Author: Radim Nakládal
Publication date: 26/08
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What is MetaMask? You may ask. Well, as in the real world, when we want to operate with our financial assets, we need storage, a safe place. In the Crypto space, exactly for this purpose, we have the crypto currency wallets such as MetaMask, Binance and many others. Without crypto wallets, simply put, it’s hard to directly own and control crypto assets, besides other useful features.
So, the main focus of this article is to showcase basic characteristics of a crypto wallet. How does a crypto wallet work? What is a crypto wallet used for? Apart from the crypto wallet security, we will take a look at the MetaMask wallet itself and why it is unique.
Basic characteristics
1. What is a crypto wallet?
Crypto wallets operate with private keys to keep your stored cryptocurrency in them secure. They come in several varieties. Wallets can be either physical devices “cold” wallets, software programs “hot” wallets, online services ”non-custodial” wallets (crypto exchanges), or even paper-based. Accessible as desktop programs, browser plug-ins, and mobile apps.
2. Why do we need them?
They serve as connectors to access the blockchain storing your crypto assets by using public and private keys. Basically, this means that you are a machine-readable proven owner of your coins.
3. How does it work?
These keys have the ability to track ownership, receipt, or spending of cryptocurrencies. A public key allows others to make payments to the address derived from it (similar to the bank account number). A private key enables the spending of cryptocurrency from that address (similar to the PIN code)
4. What is a seed phrase?
Also known as the recovery phrase - backup plan if you lose access to a crypto wallet or generated password. When creating a personal wallet, every crypto wallet platform generates a seed phrase. An important step is to write down the seed phrase and store it in a safe place, as anyone can access your wallet with the seed phrase.
5. Are crypto wallets trustworthy?
The most important criteria for choosing a wallet is, of course, security. Consider the potential security risks involved. These risks can include threats such as hacking, phishing attacks, and loss of access to the wallet due to forgetting login credentials. As long as you have access to your recovery phase you can regain access to your funds in next to no time.
Usually, cold storage wallets or hardware wallets are considered more secure. Their advantage is that they keep your private keys offline. When it comes to wallets from third parties, it's best to remember. “Not your keys, not your coins.”; “Be your own bank.”
Moreover, fiat currency (i.e. traditional money) deposited in banks is usually protected by insurance. However, you won't get the same level of protection with cryptocurrencies. Therefore, we must be rather cautious.
MetaMask
MetaMask is a free crypto wallet available on the web and mobile. Enables to storage and swap of cryptocurrencies, interacting with the Ethereum blockchain ecosystem, and hosting a growing array of decentralized applications (dApps). Giving access to the world of Web3. Raising the standards of usability in blockchain and crypto technology. Vitaly important for the growth of decentralized finance and non-fungible tokens. MetaMask is one of the world's most popular cryptographic applications. Thanks to its user experience (UX), frequent updates, and simple wallet interface.
In 2020, MetaMask was updated to allow integration with Binance Smart Chain(BSC). This means a free switch between Ethereum and Binance crypto wallets, trade on DEXes from both networks, and access dApps from both ecosystems. The decision to expand access to more blockchain networks supports MetaMask's primary goal of creating an interoperable and interconnected Web3 ecosystem.
How Does MetaMask Work?
One of the unique features of MetaMask as mentioned above is that it is used for Ethereum blockchain, Binance Smart Chain, and many layer 2 networks like Arbitrum, Polygon, etc., but not for the Bitcoin blockchain. Can be limiting, however, ERC-20 and ERC-721 token standards can be stored on the wallet. Passwords and private keys are securely stored by the application’s advanced encryption technology within the browser via a MetaMask extension. Such a design gives users more control over their public and private keys. Of course, each newly created account comes with a unique recovery seed phrase.
MetaMask provides a trade function for peer-to-peer (P2P) token swaps. Basically, The transaction does not need to go through an order book, or decentralised exchange (DEX). Actually, this solution reduces friction, limits slippage, and lowers costs overall. Decentralized applications (dApps) such as crypto-loans, Ethereum-powered games, NFTs, and more are accessible directly from your wallet. The greatest utilization can be seen in spending, sending, or staking crypto. Within the Ethereum ecosystem without having to manage external wallet integrations or unnecessary transactions. Thus, MetaMask provides an entry point into the world of DeFi and other blockchain-based sectors and services. It provides a portal for end-users to access dApps while allowing developers to simplify the path to market for these applications.
Potential Risks
1. On-line security
On the one hand, MetaMask’s browser-based nature does not allow access to any of your personal information through the MetaMask extension itself. On the other hand, the web browser you access might. Although the browser will not have access to your private passwords or other sensitive data. Most browsers are engineered to collect information about when and how you use any built-in application or plugin. Theft of this data remains theoretically possible, since MetaMask stores private keys within the user’s browser. If you store passwords on your browser or device, do not save them. If your browser or device is hacked by malware, your stored passwords may be exposed. Your MetaMask assets are also at risk if your device is stolen.
2. Save storage
It is for such reasons that cold storage is recommended. In case of large amounts of assets stored on hot wallets or due to long-term activity in the crypto space. Hot wallets can never be as secure as cold wallets.
Additionally, if you own a lot of cryptocurrencies, split these funds and diversify them in multiple wallets. This is always wise advice. By storing your cryptocurrencies in multiple places, you reduce the odds of losing all of your cryptocurrency funds if one wallet is hacked.
3. Learn how to spot a scam
The easiest way to rob a cryptocurrency wallet is through phishing attacks. When clicking on an infected link, malware is downloaded to the computer and assets could be stolen. Another option is to open a fraudulent page that has a similar look to the official website. After filling in the login details, the attacker then disposes of the wallet credentials.
Just to remind you. Here are some suggestions on how to defend yourself.
● Am I expecting this message?
● Is it about a legitimate request?
● Do I need to click the link?
● Are there spelling mistakes?
● Avoid pop-ups
Since its release in 2016, MetaMask has established itself to be one of the most used and trusted crypto wallets. In fact, it has undoubtedly played a major role in the development of decentralized applications and giving access to the world of Web3. Although MetaMask interacts with the Ethereum blockchain ecosystem for now, we may see further expansion in the future. As for security. Nothing is perfect. Especially in today's digital world. On the one hand, it brings us amazing technology and possibilities. On the other hand, it can seem confusing and hard to navigate. Fraudsters are on the rise and are constantly improving their practices. The only thing that can help us is to educate ourselves and adapt.
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Reference List
● “What Is a Crypto Wallet"
● "MetaMask.”