How to build a crypto wallet?

Building a crypto wallet as a Web3 startup founder can be a strategic move with significant business benefits, ranging from enhanced user ownership and integration to branding and potential revenue streams. 

Think of your wallet as a core component of your Web3 strategy, not just an add-on. If done right, it can significantly strengthen your ecosystem, foster community, and ultimately drive your startup's success. 

But go in with your eyes open to the commitment and challenges involved. It's a complex task with substantial development, security, and UX challenges.

Just in case, what is a crypto wallet anyway?

Before diving in, let's clarify. A crypto wallet isn't actually where cryptocurrency is. Think of it like an online banking app. The money isn't in the app. It's in a bank account. The app gives users the keys (private keys) to access and manage the crypto on the blockchain. 

There are two main types you need to choose from if you haven’t already:

• Custodial wallets. Think of this like keeping your cash in a bank. A third party (like an exchange) holds your private keys for you. It's convenient, but you don't fully control your assets. Examples: Coinbase, Binance.
• Non-custodial wallets. You own the private keys, which gives you full control but also full responsibility for their security. Examples: MetaMask and Ledger (hardware).

As a startup, deciding which type to build is your first crucial decision. 

Non-custodial offers more user empowerment and aligns with the core ethos of crypto, but it's significantly more complex to build and requires robust security measures.

Why build a crypto wallet? The business benefits

First of all, a well-designed and feature-rich custom wallet can be a significant differentiator in Web3, attracting users who value a seamless and integrated experience. You’ll have a unique selling proposition that sets you apart from competitors relying on generic wallet integrations.

People also often mention a wallet brand as shorthand for a larger platform (e.g., “Metamask” for Ethereum). If your wallet gains traction, it effectively becomes your brand ambassador. 

What’s more, a custom wallet allows for seamless integration with your dApp or platform. Imagine users interacting with your services directly from their wallet without needing to connect through third-party wallets. This streamlines the user experience significantly. 

Expect higher engagement and conversion rates within your ecosystem. Friction is reduced, making it easier for users to participate.

It’s also a nice potential for new revenue streams. Depending on your strategy, you might explore revenue streams like:

• Transaction fees (on swaps or other in-wallet features). If you integrate a decentralized exchange (DEX) aggregator or other financial services.
• Premium features/services. Offering advanced features for a fee.
• Partnerships. Collaborating with other projects and integrating their services into your wallet.

Crypto wallets: target audience

The characteristics of your target audience will heavily influence the features and design of your crypto wallet. Consider these segments:

• Early adopters and crypto natives. These users are likely familiar with self-custody and understand the risks and rewards. They may appreciate advanced features, multi-chain support, and DeFi integrations.
• Your existing community. If your startup already has a community, these users are a natural starting point. Their needs and expectations related to your platform should be central to your wallet's design.
• Developers. If your platform targets developers, your wallet might need features like API access or integration with development tools.
• Specific niche users. If your startup focuses on a particular niche (e.g., NFTs, DeFi, gaming), your wallet should cater to the specific needs of that community. This might involve direct marketplace integrations, specialized transaction types, or support for specific protocols.
• Beginners to crypto. If you aim to onboard new users to Web3, your wallet needs to be incredibly simple, intuitive, and educational. Focus on basic functionalities and clear explanations.

The UI/UX of crypto wallets

Since crypto is inherently complex and complicated (for some), simplicity is very much appreciated, but not at the expense of clarity. 

The main rule of design should probably be: Don’t dumb it down. Simplify it instead. 

For example, your crypto UI should abstract away the technical jargon as much as possible without being misleading. You’ll look much better compared to your competitors, as many wallets today still suffer from clunky interfaces and confusing terminology.

The next piece of advice is to not make the security features feel like a chore. Try integrating them a bit more seamlessly into the user flow. Don't make your users jump through hoops so tedious that they'll bypass security measures.

A few important additions - provide contextual help and explanations. Tooltips, in-app guides, and clear error messages are your friends. 

And don’t forget about mobile users - most users will interact with your wallet on their phones. Design for smaller screens first and then adapt for larger ones.

How to build a crypto wallet - step-by-step guide

Follow our steps below, and you’ll have a strong starting point to launch a user-friendly, secure crypto wallet that can grow with your ambitions.

