Evolution of cryptocurrency wallets

With so many cryptocurrency wallets of all kinds on the internet today, where did they all come from? Wallets have come a long way, from the first cryptocurrency wallet launched by Satoshi along with the release of Bitcoin, to the advanced touch screen security devices we have today.

The evolution of cryptocurrency wallets is fascinating, starting in 2009 with the first bitcoin wallet. Let’s take a look at the milestones along the way.

2009: The first Bitcoin wallet

The first cryptocurrency wallet launched in 2009. Satoshi Nakamoto launched it along with the release of Bitcoin itself. This wallet was Bitcoin-Qt. Bitcoin-Qt started quite light because Bitcoin didn’t have a history to record yet. Over time, Bitcoin-Qt’s requirement of having to download the entire history of the Bitcoin blockchain would make the program a notorious “memory-consuming” wallet.

Currently, the history of the bitcoin blockchain has a size of more than 250 gigabytes. Some users still swear by the simplicity of Bitcoin-Qt, which has been renamed Bitcoin Core. These users must really love it, as it requires over a quarter of a terabyte of memory.

2014: hardware wallets arrive

The next major step in wallet technology would occur in 2013, when Czech company Trezor began its crowdfunding campaign to support the development of the first hardware wallet.

Trezor means “vault” in Czech and the people who started the company had recognized that the potential cryptocurrency of value would come to generate. By 2014 the price of Bitcoin had made huge gains and people wanted a safer means of storing their Bitcoins. Trezor One was the first hardware cryptocurrency wallet with cold storage features.

2014 would prove to be the year in which portfolios of all kinds broke through barriers. Not long after Trezor, Xapo, a Hong Kong company, would release its hardware wallet to market. Xapo’s board of directors featured an all-star team from the world of finance, including the founder of visa, the CEO of CitiBank, and Bill Clinton’s secretary of the treasury.

Xapo’s portfolio also featured cold storage, however they used the word “cold storage” literally. Xapo’s cold room is located on servers in the Swiss Alps. Some may argue that having your crypto assets on someone else’s server is not the same as having your crypto assets offline, accessible only to you, hidden for safekeeping and hoarding.

Cryptocurrency wallet company, Ledger, also reportedly started in 2014, but wouldn’t release its first hardware wallet until 2015. This initial launch was for the Ledger Wallet Blue, a smart-card-based wallet. While smart cards have mostly been eliminated, this difference in manufacturing choice would set Ledger apart from their competitors in the field. This difference led them to develop their own unique operating system known as BOLOS (Blockchain Open Ledger Operating System).

2015: Other types of wallets

In addition to emerging hardware wallets, several other wallet types were also available in 2014. The amount of choice of desktop wallets had begun to grow into the seemingly endless amount there is today, and mobile wallets made their way onto the stage. The first mobile wallet was approved for distribution on the Apple Store in June 2014, and the title belongs to CoinPocket.

When 2016 was just around the corner, wallets were largely separated into two categories: hot and cold wallets. A cold wallet is the most ideal method for long-term storage. It is not connected to the Internet and therefore is not as compromised from a security point of view. Hardware wallets and paper wallets are an example of a cold wallet.

Hot wallets are connected to the internet and are less secure for long-term storage. Hot wallets include software wallets, browser wallets (e.g. MetaMask), and exchange wallets. Interestingly, you can also connect hardware wallets to hot wallets (like MetaMask for example) to probably get the best of both worlds.

2016: Established competitors

By 2016, the amount of wallets available for each platform and device had soared. There were both many hardware and software wallets on the market for everyone. People had even created paper wallets to trade cryptocurrency using printed QR codes if they couldn’t access a hardware wallet.

By this time, Trezor, Ledger, and other companies had begun to assert themselves in a sea of competition in the field of hardware wallets. Ledger and Trezor had both launched updates to their flagship products that would shape the hardware wallet market we’re familiar with today.

The Trezor 2 would sign its first transaction in 2016 and the Ledger Nano S would launch in 2016. In Ledger’s case, this marked a shift from their smartcard hardware to the industry-standard configuration of a USB stick with a small LED screen. It was also with the launch of the Nano S that Ledger’s BOLOS software would take center stage for the company.

2017 – to date: the current market

Today there are portfolio choices to meet every need. Thirteen years after the launch of the first Bitcoin wallet, there are now software options for every device and hardware wallets for cold and long-term storage of all types of tokens. Finally, the case is no longer binary (self-custody and custody wallets). Now there is a middle ground. Semi-custodial wallets use cryptographic tricks to divide ownership of funds in a wallet into two or more parts. With some UI/UX magic added, semi-custodial wallets are quickly becoming an easy way to integrate new users due to reduced complexity.

Trezor and Ledger have established themselves as the Pepsi and Coca-Cola of the hardware wallet world, but there are also competitors like ColdCard, KeepKey and Ellipal Titan that continue to make things interesting.

In the field of hardware wallets, Ledger’s Stax wallet will launch in 2023. Stax has a whole suite of features, including the security features of the Nano S and Nano X. It supports wireless charging, similar to current Apple devices, is bluetooth-enabled for pairing with mobile devices, and has a touch screen for easy transaction signing compared to the previous LED screen with buttons on the side. The Stax is available for pre-order right now and will ship in March 2023.

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