What Are the Top Crypto Wallets to Use in the RSK Ecosystem?
The cryptocurrency industry today is home to more than $1.6 trillion in market cap and macro-factors considered, sky’s the ceiling for the global digital assets space. With the amount of money pouring into the cryptocurrency industry inflating with time, it is also important to consider the safety mechanisms in place — largely crypto wallets – that safeguard the digital assets held by users.
In this guide, we delve deep into the world of crypto wallets, discussing key questions such as what exactly are crypto wallets, the significance of crypto wallets, the different types of crypto wallets and what kind of crypto wallets are available on the market. In addition, we will also discuss the crypto wallets in the RSK ecosystem, wallet integrations and measures to take note of while using any crypto wallet. So, without further due, let us dive into it.
What Are Crypto Wallets?
For the novices in the industry, before setting up a crypto wallet, it is important to fully understand what exactly is one and whether you have any actual need for it. Simply put, a cryptocurrency wallet is just a regular wallet but specifically designed for cryptocurrencies. You do not store physical currencies in a crypto wallet but rather store virtual assets by receiving them in your wallet via the unique wallet address.
To transact and store cryptocurrencies securely, all that is required is a crypto wallet address which is the public key in technical parlance and a user specific private key. Note that your private keys are not to be shared with anyone under any circumstance. If anyone ever asks for your private key, it is very likely they are trying to scam you and your crypto funds could be in danger. Never share your private keys.
A public key or in common words, your crypto wallet address essentially works like a bank account in that it can be shared with any individual or an institution so they can send you funds or ask for your funds once you authorize any such transaction. Crypto being purely digital in nature means the digital assets are not actually stored in your wallet per se. In a similar way, the private key can be considered the equivalent of a bank account password or debit card PIN as sharing either of the two can give someone else complete control over your funds.
The Need for Crypto Wallets?
Sure, crypto wallets are paramount for securing crypto assets and tokens but the use-case for crypto wallets can extend far beyond securing digital assets. For instance, the rising popularity of crypto debit cards has created a lot of demand for companies to start issuing cards that function both as a safe crypto wallet to store crypto assets in and as a tool to make payments in crypto on the go. To date, several big crypto exchanges have released crypto debit cards in partnership with payments giants such as Mastercard, Visa and others.
Furthermore, crypto wallets can also be used for advance purposes such as staking, claiming airdrops and claiming staking rewards. For instance, the rising number of proof-of-stake networks today has made staking a quite essential part of every crypto project where users can stake their tokens and expect staking rewards in return that are directly credited to the source crypto wallet address. While there are separate staking solutions that can be accessed via crypto exchanges and web interfaces, being able to stake via a wallet is more convenient as it allows users to keep all their crypto assets in one place and make them to work and provide yield.
Thanks to the rise of decentralized finance (DeFi), crypto wallets can also be used for swapping tokens directly via a protocol or a DEX such as RSKSwap and to be a part of the governance by staking your tokens.
The need for a crypto wallet is also, to an extent, determined by the kind of crypto wallet one is looking for. In 2021, the market is flooded with a wide variety of different crypto wallets that have their own peculiar features and functions. Among the hundreds of types of different kind of crypto wallets, the key decision is to choose the one that aligns with your requirements. In the next section, we are going to discuss the different kinds of crypto wallets and which could be the right wallet for you based on your needs.
What Are the Different Types of Crypto Wallets?
Today, there is no dearth of crypto wallets and, of course, the types of crypto wallets. Based on your requirement and level of protection, you can choose the right kind of crypto wallet for all your digital assets. However, before we discuss the specific types of crypto wallets, it is important to establish a broad-level differentiation between the type of wallets.
Broadly speaking, crypto wallets can be segregated into two different buckets — hot wallets and cold wallets. Hot wallets are the ones that are ‘always in action’ in that they can be used readily to move crypto assets around or even trade them for fiat. The best examples of hot wallets are wallets held by centralized exchanges. That being said, hot wallets are relatively more risky than cold wallets when it comes to security.
