DeFi wallets ensure secure and user-friendly user interfaces that facilitate interactions with DeFi products and protocols, replacing traditional log-in methods of web2 platforms and offering interoperability across all major DeFi protocols and blockchains. In this article, we will take a closer look at different wallets, how they work, and which is the best DeFi wallet available in the market.
What Is A DeFi Wallet?
A DeFi wallet is a non-custodial wallet that allows users to store crypto assets. They offer users a secure and user-friendly interface to interact with the DeFi ecosystem, offering a high level of interoperability across all major DeFi protocols and blockchains. Through DeFi wallets, users can interface with DeFi protocols such as decentralized exchanges, swap assets, access lending and borrowing protocols, staking, yield farming, and more.
Because these wallets are non-custodial, only those that have access to the private key or seed phrase can access the funds in the wallet. The seed phrase is typically made up of 12 random words. Non-custodial crypto wallets are primarily divided into two types, hardware wallets, and software wallets. Hardware wallets look like USB sticks, allowing users to hold their assets offline. Popular hardware wallets include the likes of Trezor and Ledger. On the other hand, software wallets are online wallets that can be accessed through the phone or web browser. Popular software wallets include MetaMask and Rainbow Wallet.
How To Choose A DeFi Wallet?
There are several factors to consider when selecting a DeFi wallet. One of the most crucial points to consider is which blockchain you plan to use the wallet on. For example, suppose you wish to use the Solana blockchain. In that case, consider wallets such as Phantom, Sollet, or Solflare, which can seamlessly interact with Solana-based decentralized apps and protocols. Popular web3 wallets, such as MetaMask, do not offer native support for the Solana blockchain.
Other DeFi wallets are integrated with specific decentralized finance applications, allowing users to interact with these protocols and conduct trades directly from the wallet. MetaMask and Solflare are examples of such wallets. The former enables users to swap tokens from within the app itself, while the latter allows users to manage staking accounts. Argent, an Ethereum wallet for DeFi and NFTs, uses zkSync’s layer-2 network to reduce transaction costs. It also allows users to purchase funds using debit cards and stake at significantly lower fees. Furthermore, it is also integrated with Yearn, Lido, and Gro.
Wallets such as MyEtherWallet offer native support for hardware wallets, making them an excellent choice for users who wish to interact with DeFi protocols using crypto stored in cold wallets. Other wallets, such as Gnosis, put a heavy impetus on security through multi-signature transactions. This means transactions must be confirmed by several designated users simultaneously for them to go through. It also allows users to nominate guardians that can help recover access to the wallet in case the private key is lost.
With so many options, and different wallets serving specific purposes, users may end up using different DeFi wallets based on their needs.
What Are DeFi Wallets Used For?
Once the wallet has been set up, it can be used to store, manage, and trade cryptocurrencies on several DeFi protocols. Users can use the wallet to interact with various DeFi applications such as lending and borrowing platforms, decentralized exchanges (DEX), and other protocols built using blockchain technology. DeFi wallets can help interact with DeFi protocols in a number of ways, such as through staking, mining, yield farming, and lending and borrowing.
Which Is The Best DeFi Wallet?
Let’s briefly examine some of the best wallets currently available.
MetaMask is one of the most popular and widely recognized DeFi wallets in the market. It offers a high level of versatility, supporting ERC-20 and BEP-20 tokens. MetaMask also offers users cross-platform availability and is available across iOS, Android, laptops, desktops, and browser extensions. Furthermore, several popular browsers, such as Firefox, Chrome, and Brave, offer support for MetaMask.
Trust Wallet is another highly popular and user-friendly wallet that supports a vast array of cryptocurrencies. It offers a simple user interface, allowing users to store almost any crypto asset from nearly all major blockchains. The wallet allows users to access dApps and use their products and services. It also features advanced security features to ensure the safety of your funds, and users can quickly backup their wallets to prevent any loss of funds.
