wallet: Your Private Keys

A single-signature wallet is like your exclusive key. Only you can open this door and directly manage your account and assets. Most Web3 users start their Web3 journey with a single-signature wallet. In the market, almost all wallets used by individuals are single-signature wallets.

The advantage of a single-signature wallet is that it is easy to operate and does not require reliance on others, making it suitable for individual investors to trade or manage assets at any time. However, the security of a single-signature wallet depends entirely on the user. If the private key or mnemonic is lost, the assets may be irrecoverable; once leaked or stolen, the funds will be directly transferred. Therefore, users who use single-signature wallets need to make backups and carefully manage mnemonics and authorization operations.

Multi-Signature Wallets: A Safe Lock for Teamwork

A multi-signature wallet is like having multiple locks, which can only be opened by multiple people using their own keys at the same time. This design is very suitable for teams or institutions to jointly manage funds, and can effectively prevent the risks brought by single-person operations.

Common multi-signature wallets, such as Gnosis Safe and SafePal Multi-Signature Edition, allow multiple authorized persons to be set up, and transactions can only be executed after the preset number of signatures is met. For example, a 3-person account requires 2 people to agree to transfer funds, so that even if one of the "keys" is lost or leaked, it will not affect the security of funds.

However, the complexity of multi-signature wallets also means that the operation is less efficient. Each transaction requires multiple people to confirm, which is not flexible enough for users who trade at high frequencies. In addition, the setup and recovery process is more cumbersome, requiring team members to maintain good communication and collaboration to avoid funds being unable to be mobilized in time due to process jams.

Single-chain wallet vs multi-chain wallet: Differences in ecosystem selection

In the early days, most crypto wallets were single-chain and focused on a certain ecosystem. However, as users demanded multi-chain and even cross-chain, multi-chain wallets came into being.

Single-chain wallet: quality is more important than quantity

A single-chain wallet is like a pass specially built for a certain "city", which is only applicable to all transactions and activities in that city. Single-chain wallets mainly provide an extremely optimized experience for a specific ecosystem, such as faster transaction confirmation, lower handling fees, and convenient functions for directly connecting to dApps on the chain. In addition, single-chain wallets usually support functions unique to the ecosystem, such as staking rewards, cross-chain IBC operations, etc., allowing users to operate more smoothly on a specific chain.

However, single-chain wallets also have limitations. If you want to switch between multiple ecosystems, single-chain wallets are not flexible enough and may require other tools, which undoubtedly increases the cost and complexity of operation. Therefore, single-chain wallets are more suitable for users who focus on a certain chain for a long time, but not for cross-chain investors.

Multichain Wallet: A universal tool for cross-ecological management

The multi-chain wallet is more like a "global pass" that supports multiple public chains and cross-chain operations, and is particularly suitable for managing assets in multiple ecosystems.

Multi-chain wallets basically support multiple mainstream blockchains such as Ethereum, BNB chain, Polygon, and are compatible with various token standards. This design allows investors to directly participate in DeFi, NFT transactions and cross-chain bridge operations in multiple ecosystems without having to frequently switch wallets, greatly improving management efficiency.

It is worth noting that some networks of the multi-chain wallet need to be added manually by the user, and the chains also need to be switched manually. These operations require a certain learning cost for novices. If not managed properly, it may also lead to the wrong chain or network addition errors. Of course, if you are currently only using some widely used mainstream public chains, then the multi-chain wallet is basically built-in.

AA Wallet: Intelligent Good News for Newbies

If you think managing private keys is too complicated, AA wallet may be more suitable for you.

AA wallet (account abstraction wallet) is a "smart assistant" in Web3 wallets. Its biggest feature is that it manages accounts through smart contracts, supports limit payment, regular payment, social login and recovery, batch transactions and other functions, and is more intelligent and friendly than traditional wallets. In particular, the retrieval mechanism allows users to no longer rely entirely on mnemonics. Even if the private key is lost, the account can be retrieved through the preset recovery mechanism, which greatly reduces the operational risk.

Common AA wallets include Argent and Safe Wallet. Taking Argent as an example, it allows users to set up a "Guardian" to help restore account permissions. If the phone is lost or the account is locked, the account can be restored by the guardian without worrying about the loss of the mnemonic.

However, the shortcomings of AA wallets are also obvious. Since it relies on smart contracts for management, it has higher requirements for the stability of the blockchain itself and the security of the contract. Once there is a loophole in the contract, it may lead to asset losses. In addition, the setting process of AA wallets is more complicated than traditional wallets and requires a certain learning cost. Newbies may need to spend time to familiarize themselves with the operation process.

Wallet portfolio recommendations for Web3 investors

For Web3 investors, the choice of wallet is not just one. Whether participating in crypto product investment or managing long-term locked assets, a Web3 investor needs to prepare at least a hot wallet and a cold wallet - the hot wallet stores a small amount of liquid funds to meet short-term transaction needs; the cold wallet manages the tokens you need to hold for a long time to ensure the safety of fixed assets.

The combination of these two wallets can also cover different needs in the investment process, taking into account convenience and security.

Because hot wallet transactions are convenient, if you want to quickly participate in transactions, project IDOs or airdrops, etc., it is recommended to use a hot wallet to ensure that you can connect to the platform at any time to complete related operations.

However, if the project tokens you hold are in the lock-up stage and cannot be traded immediately, it is recommended to use a cold wallet to manage them, and transfer them to a hot wallet for subsequent transactions or other operations after the assets are unlocked. In addition, if you hold large amounts of tokens, such as several BTC, and do not need to trade frequently, it is also recommended to store such assets in a cold wallet. After all, if something goes wrong with the hot wallet, your entire fortune will be gone.

In addition, if you are not fighting alone, then a multi-signature wallet is a very important choice. Especially for organizations such as crypto funds and DAOs that require multiple people to manage large amounts of funds, by setting up multi-person management permissions, single-point operation risks can be avoided. At the same time, the multi-signature mechanism can ensure that important transactions must be approved by team members before they can be executed, which can also enhance the trust of the entire organization.

Wallet configuration is not the end, but the starting point

Wallet selection is the first step in Web3 investment, and configuration combination is the key link to ensure asset security. For novices, there is no need to pursue "one-step solution", but to gradually improve the wallet combination according to investment needs.

After reading this article, you must have a certain understanding of which crypto wallet to choose. In the next article, we will further explain how to register and use these wallets, so that you can quickly move from theory to practical operation.