Cryptocurrency Wallet Development: How to Create a Crypto Wallet in 2024 - K&C (2024)

The cryptocurrency market has been continuously evolving. Over the last few years, many trailblazing developments have occurred, like tokenizing real-world assets (e.g., real estate or art) in the crypto world. In addition, crypto wallet development (sometimes also called blockchain wallet development or Web3 wallet development) has become an essential part of the blockchain development space.

With the heightened interest in cryptocurrencies, the future of crypto wallet development looks bright. Crypto wallets are needed to have easy access to cryptocurrencies. As of 2024, there are over 10,000 cryptocurrencies, and transactions are carried out via wallets for all of them.

This blog post provides comprehensive insights into crypto wallets and their different types, and then focusses on their development and features, tech stack and challenges concerning development.

What Are Crypto Wallets, and What Are Their Benefits?

While digital wallets like PayPal are used to transact digital currencies in general, crypto wallets are digital tools that enable users to send, store, and receive cryptocurrencies. They comprise a pair of cryptographic keys: a public key, the address used to receive funds, and a private key, which is utilized to sign transactions and access the funds stored within the wallet. Crypto wallets can be software-based (e.g., mobile wallets) or hardware-based (physical devices).

Cryptocurrencies are digital assets represented as bits of data stored on a blockchain. These bits of data are distributed across the entire blockchain network. Crypto wallets facilitate the association of all these data bits with the user’s public address and add up the total amount of assets in the user’s interface.

One of the main functions of crypto wallets is sending and receiving cryptocurrencies. Usually, the sending process involves entering the recipient’s wallet address, selecting an amount, authenticating the transaction using the user’s private key, paying the transaction fee, and sending it. Receiving cryptocurrencies is even simpler. The recipient needs to provide their public address so the transaction can be carried out.

Wallets are essential as they provide enhanced security for storing, sending, and receiving cryptocurrencies. Moreover, they let users have complete control over their funds, providing more privacy than traditional banking systems. This enhances the security and ease of transactions, making them less susceptible to interference and fraud.

In addition, crypto wallets in most cases offer low transaction fees (which, however, depends on the cryptocurrency, can fluctuate and be higher during network congestion), which fosters affordability among users. Furthermore, decentralization and transparency are other benefits that come with blockchain technology.

Types of Crypto Wallets

Overview of different types of crypto wallets

There are different types of crypto wallets for varying needs and user intentions. Regarding internet connectivity, we can differentiate between cold and hot wallets. In terms of governance, there are custodial and non-custodial wallets.

Choosing the right type of wallet depends heavily on users’ individual preferences and objectives. Each type of wallet offers different trade-offs in terms of usability, security, flexibility, and control over users’ funds.

In this section, we’ll explore the types of crypto wallets and provide key features of each type.

Cold Wallets

Cold wallets are not connected to the internet and are stored offline. Common devices used for cold wallets include hardware wallets (like Ledger and Trezor), air-gapped computers, and encrypted USB drives. Because they are not connected to the internet, cold wallets are practically inaccessible for cyberattacks, significantly minimizing the risk of hacking, phishing, and malware threats.

Cold wallets are more commonly used for long-term holdings, as a substantial amount of money can be easily stored without exposure to common cyber threats. These wallets are considered hack-resistant and are compelling choices among big HODLers.

There are the following subtypes of cold wallets:

Hardware wallets

Hardware wallets offer the highest level of security for storing cryptocurrencies. They store public addresses and private keys offline. Hardware wallets look similar to USB hard drives, usually with a built-in screen and side buttons.

They are battery-less and can be easily connected to a computer. Although they can be expensive, they are considered to have high-security standards. Examples of popular hardware wallet brands include KeepKey, Ledger, and Trezor.

Paper wallets

Paper wallets are physical documents containing private and public keys (and/or a corresponding QR code). Crypto users should write down or print their private keys and corresponding QR codes on paper for secure storage. These keys and codes must be kept safe, as they are essential for accessing the associated cryptocurrencies.

These types of wallets are offline. They are not prone to hacks, enhancing safety, as they store fundamental property in a safe or deposit box. However, one of the cons of paper wallets is not being able to send partial funds.

Hot Wallets

In contrast to cold wallets, hot wallets are connected to the internet.

Common devices and tools used for hot wallets include desktop computers, mobile phones, tablets, and web browsers. These types of wallets pose more significant risks and are less secure.

On the other hand, these wallets provide seamless live access to cryptocurrencies, which makes them an enticing choice among short-term traders. Hot wallets are best for active trading and daily transactions.