Step 1. Decide on the wallet type

Earlier in the article, we mentioned that the first big decision is whether your wallet will be custodial or non-custodial. If it’s your first crypto project, most new crypto startups find the non-custodial route more appealing, especially since it fits the decentralized nature of blockchain. 

Step 2. Choose a platform

Next, consider the platforms you want to support and the blockchains your wallet will handle. Most start by selecting one major blockchain. 

For example, Bitcoin is still the largest by market cap and has a global community. Ethereum is also a popular choice because of its ecosystem, which features ERC-20 tokens, NFTs, and countless decentralized apps. 

For platforms, mobile wallets (iOS and Android) are widely used because people want crypto access right from their phones. Web or browser-extension wallets, like MetaMask, are also highly popular for desktop use. Desktop apps remain an option, too, though their user bases can be smaller.

Step 3. Plan the wallet architecture

At this stage, you’ll outline the overall structure of your app, including how the frontend (the user-facing part) and any optional backend services will operate. 

Many rely on frameworks like React or Vue for a web-based wallet, which are often combined with libraries such as web3.js or ethers.js to handle all the blockchain interactions. 

If you’re building a mobile app, React Native or Flutter are common cross-platform solutions that let you write your code once and deploy it on both iOS and Android.

Step 4. Security and compliance 

Of course, you also have to tend to security measures, especially when your app is responsible for handling private keys. 

For secure key generation, make sure you use trusted libraries that implement the relevant Bitcoin Improvement Proposals (BIPs) and Ethereum Improvement Proposals (EIPs) or standards like BIP39 and BIP44 for Ethereum wallets. 

Emphasize strong encryption whenever keys are stored locally on the device, and design clear backup/recovery flows so users can write down their seed phrases.

On the compliance front, if your wallet ever handles fiat or custodies user funds, you’ll want to be aware of KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. 

Because a non-custodial wallet typically leaves control in the user’s hands, you might have fewer regulatory issues, but you should still consult legal experts, especially if you plan on introducing any services beyond basic wallet functionality.

Step 5. Development and launch

Once you have a solid architectural plan, it’s time to start building. To make this concrete, imagine you’re creating a non-custodial Ethereum wallet on mobile—one of the most common scenarios for a new crypto startup.

Begin by setting up your development environment. If you choose React Native, install Node.js and create a new project. From there, the first big feature is wallet creation and seed phrase generation. Next, you’ll implement the wallet’s essential features: viewing balances, sending transactions, and receiving assets. 

When you’re ready to release your wallet, you’ll typically deploy your code to the relevant app stores if it’s mobile or to a hosting service if it’s web-based. App store reviews can be a little tricky with crypto apps, so double-check each store’s guidelines.

Even though this is a step-by-step guide on how to build a crypto wallet, there are many little steps that will only make sense from a developer's perspective, so we advise you to reach out to the team that will actually build your crypto wallet. Merge is a click away if you need our assistance with design and development.

Building a crypto wallet: what to expect

Building a crypto wallet is not a small feat. Here's what you can realistically expect:

• Significant development effort and cost. Developing a decent and secure wallet requires a skilled team and a hefty investment in time and resources. 

Consider reaching out to a dedicated team of professionals who can design and develop your wallet faster and more cost-effectively than you doing it all by yourself. 

• Ongoing maintenance and updates. The crypto landscape is constantly evolving. You'll need to continuously update your wallet to support new features, address security vulnerabilities, and adapt to blockchain upgrades.
• High security stakes. You have to be extra careful with wallet security. Any vulnerabilities in your wallet could lead to significant financial losses for your users and irreparable damage to your reputation. Expect to invest heavily in security audits and best practices.
• UX/UI challenges. Designing a wallet that is both secure and easy to use is a complex challenge. You'll need to prioritize user experience to avoid alienating non-technical users.
• Regulatory scrutiny. Depending on the features and geographical reach of your wallet, you may face regulatory scrutiny and need to comply with KYC/AML requirements.
• User education: Many users are still new to crypto and self-custody. Expect to invest in user education to help them understand how to use your wallet safely and effectively.

If you have a strong reason (UX, business model, integrated features) and the resources (talent, time, capital) to build a wallet, it can be a strategic move that cements your brand’s place in Web3.