The first-ever cryptocurrency wallet was released alongside bitcoin (BTC) in 2009. Over the past decade, technology has evolved to become more advanced and gain a variety of features.
In this article, we delve deeper into the evolution of cryptocurrency wallets and how they work.
What Are Cryptocurrency Wallets?
Like with any other form of currency, cryptocurrencies need a place where they can be stored. This is where crypto wallets come in.
They allow users to manage all of their cryptocurrency balances in one place and support easy transfers through the blockchain. Some wallets allow users to sell or buy assets, as well as interact with decentralized applications (dApps).
Cryptocurrency wallets work by utilizing cryptographic keys, a long string of random and unpredictable characters, to secure and manage a user’s currency holdings. These keys are essential for conducting transactions on a blockchain network. There are two types of cryptographic keys every crypto wallet has: public and private.
- A public key acts just like a bank account number and can be shared widely with anyone else;
- A private key acts like a PIN.
The First Ever Crypto Wallet (2009)
The first ever cryptocurrency wallet was created by Satoshi Nakamoto alongside the first ever digital asset, bitcoin (BTC).
In order for the wallet to be usable, a user had to download the entire history of the BTC blockchain. This was doable at the start, however, as the coin gained more popularity and expanded, so did the period of synchronization.
According to a review published by Ethereum founder Vitalik Buterin in 2012, by then, the cryptocurrency wallet had to be running practically constantly so that it could always be updated with new BTC data.
“Because it is a full node, the client must download the entire (currently 6 gigabyte) blockchain to operate, which can take up to a few days the first time you start the client and several minutes to an hour every time you start the client afterward if you do not keep it running constantly.”
The First Mobile BTC Wallet (2011)
The first ever mobile bitcoin wallet application released for Android was created in 2011 by Electrum. The company claims to be “one of the most popular bitcoin wallets” to exist and made it easier for users to manage their BTC holdings on the go.
With the growing interest in cryptocurrencies, third-party wallet services began to emerge, offering users alternatives to the original bitcoin client’s built-in wallet. Such services aimed to provide more user-friendly interfaces and additional features, contributing to the diversification of the cryptocurrency wallet ecosystem.
Hardware Wallets (2014)
Around 2014, hardware or cold wallets entered the cryptocurrency scene.
Such wallets specialize in storing private keys offline, reducing the risk of online attacks, and became more popular among users who prioritized the safety of their cryptocurrency holdings.
One of the pioneers of these hardware wallets was Trezor.
Multisignature Cryptocurrency Wallets (2014)
Multisignature (also known as Multisig) cryptocurrency wallets require multiple signatures to authorize a transaction.
Unlike traditional wallets that rely on a single private key to initiate transactions, multisig wallets involve multiple parties or private keys collaborating to validate and authorize transactions. This added layer of security makes these wallets particularly useful for enhancing the protection of cryptocurrency holdings, especially in scenarios where multiple individuals or entities are involved.
Popular examples of multisig crypto wallets include Armory, Guarda Wallet, and Linen Wallet.
Ethereum Wallet Enters the Scene (2016)
In 2016, ether (ETH), the second-largest cryptocurrency on the market, had introduces its wallet ecosystem.
Ethereum wallets allow users to access their coins and are able to store any digital assets built on the Ethereum ecosystem.
The blockchain explained:
“Ethereum wallets are applications that let you interact with your Ethereum account. Think of it like an internet banking app – without the bank. Your wallet lets you read your balance, send transactions and connect to applications.”
According to the Ethereum website, there are over 50 Ethereum wallets for users to choose from, including Rabby Wallet and Portis.
Token Wallets (2017)
As the crypto industry continued to evolve, so did the cryptocurrency wallets.
By 2017, the world of cryptocurrencies continued to expand beyond BTC and ETH with the introduction of various other coins and tokens in the likes of cardano (ADA). This called for the creation of crypto wallets that would support a variety of tokens issued on different blockchain platforms.
This was the year when Coinbase decided to launch its self-custody wallet as a mobile application, with Robinhood rolling out its Polygon-based wallet on iOS.
The Crypto Wallets of 2023
In 2023, there are three popular types of crypto wallets:
- Hardware wallets;
- Software wallets (or hot wallets): Applications or software programs that allow users to store, manage, and transact with their cryptocurrency holdings;
- Paper wallets: a physical document that contains the information necessary to store and access cryptocurrency funds offline.
According to data published on SkyQuest, the platform projects that the cryptocurrency wallet industry will surpass $60 billion by 2030 as preference for digital assets continues to grow.
Today, wallets range from simple apps to more complex security solutions. If you are looking for the best crypto wallet, ensure you do your own research and make decisions based on your personal needs, preferences, and goals.