On the contrary, cold wallets are the crypto wallets that are typically not connected to the Internet at all times, thereby reducing the possibility of them being compromised. In essence, by not being connected to the Internet, cold wallets are protected from unauthorized access, cyber hacks and other vulnerabilities. Furthermore, private keys are stored offline within your device. Your keys, your money.
Now that we have established the key differences between hot and cold wallets, let us now examine the different types of crypto wallets in existence today.
As the name might suggest, web wallets can be accessed via any web browser by just feeding in your password. The fact that these wallets can be accessed via any browser means the user is not required to download any specific software for the same. All that is required is to install the relevant web wallet plugin in your browser, noting down your private key (seed phrase), setting up a password and that is it. You’re all set.
The leading web wallet today is Metamask with more than 5 million active users across the world. The rising use of Metamask can largely be attributed to the rapid development of the DeFi and NFT space.
These wallets are installed on your computer system just like any other application. However, just like any other application, the installation is not much different and only requires a user to note down the seed phrase and set up a password. Once done, the user can start transacting crypto assets via their wallet.
Compared to web wallets, desktop wallets are considered relatively safer as users can access their account on the platform the software is downloaded into which ensures user privacy. However, desktop wallets can be susceptible to hacking if there is any malware in the system the wallet is downloaded into. For extra safety, it is always advisable to have a backup of the private key and storing it offline, preferably on a piece of paper.
Mobile wallets, as the name might hint, are crypto wallets that can be operated via your mobile phones. Mobile wallets are the preferred choice when the user regularly shops online from stores or websites that accept payments made in cryptocurrencies.
Considered the most secure type of crypto wallets among all, hardware wallets are typically used by individuals who have a substantial chunk of their net worth tied up in crypto assets. As one might infer from the name, hardware crypto wallets differ from the rest of the wallets in that they are tangible and have physical characteristics unlike software wallets.
Hardware wallets store a user’s private keys in a hardware device such as a flash drive. Although hardware wallets can technically be used just like any other software wallet, i.e., to make transactions, they are primarily used to secure crypto assets in a completely offline manner without compromising on user privacy whatsoever.
Unsurprisingly, hardware wallets are also the most expensive type of wallets as only a handful of companies around the world over are in the business of making secure hardware crypto wallets. However, it is more than worth its value as it gives you unparalleled security and peace of mind. Two of the major hardware wallet issuing companies today are Ledger and Trezor.
RSK Wallet Integrations
Now that we have discussed some key characteristics about crypto wallets, let us switch gears and examine what the Bitcoin-powered smart contract platform RSK has done with regard to crypto wallets. In the next section, we will discuss the key wallet integrations RSK has entered into in the recent past, their implications, and how it benefits the entire RSK ecosystem at large.
Liquality eases the process of accessing the RSK ecosystem in that it supports cross-chain functionality and with an intuitive interface, it allows users to experiment with decentralized applications (dApps), atomic swaps and much more. Let us discuss the RSK wallet and Liquality integration in detail.
Before we dive deep into the nitty-gritty of the integration, it is important to understand what exactly is Liquality. For the uninitiated, Liquality is essentially a crypto wallet that supports multiple digital currencies and allows easy swapping, trade, or just HODLing of crypto-assets. The Liquality wallet provides the best cross-chain interoperability wallet experience to users and recently added support for the RSK blockchain thus expanding the scope for its users by facilitating interaction with the RSK ecosystem.
With the RSK blockchain integration, Liquality users will be able to benefit from atomic swaps between BTC and RSK in just a single click. Furthermore, being a browser extension like Metamask, Liquality is a fairly easy wallet to use and set up.
The wallet requires no user KYC and no account verification that ensures users are always in control of their funds without compromising on privacy. The atomic swaps executed via the wallet ensure there is no intermediary between the two involved networks which subsequently offers a trustless environment to users. Liquality also allows users to import or export their BIP39 mnemonic seed whenever they want to.
