Cryptocurrencies surged into the mainstream in 2017. Millions of people throughout the world began investing in digital currency all at once. This surge in popularity for a new technology was made feasible by massive hype and underlying technologies. The cryptocurrency wallet, which first appeared in 2012, was one of the major technologies that enabled such rapid growth.
Cryptocurrency wallets are now available in a variety of designs and sizes. Businesses and entrepreneurs in Dubai are looking for opportunities to invest in and profit from this new currency revolution. One such opportunity is crypto wallet development Dubai, which involves creating and designing secure digital wallets specifically tailored for the needs of cryptocurrency users in the region.
With that in mind, let’s look at how you may get started with your own cryptocurrency wallet.
What is the definition of a cryptocurrency wallet?
First, the fundamentals: What is the definition of a cryptocurrency wallet?
A cryptocurrency wallet functions similarly to a bank account for your cryptocurrency. It tells you how much bitcoin you hold, how much it is worth in other currencies, and makes it simple to transfer, receive, and exchange cryptocurrencies.
However, keep in mind that a cryptocurrency wallet does not store your cryptocurrency. All cryptocurrency is technically stored in a blockchain, which is a ledger that maintains track of every coin in a certain form of cryptocurrency.
In this sense, crypto wallets are similar to bank accounts. When your bank account shows that you have $1,000, it does not necessarily mean that $1,000 is in an account in your name. It means that your bank owns $1,000,000, and $1,000 of that is yours. Your account gives you the ability to manage and use that money, but it is only an interface for interacting with it; it does not actually keep that money.
The same holds true for bitcoin wallets. They, like an account, hold the information that confirms you own cryptocurrency. The blockchain stores information on how much cryptocurrency you own, and the blockchain integrates with your wallet. Just like a bank!
You can lose your cryptocurrencies, just like a bank, if you lose track of your account information. If someone steals the data that proves your cryptocurrency is yours, they can claim it as their own. Because crypto isn’t as well-established as banks (by design, to be sure), keeping your crypto safe is mostly the responsibility of cryptocurrency wallets.
A cryptocurrency wallet has no distinguishing features other than the fact that it maintains the information that proves your cryptocurrency is yours. You could possibly write that information on a piece of paper and use it as your wallet (just don’t lose it!)
While maintaining your crypto on paper is undoubtedly one of the most secure methods of storage, it lacks features. It can only “receive” and “store” cryptocurrency. Those interested in developing bitcoin wallets must therefore:
- Create an app or gadget that stores a person’s bitcoin information.
- Make sure this information is as safe as possible.
- Add features that make their cryptocurrency wallet more valuable than competitors.
The different types of cryptocurrency wallets
As previously stated, a cryptocurrency wallet can be anything that contains information proving you own your coin, including a piece of paper. Of course, enterprises interested in developing bitcoin wallets aren’t interested in selling paper.
The four most frequent types of bitcoin wallets accessible today are listed below. Each offers advantages, disadvantages, and hazards. The more secure something is, the more complicated and limiting it will be. You want to select the format that best meets your objectives and balances these considerations.
Web-based bitcoin wallets are popular in the same way that SaaS and other web-based products are. They’re simple to use, available on all of your devices, and operate regardless of the user’s computational power/storage.
Web wallets have the disadvantage of being limited in terms of security and features. Because downloadable mobile apps are more popular with consumers, you may have difficulty convincing them to utilize them.
This takes us to the topic of mobile cryptocurrency wallets. Unsurprisingly, they are the most popular among crypto users today. They are simple to use, can be carried with you wherever you go, and can take advantage of smartphone hardware (such as NFC or Bluetooth).
The disadvantage of mobile wallets is that they are frequently stranded on a person’s phone. Furthermore, because mobile is such a popular medium these days, there is a plethora of spyware masquerading as a mobile bitcoin wallet. You must not only keep things secure, but you must also communicate to your users that your wallet is as secure as it claims.
Desktop cryptocurrency wallets are typically the most feature-packed. These, like mobile wallets, retain all of your cryptocurrencies on your computer. You don’t need an internet connection for these wallets to work, though they offer many of the same benefits that you get with a web-based wallet.
The pros of desktop wallets are that they’re secure, geared towards the tech-savvy, and have a feeling of authenticity that mobile and web apps usually don’t. Consider the contrast between an app like Acorns and Fidelity Investments. The first is more approachable, while the second is more robust.
However, this can also be a hindrance to desktop wallets. Cryptocurrency is no longer limited to the technologically skilled. As such, desktop wallets can be intimidating to users, assuming they’re even aware they exist.