Argent is an excellent choice for beginners just starting out in the DeFi ecosystem. It offers users a simple, easy-to-navigate interface and a streamlined design making it extremely easy for users to access DeFi services and products. The Argent wallet is also highly secure and has several security features such as two-factor authentication, biometric authentication, and recovery phrase to ensure user data and funds are secure.
One of the best hardware wallets available in the market, Ledger allows users to store almost all major cryptocurrencies. It can seamlessly integrate with software wallets such as Trust Wallet and MetaMask, allowing users to manage their assets seamlessly. Ledger offers its users two hardware wallets, the Ledger Nano S and the Ledger Nano X, both offering a high level of security for user assets. The wallet also offers community support through software integration, allowing the wallet to connect to several decentralized exchanges.
The Torus wallet is a DeFi wallet that allows one-click login for Web 3.0 applications such as NFT platforms and decentralized exchanges. The wallet acts as a gateway to the decentralized ecosystem, blurring the line between Web 2.0 and Web 3.0 and enabling users to log in using traditional Web 2.0 accounts such as Facebook, Google, or Discord. The Torus Key Infrastructure, ensuring uncompromised security and custody, supports all transfers made using the Torus wallet, providing access to decentralized ecosystems.
The wallet is based on Shamir’s Secret Sharing (SSS) and leverages private keys. Users can create three separate shares placed in different locations. As long as the user is able to access two out of three shares, they can retrieve their private key.
The Phantom wallet is a non-custodial web3 wallet and is the primary wallet for the Solana ecosystem. Phantom is to Solana what MetaMask is to Ethereum. The wallet is available as a browser-based wallet and aims to enable Web 3.0 by allowing users to transfer crypto assets between Solana dApps and their wallet seamlessly. Currently, the wallet supports USDT, USDC, Raydium (RAY), SRM (SRM), and every utility token launched by Solana dApps. It also comes with several features such as NFT compatibility, a built-in exchange, crypto staking, Web 3.0 support, and compatibility with hardware wallets such as Ledger.
How to Withdraw Funds From Your DeFi Wallet?
Some users may find using a DeFi wallet a little tricky. This is because they cannot directly transfer the funds to their bank account. Instead, users must first withdraw their funds to a cryptocurrency exchange before transferring them into their bank account. While there are several prominent exchanges to choose from, it is imperative to remember that several exchanges are facing significant regulatory pressure as regulators crack down on the crypto ecosystem.
In such an uncertain and hostile regulatory climate, CoinSmart is one of the best options for withdrawing funds from your DeFi wallet. Founded in 2018, CoinSmart has established itself as one of the most trusted cryptocurrency exchanges worldwide as a publicly traded company. The exchange offers several features for both beginners and advanced users. The platform also offers enterprise-grade security and cold storage and allows users to fund their accounts through SEPA, wire transfers, and e-transfers.
To withdraw their funds from their wallet, all users must do is follow the steps listed below.
- Create your CoinSmart account using your email. Ensure that you set a strong password to protect your account.
- Once you have created your account, complete your KYC.
- After completing your KYC, you can transfer funds from your DeFi wallet to your CoinSmart wallet.
- Once the funds are in your CoinSmart account, you can transfer them into your linked bank account.
Choosing The Best DeFi Wallet
DeFi wallets have made it easy for users to access decentralized finance, enabling interactions with DeFi protocols and offering a high level of interoperability. Furthermore, they allow users to have complete ownership of their assets while maintaining their anonymity; a must for DeFi. While there are multiple options, we have highlighted some of the most popular wallets to choose from. Some wallets may support more assets, while others may offer greater security. Ultimately the choice rests in the hands of the user, depending on their requirements.
Our recommendation is to select a wallet that brings versatility, robust security, and compatibility with the assets you’re keen on trading. Software wallets may offer convenience but may have some security concerns. Hardware wallets keep your assets offline and also give you access to DeFi apps. However, they do not offer the same level of convenience as a software wallet.
Disclaimer: The contents of this blog are strictly for information purposes only. The opinions expressed in this blog do not have any connection to CoinSmart, and they do not aim to provide you with investment advice. It is important that you do your personal research and/or consult an investment advisor to determine what is right for you.