However, it is important here to draw a distinction between Liquality and Metamask. While Metamask primarily serves the Ethereum network and ERC-20 tokens, Liquality supports multiple chains such as Bitcoin, Ethereum Web 3 and RSK. This makes it easier for users to hold, swap and trade digital assets across different ecosystems.
Following the integration with RSK, Liquality users can now perform atomic swaps between RBTC and BTC, ETH, USDC, DAI, USDT, WBTC and UNI. The security and efficiency of the Liquality wallet can be estimated from the fact that, to date, it has processed atomic swaps worth more than $4 million without ever incurring any loss of funds.
Users interested in DeFi on Bitcoin can choose to explore the space by swapping their assets for RBTC on Liquality and then using the RBTC to interact with dApps such as Sovryn which allows users to lend, borrow and margin trade their assets. This gives the users or RBTC holders an opportunity to earn yield on their bitcoin holdings without ever giving away its ownership to a centralized entity.
It should also be recalled that in addition to supporting the aforementioned cryptocurrencies, Liquality also supports several fungible tokens such as RIF (RIF Token), RDOC (RIF Dollar on Chain) and DOC (Dollar on Chain) on the RSK Network.
For those not in the know, rWallet is the native crypto wallet of the RSK ecosystem. It is an open-source, decentralized and easy-to-use wallet that allows users to tap all the services and benefits of the RSK ecosystem. Available both on Android and iOS platforms, rWallet’s code-base is open for developers so they can create their own wallet with new features and innovation while at the same time being secured by the most resilient blockchain networks of all.
rWallet is a completely secure and privacy-preserving wallet in that by using rWallet, at no point of time is the user’s data shared or viewed by any third party including RSK. No entity other than the user can access their tokens or view their personal data. The technical documentation of rWallet can be reviewed here.
At present, rWallet supports functionality for 7 languages — English, Chinese, Spanish, Japanese, Korean, Russian, and Portuguese while there are plans to add support for more languages soon enough. In terms of the number of tokens supported, rWallet can be used to store bitcoin (BTC), smartBitcoin (RBTC), RIF Token (RIF) and Dollar on Chain (DOC).
It is worth highlighting that rWallet was launched with native support for RIF Name Service (RNS) which means that users can use their RNS human-readable blockchain domain as their wallet address to receive crypto assets on the go without having to remember or cross-check the long and complex alphanumeric wallet addresses. If the ability to receive crypto assets on easily readable wallet addresses piques your interest then consider registering your RNS domain right now here.
It is imperative to register the domain at the earliest as there is no guarantee the domain you are seeking would be available in the future. Notably, one can register their RNS domain via the rWallet by simply using the dApp browser. As icing on the cake, there is another exciting feature within the rWallet which is its in-app decentralized app browser that enables users to seamlessly navigate through dApps and operate without any need to exit the rWallet. Users can browse dApps such as RNS App, RIF on Chain, Money On Chain and others to leverage all the benefits of DeFi on Bitcoin. Additionally, the rWallet also supports Native Segwit/Bech32 which means users can save further on their BTC transaction fees while using the wallet.
Remember the astronomical transaction fees on the Ethereum network at the height of the famed ‘DeFi Summer of 2020’ when just withdrawing a few stablecoins such as DAI costed users upwards of $30 or sometimes even triple figures in gas fees? RSK fix this and it does it so via the Defiant Wallet.
Let us quickly summarize the issue in hand. Typically, depending on the amount being transacted, gas prices on the Ethereum blockchain can add up to as much as 50% of the total transaction value. In response, and to ensure users are not subjected to such hefty gas fees merely to move their own funds around in a network, RSK and MakerDAO joined forces to provide an alternative that leverages the gas-efficient RSK blockchain via Defiant — a non-custodial cryptocurrency wallet that supports both the Ethereum and RSK network.
