Welcome to yet another resource-packed newsletter by Developer Nation. In this one find Java tricks you should know about, build lightweight APIs with NodeJS and learn the difference between Agile-VS-Scrum, the terms often used interchangeably in modern Software Product Lifecycle.
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The Developer Nation surveys are committed to giving back to the community in multiple ways. We do so by sharing the data and insights we collect. We also donate to causes aligned with our mission. The donation program has become a core element of our surveys, and we have realised that it is essential for the community.
How does it work?
For each survey wave that we run, we donate 0.10$ to the favourite charities of our Developer Nation Community. The goal is to reach at least $2000 in donations.
What happened during the 24th Developer Nation survey?
During our 24th Developer Nation global survey, we collected a surprising total of 26,289 qualified responses meaning that we could surpass our goal by donating $2,607!- and support the causes you care about.
We always prioritise developer-centric organisations, helping software developers excel in their career and personal development. Nevertheless, we support other causes that matter a lot to our community.
Embracing transparency, we list below the organisations we supported with our donations. The amounts correspond to how the respondents of the Developer Nation survey voted for them.
The mission of freeCodeCamp is to help people learn to code for free. I’m personally a huge fan of the work they are doing and have learned quite a bit from there. A total of 9183 survey participants picked them for support so we could donate $918 to freeCodeCamp.
Girls Who Code is on a mission to inspire, educate, and equip girls with the computing skills to become change agents in their communities. A total of 6,423 survey participants picked them for support so we could donate $642 to Girls Who Code.
The Raspberry pi foundation empowers young people to use computing technologies to shape the world while CoderDojo helps enhance and build tech skills in an informal, creative and social environment. A total of 6,515 survey participants picked them for support so we could donate $652 to the Raspberry pi foundation and Coder Dojo.
WWF is on a mission to protect threatened species and their habitats. A total of 3,953 survey participants picked them for support so we could donate $395 to the World Wildlife Foundation.
A small number of Donations from DN Prizes
In each survey, we give developers the option to donate the cash value of their prize to one of the charities we support. We’re pleased to share that developers donated an additional $315 from their prizes! We’re thankful for their generosity! The initial goal was to donate around $1,800 but we ended up smashing our goal by donating $2,607!
Giving back to the broader community is at the very core of our mission. We are grateful and also proud of our community members for embracing our program and contributing to it. Being community-led, this effort could not be without your valuable contributions. Please share your thoughts and suggestions for future donations using the donation program section of our forum.
Help improve the developer experience with Salesforce solutions.
Developer Nation is running a short survey with our friends at Salesforce. If you are currently using any Salesforce solutions (incl. Tableau, Heroku, MuleSoft, Slack, etc.), you can share your experience and help Salesforce improve its products.
Previous developer surveys have provided great insight into who Salesforce Developers are and how developers learn and use Salesforce, which led to informed improvements. For instance, we learned that the developer community loves and engages with videos from Salesforce developer advocates, especially on platforms like YouTube. In particular, they prefer short video content that helps them solve tricky challenges. Based on these two helpful pieces of data, a YouTube playlist was created called Developer Quick Takes, demonstrating clever solutions in short-form videos.
This is for developers but also admins, architects, analysts, and more.
In the past, the survey has been focused on developers only, but now it is welcoming anyone who builds and develops in the Salesforce ecosystem to participate. As the Salesforce product portfolio has grown, the community that builds using them has also grown. In an effort to be inclusive, the survey is now open across several communities to include admins, developers, architects, analysts, and more. This survey covers products from the entire Salesforce ecosystem, including Heroku, Slack, Tableau, MuleSoft, and many others. Whether you use Salesforce low-code builders every day, write Apex code occasionally, or build in the Salesforce ecosystem in another way, we want to hear from you!
Have your voice heard and help shape the future of software
At Developer Nation, we partner with tech companies to help them gain insights and thus equip their product teams with the right tools to create improved customer and product experiences. Your feedback will be put to good use and shall inform product improvements and the future of building and developing Salesforce. We will also, share some key insights and an impressive list of prizes waiting to be claimed by the survey participants.
The 24th Developer Nation Survey is live, here’s a look at the winners so far!
What are the Developer Nation Prize draws?
We run weekly prize draws throughout the survey period (December 8th 2022 to February 3rd 2023) for developers who have taken our survey. You can take a peek at the full list of prizes on offer here. In addition, developers earn 100 points for every survey completed, plus 10 points for providing their feedback about the survey.