There are the following subtypes of hot wallets:

Desktop wallets

Desktop wallets are software applications that users can install on their desktop computers or laptops. They are compatible with various operating systems, such as Windows, macOS, and Linux. Desktop wallets are one of the most secure ways among hot wallets to store cryptocurrencies. They provide a perfect balance between security and accessibility, though they are typically connected to the internet.

Some examples of desktop wallets are Electrum and Exodus.

Mobile wallets

Mobile wallets are similar to desktop wallets. They are installed on smartphones or tablets and are best for on-the-go transactions, i.e., daily usage.

However, their connection to the internet makes them vulnerable to malware and hacking. Therefore, robust encryption mechanisms, such as end-to-end encryption and secure password protection, are essential to safeguard these wallets.

Examples of mobile wallets are Trust Wallet and Coinomi.

Web wallets

Web wallets run on cloud servers and can be accessed by any internet browser. They can be either hosted by third-party providers or non-hosted, where users manage their own private keys. Web wallets are best for small investments and when lightning-fast transaction speeds are needed. However, they can be susceptible to cyber threats like DDOS attacks.

Some examples are MetaMask and Coinbase.

Custodial wallets

Custodial wallets are supplied by third-party service providers, such as centralized exchanges that manage the private key on behalf of users. These wallets are user-friendly and easy to use for beginners.

Examples of exchanges that provide custodial wallets are Binance and Kraken.

Non-Custodial wallets

Non-custodial wallets, also known as self-custody wallets, allow users to have full control over their assets with no third-party involvement. Users manage their private and public key pairs autonomously. If these keys are lost, cryptocurrencies can be lost forever; the user bears sole responsibility for their safekeeping.

Examples of non-custodial wallets are MyEtherWallet and Trezor.

Market of Crypto Wallets and Is There a Need for Them?

While cryptocurrencies are taking remarkable strides, there’s little doubt about crypto wallets’ evolution. Crypto wallets help users to store and manage their assets securely.

Moreover, they facilitate seamless integration with dApps and enable interaction with DeFi services. These wallets also provide cross-platform operability and help diversify portfolios. In short, there is an immense need for crypto wallets in today’s world.

According to Vision Research Reports, The global crypto wallet market was valued at USD 10.28 billion in 2023. It is predicted to reach USD 94.45 billion by 2033, growing at a CAGR of 24.83%. The widespread adoption of cryptocurrencies and global acceptance fuels the crypto wallet market.

How to Create a Cryptocurrency Wallet

Crypto wallet development in 7 steps

Creating a crypto wallet involves several steps. Here’s a guide to getting started in crypto wallet development.

The following steps give you a rough idea about how to create a secure, scalable, and user-friendly cryptocurrency wallet.

Define the wallet type and features

Before developing a crypto wallet, you should define whether the type of wallet will be web-based, mobile, desktop, or hardware. In addition, it is crucial to identify the key features to be included in the wallet, such as user authentication, multi-currency support, and QR code support.

Choose the technology stack

In crypto wallet development, the appropriate technology stack should be selected based on the type of wallet you intend to build. For web-based wallets, for example, JavaScript frameworks like React.js for the front end and Node.js for the back end can be chosen.

Develop the user interface

Focus on creating an attractive and user-friendly interface by applying the best UI/UX design practices.

Integrate blockchain technology and implement security features

It is important to integrate blockchain APIs. For instance, web3.js, an Ethereum JavaScript API, facilitates interaction with a local or remote Ethereum node. Develop smart contracts and prioritize security with AES encryption and biometric authentication.

Test and debug

Thoroughly test the wallet to identify and fix bugs. Conduct security audits to ensure there are no vulnerabilities.

Deploy and maintain

Finally, the wallet can be deployed on appropriate platforms and regularly maintained by updating it with the latest security patches and new features.

Ensure compliance and support

Staying updated with regulatory requirements and ensuring the wallet complies with KYC (Know Your Customer) and AML (Anti Money Laundering) regulations is crucial. Providing customer support to assist users with any issues they encounter should also be included.

Key Features to Include During Your Crypto Wallet Development Project

Key features of crypto wallets

In order to develop a practical crypto wallet, you should be aware of and incorporate critical features to enhance its functionality and user experience. Proper analysis and planning of these features are crucial to creating a wallet that stands out in the market.

Below, we’ve highlighted some fundamental features to include in your crypto wallet, which makes it more credible and usable among your user base.

User authentication

One of the key features to include when developing a crypto wallet is robust user authentication. This feature will enable authorized access to the wallet. To authenticate users, the wallet has to implement various compliance standards, including AML and KYC.

This feature is achieved by implementing various methods, such as password protection, biometric authentication, multifactor authentication, and multi-signature authentication. Such technologies prevent unauthorized third-party interference and enable authorized users to store and manage funds with heightened security.