For the uninitiated, the transaction cost or in crypto jargon, ‘gas’ is merely the cost that an Ethereum wallet address owner must pay to the network validators to get their transactions approved on the blockchain. This gas on Ethereum, measured in a unit called gwei (1 billion gwei = 1 ETH) went absolutely berserk during the DeFi summer and most recently, during the NFT frenzy that took a hold of the wider crypto industry.
Enter RSK with its native RBTC token which is pegged 1:1 to BTC and is also used to pay for gas in the RSK ecosystem. However, there is a huge difference in the dollar value that is incurred while paying gas fees in ETH compared to RBTC. For instance, a typical RSK transaction that interacts with smart contracts costs less than $0.15 in RBTC compared to more than $30 in ETH.
This begs the question, how can one withdraw DAI at minimal transaction cost? The answer is simple, just convert your DAI to rDAI and withdraw. Users can convert their DAI holdings to rDAI which, in technical terms, is essentially moving DAI from the Ethereum network to the cost-efficient and scalable RSK network. This can be achieved easily via the Defiant wallet that supports both smart contract platforms. Specifically, users can choose the Ethereum token bridges designed by the RSK Infrastructure Team (RIF) for this exact purpose.
The bridge simply locks the tokens that are to be transferred to the said tokens on the Ethereum blockchain and mints the equivalent amount of tokens on RSK, thereby guaranteeing a stable and decentralized exchange rate via smart contracts. Bonus fact, you can be assured about the accuracy of data and price-feeds on the RSK blockchain as it is powered by industry leading decentralized oracles solution, Chainlink.
Coming back to the transfer of tokens, by moving DAI from Ethereum to the RSK network, users can use the stablecoin for virtually every purpose they could on the Ethereum network but with dramatically lower transaction fees. Sending DAI from one wallet to another on the RSK network can be more than 80x cheaper than doing the same on Ethereum.
Most recently, IOV Labs, the entity behind the RSK blockchain announced the launch of RSK Multisig wallet that allows users to choose the number of keys that can be used to open the vault and the ‘threshold’ number — the number of keys required to open the vault. For those not in the know, the term ‘multisig’ means multiple signatures and is typically used to describe accounts that are associated with more than one private key. While this may sound complicated, the primary aim behind a multisig wallet is to eliminate the threat of a single point of failure in case of any outside attack.
The newly unveiled RSK Multisig gives the RSK users an option to manage both — the RIF Savings and Vault – in a safe and simple way via a wallet that requires multiple signatures to execute any transaction. Aimed towards IOV Labs partners and wallets, the RIF Multisig solution can also be used by investors, users, exchanges and other entities involved in the business of handling digital assets and cryptocurrency wallets.
The RIF Multisig allows users to leverage the Gnosis Safe solution that offers a wide swathe of smart contracts, an SDK, a backend and web application and development tools that enable the development of multisig wallets in Ethereum and other EVM networks. For the RSK ecosystem, the Gnosis Safe will be used to enable RSK developers to deploy the Gnosis smart contracts in the RSK ecosystem.
Among other benefits of adopting the Gnosis Safe by using RIF Savings & Vaults solution, RSK developers can use RSK SDKs and documentation to create their own multisig wallets and choose their owners and threshold by themselves. Moreover, the developers can also choose to receive gas in RBTC, receive ERC-20 tokens including RIF tokens and request transactions to other owners for sending RBTC and ERC-20 tokens.
The multisig wallet solution can also be used to send raw transactions, extract the list of pending transactions, confirming pending transactions both on-chain and off-chain, voiding pending transactions and deleting a multisig and withdrawing its funds. All RSK ecosystem stakeholders will be able to benefit from an additional layer of security in comparison to single-sign storage. This means that crypto brokers and OTC traders can distribute the admin keys for their funds to dilute the risk and make sure that no single person is able to withdraw funds on their own.
If you are a developer and wish to integrate the RIF Multisig solution with dApps, you may try out the software via the UI sample app here.
Are Crypto Wallets Completely Safe?