The hardware wallet is the final type of cryptocurrency wallet. This is perhaps the “classiest” way to store your cryptocurrency and functions similarly to a paper wallet.
Most hardware wallets are just physical devices that plug into your computer and store the information that confirms you own your cryptocurrency (your address and keys). They typically take the form of flash drives or portable hard drives with a small LED screen. This screen will display things like your address and key, the amount of cryptocurrency you own, and so on.
These wallets generally don’t do anything beyond this as they, by design, don’t connect to the internet. Encryption is standard for these devices as well, making them very secure. If someone forgets their encryption password, though, then that person will likely lose their cryptocurrency as well.
As such, hardware wallets are great for security-conscious crypto holders and stablecoins. However, a more flexible solution will work better for those who want to trade unstable crypto assets.
Creating a cryptocurrency wallet on your own or using a custodial service
The custodial wallet is another fork in the road you’ll encounter once you start developing bitcoin wallets. Custodial or non-custodial hot wallets are available.
Custodial wallets store your cryptocurrency on your behalf. You can still trade, transmit, and receive cryptocurrencies, as well as manage it in other ways. You simply do not keep your wallet’s actual keys and address. Coinbase, which functions similarly to a stock trading program, is one of the most popular custodial wallets.
Non-custodial wallets allow you complete access to your cryptocurrency. They are simply the medium through which you govern it.
Custodial wallets are often easier to use, have more features, and the advantage of keeping track of your cryptocurrency for you. You will not lose your cryptocurrency as long as you have the program downloaded and your username/password memorized.
On the other hand, you rely on the custodial wallet to maintain track of your cryptocurrency correctly. You lose your cryptocurrency if they are hacked, subjected to a government confiscation, or simply decide to close operations.
When weighing these two possibilities, keep in mind the type of product you intend to create. Custodial wallets are becoming the most popular type of wallet. The popularity of custodial wallets stems mostly from consumers viewing cryptocurrencies as a marketable asset rather than a currency. However, as time passes and the market becomes more stable, non-custodial wallets are expected to take control.
6 Components of Cryptocurrency Wallet Development
1. Authorization by the user
Your company, like any other business that relies on security, must provide your users with a high level of safety. Cryptocurrency isn’t quite as dangerous as it was a few years ago, but it’s still a financial asset that should be safeguarded. It is critical to keep things encrypted, locked behind logins and 2FA, and to implement a robust account recovery mechanism.
2. Offline accessibility
A non-custodial wallet is required for offline access to a crypto wallet. It also necessitates the storage of a person’s address and keys on a personal device such as a computer, smartphone, or hardware wallet.
Consideration of offline access in the building of your cryptocurrency wallet might lead to features such as offline crypto transfers and more secure crypto storage.
3. Capabilities for scanning QR codes
QR codes and NFC tags have a lot of promise for the development of bitcoin wallets. They enable contactless fund transfers, which have already begun to replace traditional credit and debit cards.
Adopting NFC and QR codes as bitcoin payment methods is not only a terrific way to embrace the tech-y side of this technology, but it is also beneficial for P2P payments.
4. Notifications of transactions
Of course, every software that facilitates financial transactions should include transaction notifications, and Bitcoin is no exception. Notifications provide security and validation. And on exchange sites like Coinbase, they can notify consumers when the value of assets they own has increased or decreased.
5. Features of trading and exchange
As previously said, most cryptocurrencies have not yet achieved a degree of value stability. And they are likely to remain that way until they are widely accepted by consumers, corporations, and governments.
Until then, many of your users will most likely use cryptocurrency as a transferable asset rather than a money. As a result, you should think about introducing trading and exchange tools to your site. Users may also prefer to exchange their cryptocurrency for fiat currency until it is generally accepted as a payment method. So having a structure in place for doing so is something to think about.
6. Integration of a payment gateway
Finally, linking your cryptocurrency wallet with a payment channel, such as PayPal, is a good idea. It might help to legitimate your wallet and make it more desirable compared to alternatives that appear to lock your cryptocurrency into an app.
Developing a successful cryptocurrency wallet requires careful consideration of various factors. Security, compatibility, user-friendliness, private key management, multi-currency support, development cost, integration with exchanges, compliance and regulation, backup and recovery, and various platform-specific developments all contribute to the overall success of a cryptocurrency wallet. By prioritizing these factors, developers can create robust and user-centric wallets that meet the evolving needs of the cryptocurrency community.