What Is a DeFi Wallet?
In a nutshell, crypto DeFi wallets are primarily intended to be used as a way to store cryptocurrencies.
It is the same principle as the physical wallets we are used to, except that you can use it to store your digital assets. Notably, DeFi wallets have a higher level of security than physical wallets. In fact, they can only be accessed with a password as well as a key phrase — or seed phrase, usually made up of 12 random words, that helps you to recover access to your wallet.
However, the DeFi space is far more than just a place where you can buy and sell financial assets, it’s also a marketplace where you can find a variety of products and services. There is even the opportunity to build decentralized applications and crypto assets. The decentralized crypto wallets serve as the gateway to a whole decentralized ecosystem. By utilizing these wallets, you can have access to this innovative financial and economic system. DeFi wallets are the tools that enables a platform to recognize you even if it doesn’t know any of your personal details.
Simply put, a DeFi wallet allows you to swap assets; earn from lending, staking, farming services; check your NFTs (non-fungible tokens) or connect to platforms to mint and buy them. In the absence of tools that allow you to prove that you own your assets when you access one of these platforms, you would not be able to prove your rights over them.
Differences Between CeFi and DeFi wallets
You can find both centralized and DeFi crypto wallets in the crypto space. Wallets fall into these two broad categories, and analyzing them will help you better understand the benefits of DeFi wallets, as well as some disadvantages you should know:
Decentralized cryptocurrency wallets are non-custodial, or user-custodial: this means that you are the only responsible for them. Your wallet isn’t managed by anyone else, and passwords and seed phrases are yours. On the other hand, centralized wallets are custodial, meaning that the providers control your passwords and give you only a kind of interface you can use to make transactions and see the corresponding public addresses.
So, while a key benefit of DeFi wallets is full control over your assets, you still need to pay attention to your passwords because no one can help you to recover your crypto assets if you lose your keys.
Wallets for DeFi need a different structure in order to allow users to benefit from a space that avoids intermediaries. So, each transaction is on-chain and fees are needed to finalize them. CeFi exchanges require you to pay fees too, and these usually also include the fees related to the services provided by the centralized exchange.
As we said, when you use centralized wallets the provider knows your passwords, and since any crypto wallet needs them to confirm transactions, what providers do is manage your activity. Working like more traditional financial institutions, the procedure is similar to what happens with traditional banks, where this intermediary has the final say on your account. This is also the reason why they need to be compliant with regulations related to the financial space, though they need to know who you are: before using any centralized exchange or wallet, you’ll need to complete KYC procedures to verify your identity. On the contrary, transactions with DeFi wallets occur on a peer-to-peer basis and you won’t need to provide your personal details to use them — that is, DeFi wallets allow you to use them in full anonymity.
Typically, CeFi wallets are connected to CeFi exchanges; this enables you to transact both in fiat and cryptocurrencies. A DeFi wallet, on the other hand, only allows you to work with cryptos.
The Top 8 DeFi Wallets Compared
Now that you understand what the best Defi wallets are, let’s compare the services they offer. The table below presents a clear comparison between the eight wallet providers reviewed above, ensuring you have the information you need to make an effective wallet choice:
|Wallet||Services||Number of Supported Coins||Fee Structure||Mobile App?|
|DeFi Swap||Token swapping, staking, yield farming||50+||Variable (paid in BNB)||Currently in development|
|DeFi Wallet||Swapping, staking, storing||100+||No wallet fees||Yes|
|Trust Wallet||Crypto purchases, token swapping, dApp browser, staking||1,000,000+||No wallet fees||Yes|
|MetaMask||Token swapping, crypto purchases, dApp browser||500,000+||0.875% service fee per swap||Yes|
|Coinbase Wallet||dApp browser, crypto purchases, NFT support, swapping, staking||100,000+||No wallet fees (exchange fees do apply)||Yes|
|Trezor||Cold storage, portfolio management, crypto purchases||1,000+||Variable network transfer fee + cost of the hardware wallet||No|
|Ledger||Cold storage, crypto purchases, token swapping, dApp browser, staking||5,500||Variable network transfer fee + cost of the hardware wallet||Yes (Ledger Live)|
|Argent||Staking, crypto purchases, swapping, dApp browser||500,000+||Network transfer fees + third-party fees on crypto payments||Yes|