Simply put, the safety of a crypto wallet largely depends on how you manage it. If one is careless about keeping the private keys safe and not doing enough diligence to avoid falling for phishing attacks, then it is very likely their crypto wallets might get compromised. On the contrary, strictly abiding with the recommended security practices for crypto wallets will definitely go a long way.
Always consider or rather mandatorily write down the seed phrase on a physical piece of paper instead of typing it out on your system and storing it on cloud. By having your seed phrase or private keys written on a physical piece of paper, you are eliminating a major attack vector for hackers who might otherwise assault you with sophisticated cyber attacks and steal your keys.
Also, always prefer cold wallets over hot wallets as the former are generally magnitudes safer than the latter. To date, several high-profile crypto exchanges have fallen prey to hackers who have made millions of dollars by attacking the exchange wallets that are essentially hot wallets in technical terms.
Another important distinction to make between the types of wallets is custodial wallets vs non-custodial wallets. The terms should be self-explanatory in that custodial wallets are the crypto wallets where your digital assets are in the custody of a 3rd party. For instance, all centralized exchange wallets are custodial wallets in nature because you are trusting the exchange platform with your crypto-assets and private keys which can easily prove to be a costly mistake if the amount of funds is more than you can afford to lose.
On the other hand, non-custodial wallets are crypto wallets where you have complete control over your digital assets and private keys. However, it is equally important to continue having control over your private key and store it offline for full protection. In the next section, we will run through a few measures that can help you keep your crypto wallet safe.
Measures to Take While Using a Crypto Wallet
The following are some of the measures that you can undertake to ensure your crypto wallet remains safe and secure.
Keeping the Private Keys to Yourself
First of all, absolutely keep your private keys with just yourself. The saying ‘not your keys, not your bitcoin’ is not just a meme but a cautionary reminder of how it is important to take care of the simplest things first to ensure your funds are not compromised by any means. Secure your private keys by writing them down on a piece of paper and keep the paper in a locker or someplace only you have access to. It is worthy of note that even if you are using a cold wallet such as a hardware wallet and somehow lose it, you can still recover all your crypto funds as long as you have access to the wallet’s seed phrase or private keys.
Regular Wallet Backup
Consider taking regular backups of your crypto wallet. This way, even in the case of a computer system not working properly, a history of regular backups will help you restore your funds in an instant. In addition to having multiple backups, one should also consider keeping the backup at multiple locations such as a USB Drive, CDs, and others. As an additional security layer, consider setting a strong password for the backup.
Regular Software Updates
Next, regularly update your wallet software. Old and non-functional software can be an easy target for cyber attackers looking to assault crypto wallets and extract the asset it holds. It makes sense, as the latest version of the software will have the best security mechanisms in place which will, subsequently, also bolster the security of your digital assets.
Using Multisig Wallets
The next thing to consider is having a multisig wallet as we discussed in a section earlier in the guide. The RSK Multisig solution helps in adding extra security mechanisms to safeguard your crypto assets from hackers. As a multisig transaction requires approval from multiple entities for transacting a business, it mitigates the risk involved with transactions by limiting the power of a single controller or server.
Beware of Phishing
Finally, avoid getting phished. Sometimes the simplest of things get overlooked the most and phishing is one such attack mechanism. Always check the URL of the website you are visiting is correct and secured. Never login via your web wallet to a dApp when you are not sure about its authenticity. Also cross-check the social channels of a project.
All things considered, the importance of having a secure crypto wallet at your disposal cannot be overstated. The crypto industry is still very much in its early days and to store the new asset class now over the next few years could be life-changing for investors. To ensure long longevity of your crypto-assets, it is important to invest in a quality cryptocurrency wallet.
What kind of wallet you choose completely depends on you, your appetite for risk, the amount you are willing to spend to get a crypto wallet and several other factors. Hardware wallets are usually considered the golden standard among crypto wallets but it is not necessary to own a hardware wallet if you really want to secure your digital assets.