For existing community members who have reached over 301 points, they are also included in exclusive prize draws!
We’ll be updating this blog throughout the survey period.
The nature of professional game developers’ work can vary depending on the type of studio they work for. In this chapter, we will explore the profile of developers working for different types of game studios, focussing on their experience, roles, and technology choices.
For the first time in the latest edition of our Developer Nation survey, we asked professional game developers to describe the type of game studio they work for. The modern game development space has stratified itself into several different studio types, and within these studios, the types of tools and technologies used can vary significantly. Further to this, the profile of developers also shows differences between studio types.
We break down professional game developers as belonging to the following studio types:
Game publishers, who outsource most of their development;
Large-scale studios that develop and self-publish a collection of games;
Third-party developers who work on various games from different publishers;
Indie studios that publish and develop a small number of games
Here’s what we found
Game developers may be equally spread among different studio types, but we observe some important differences in their profiles. Developers with 3-5 years of experience are most commonly found in all types of studios except third-party developers; for this type of studio, their team is most likely to have 1-2 years of experience. Those with more than 11 years of experience in game development make up only a small portion of the general game developer population (11%) but have a much higher representation at indie studios (20%).
The most experienced developers in the industry can choose where they work. They may be choosing to work for indie studios due to greater creative control over projects or a preference for working within small teams, now rarely found in AAA development. They may also make personal decisions to work for studio types that are less likely to be involved in ‘crunch’.
“Developers at Indie studios are twice as likely to be highly experienced – 16 or more years under their belts – than those working for other studio types”
Mid-career game developers–those with 6 to 15 years of experience–make up more than a third (37%) of the developer workforce in large-scale studios, compared to only a quarter (24%) among professional game developers in general. The scope and complexity of the properties that large-scale studios work on may drive demand for more experienced developers. Despite this, the most experienced developers still more frequently choose indie studios, indicating that the previously suggested factors may outweigh the offers large-scale studios can make to these developers.
Of the many roles game developers may hold, we consider game designers, artists, UI designers, programmers, and QA engineers as the ones that consumers would likely identify with game development and are often the ‘core’ roles for producing games. Differences in studios can be seen by the different percentages of developers identifying themselves with these roles. Those who self-identify as programmers account for 39% of those working for indie studios, which is significantly higher than the professional game developer average (24%).
Similarly, the proportion of developers working for indie studios describing their roles as either game designer (46%), artist (27%), or UI designer (14%) is nearly double that of the population average, 23%, 15%, and 8%, respectively. The proportion of these roles between studios makes sense, considering the nature of development within these types of studios. Indie studios are typically smaller than other studios, with 66% of indie developers working for companies with up to 20 employees, compared to only 43% and 34% of developers working for game publishers and third-party studios, respectively. This can lead to more employees in a studio being directly involved in game design and development.
“Third-party studios have twice the proportion of developers in test roles compared to other game studios”
A counter-example can be seen with QA engineers, who are twice as prevalent in third-party studios (10%) compared to the population average (5%). Third-party studios having a larger proportion of QA engineers corresponds to their role in development cycles. These studios do a lot of development in-house, often work on larger projects, and can undertake contract work for larger studios, all of which require dedicated QA departments.
Further differences between game studios can be found in the choices of game engines. Unity and Unreal Engine are the most used game engines, with 33% and 15% of game developers using them as their primary engines, respectively. However, among developers who work for indie studios, these two game engines account for 48% and 20% of developers, compared to less than 28% and 12% for developers at other studios. Both engines are widely used and popular, with Unity being the most used engine for all studio types, but they have specific business and technical aspects that appeal to indie developers.
Why Developers use Unity
Due to its flexibility and ease of use, Unity was the common choice for indie developers when the scene emerged. This has led to a large online community and marketplace to support indie developers with tutorials, assets, and customised libraries. Unreal Engine is also popular amongst indie developers with it being considered one of the most powerful out-of-the-box engines and having a licensing structure that doesn’t require royalties to be paid until a game makes more than $1 million in revenue. The difference in popularity between the two game engines for indie developers likely lies in the availability of assets in the Unity store. Unity Asset Marketplace has over 77,000 assets and tools, compared to Unreal Marketplace’s 22,000, allowing small indie studios to offset development time with ready-made assets and tools.