User-friendly interface

Developing a user-friendly interface is crucial for the success of a crypto wallet. The interface should be intuitive, enabling both beginners and expert traders to navigate effortlessly.

The crypto wallet should also boast a clean design with a dashboard overview. It should provide users with a summary of their portfolios and an easy-to-understand navigation menu.

Multi-currency support

Supporting multiple cryptocurrencies is a key feature in modern crypto wallet development. After the massive success of powerhouse cryptocurrencies like Bitcoin and Ethereum, investors are also targeting major altcoins like Solana and Cardano. New cryptocurrencies continue to emerge on the market.

For this reason, crypto wallets need to support multi-currency. Multi-currency support is a crypto wallet functionality that enables users to store and manage various cryptocurrencies in one place, as well as exchange one currency for the another one easily. This feature enhances the wallet’s usability and flexibility, making it more attractive to users by enabling comprehensive portfolio management in one place.

Blockchain-based transactions

One limitation of traditional wallets is their inability to handle transactions supported by blockchain technology. However, crypto wallets are powered by cutting-edge blockchain technology, which prioritizes the security of users’ on-chain transactions and reduces transaction fees.

Blockchain-based transactions include several features, such as public key cryptography, transaction encryption, and user verification and authorization. These features boost the security and efficiency of transactions compared to traditional methods. Developers should focus on implementing these security components to protect users’ transactions and reduce operational costs.

QR code support

QR code scanning is a vital feature that makes sending and receiving cryptocurrencies much more efficient and straightforward. By utilizing QR code scanning, users can effortlessly transfer funds without the hassle of manually entering lengthy crypto wallet addresses, making transactions more straightforward and efficient.

Real-time analytics

Crypto wallets can provide real-time insights by analyzing charts and graphs of cryptocurrency conversion rates. In addition, blockchain developers should include features to calculate the fees associated with transactions. This feature helps users make well-informed decisions and offers a seamless entry point for new users into the crypto space.

When developing a crypto wallet, especially an online (hot) one, focusing on these key features will address the needs of a diverse user base.

Tech Stack for Crypto Wallet Development

Choosing the appropriate technology stack is crucial for developing a robust crypto wallet.

• Front-end development: If you plan to build web-based wallets, you can opt for HTML, CSS, and JavaScript frameworks like React.js or Angular.js. For mobile wallets, you can use languages like Kotlin for Android, Swift for iOS, or cross-platform frameworks like React Native and Flutter.
• Back-End Development: Node.js or Python is suitable for creating server-side logic. You can also use PostgreSQL or MongoDB for secure data storage, and Redis for real-time data processing.
• Blockchain Integration: Utilize APIs from platforms like Ethereum and Bitcoin. Ethereum’s most popular libraries are web3.js or ethers.js, and bitcoinjs-lib is available for Bitcoin. Write smart contracts in Solidity and use Truffle or Hardhat for development.
• Security Features: Implementing AES (Advanced Encryption Standard) ensures sensitive data is encrypted, while HTTPS secures data transmission. Authentication methods should include multifactor authentication, biometric authentication, and secure password hashing algorithms like bcrypt.
• Real-Time Analytics: For wallets offering real-time analytics, incorporating data visualization tools like D3.js or Chart.js can effectively render charts and graphs.Aligning the tech stack with project requirements can help developers create a secure, user-friendly, and efficient crypto wallet.

Challenges in Crypto Wallet Development

Despite the many modern features and advantages of crypto wallet development, there are challenges and risks. One of the main challenges in cryptocurrency wallet development is the security of private key management. According to the Crypto Crime Report, crypto theft and fraud incurred USD 3.7 billion in 2022 alone.

Another main challenge in crypto wallet development is creating an appealing UI/UX. Ensuring great user interaction with a seamless experience can be challenging.

Additionally, there are other significant challenges, including app scalability, compliance and regulatory issues, backup and recovery issues, and interoperability issues.

All these mentioned challenges must be addressed to create crypto wallets that comply with up-to-date standards. Developers should focus on robust encryption and design scalable architecture to tackle these challenges.

In addition, they should also ensure an intuitive UI/UX with user research and testing. Also, it is essential to provide secure backup options and educate users on storage.

Our Cryptocurrency Wallet Development Services

K&C provides a wide range of blockchain development services, including crypto wallet development. We’d love to assist you with your upcoming project in the blockchain space.

As a Munich-based IT outsourcing company, K&C brings nearly 25 years of software development expertise to the table with a portfolio that includes cutting-edge blockchain technology projects. A prominent example is the development of the front-end for the DeFi crypto lending market place Ajna.

Take advantage of reduced costs, enhanced flexibility, and access to top-tier tech talent through a trusted partner with nearshore IT outsourcing in Eastern Europe.

Discover more about our flexible service models here.