“Unity and Unreal Engine are the most popular engines for game developers, with particularly high adoption by developers at indie studios”
Unity and Unreal have many tools and utilities but are not capable of performing every possible aspect of game design. In contrast, in-house or custom tools allow developers to focus on working with engines designed around the specific requirements of their games, as well as develop tools to optimise both development and performance. Amongst the large-scale and third-party studios, the second most popular engine choice is the use of either an in-house or proprietary engine–16% and 12%, respectively. These studios have the resources, time, and business motivation to focus on developing their engines. Use amongst large-scale developers is further incentivised by allowing assets and developers to move between projects more seamlessly, with a greater familiarity with the engine.
Engines Game Publishers prefer
Game publishers have a similar level of resources and time, but their in-house engines are often pivoted to commercial engines. Unreal Engine was developed by publisher EpicGames, Source from Valve, and RedEngine from CDProjektRed. Among game publishers, the engines initially developed by a publisher but are no longer in-house, make up another 15% of primary engine choices.
Less than 5% of developers working at indie studios use in-house engines; instead, Godot is the next most common engine choice. Godot is an open-source game engine that has built a strong community of developers around it. It has created supporters due to its dedicated 2D engine and its Python-like language GDScript which accommodates many Python users worldwide and is especially popular among student developers. The open-source nature of the engine also means indie developers do not have to worry about licensing or subscription changes, reducing financial demands and worries.
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Web frameworks speed up and simplify the web development process by providing developers with a set of high-level APIs that allow abstract access to underlying system resources and other low-level functionalities. In this article, we look at how web frameworks have risen or declined in popularity, and we explore the profiles and technology use of the developers who use them.
The big picture of web usage framework
Born out of the necessity to provide consistent web experiences, frameworks revolutionised how web developers create our online world. With standardised approaches to development and framework-specific communities available for support, they are still a popular choice amongst web developers. According to our survey data, 60% of web developers use either client-side or server-side frameworks.
Indeed, web frameworks often present a time-saving option for web developers to do their jobs in simple and efficient ways. When turnaround times are tight, developing a website or a web app from the ground up may not necessarily be the best option, particularly when working with demanding clients. Indeed, when we look at deployment frequency, lead time, and time to restore service, framework users are likelier to be at the elite efficiency level. 12% of web developers who use frameworks deploy their code on demand, 8% have a lead time of less than an hour, and 51%take less than a day to restore service. For web developers who don’t use frameworks, 9% deploy their code on demand,5% have a lead time of less than an hour, and 43% take less than a day to restore service.
“Web developers using frameworks are more likely to deploy code on demand, have smaller lead times, and are quicker to restore service”
However, there are disadvantages to using frameworks. For example, it is unlikely that one framework will provide everything a web developer needs, just as it is unlikely that a web developer will use everything that a framework or a library has to offer. The proliferation of different frameworks with different standards and guidelines only further muddies these waters. In this case, it may be easier to stick to one or two frameworks and supplement their use with custom code rather than creating a bloated working environment.
Indeed, that’s what our data shows–the share of web developers using three or more frameworks is gradually dropping. Now, the average number of frameworks used is approximately the same for developers of all experience levels, around 3.2. However, usage habits change depending on specific years of experience–and may give an indication of what’s in store for the future of web development.
For example, those with less than five years of experience are more likely to use one framework (22%) than those with six years or more (17%). While age is not necessarily correlated with experience, we see a similar trend for those aged 24 and under(22% use one framework) compared to those 45 and above(17%).
We can take a look at specific frameworks to see who is using what. React is by far the most popular client-side library, as it is used by 58% of web developers who use client-side web frameworks. React’s stable popularity as a library is contrasted by jQuery’s decline, which has experienced a 13 percentage point drop in usage in the past 12 months. Comparing the two, React is perhaps more capable of handling the modern web development environment–it’s faster, has a larger library of npm packages and is efficient at creating larger web applications.
Who are the developers using jQuery?
Looking closely, we find that those with more than 11 years of web development experience are nine percentage points more likely to use jQuery than those with less than ten years (49% vs 40%). Similarly, these seasoned web developers are less likely to use React(52%) compared to their peers (58%). As jQuery was created nearly a decade before React, it makes sense that those with more web development experience are sticking to what they know.
“Experienced developers are more likely to use jQuery and less likely to use React than their peers”
What about server-side frameworks?Next.js and Spring have been on the rise in the past 12 months.Next.js’ and their popularity is likely linked with React–after all, Next.js is a framework built upon React. Infact, 86% of those who use Next.js also use React; for comparison, only 45% use jQuery. As for Spring–a Java-based framework–itsincrease in usage may be explained by a similar increase in Java use amongst web developers–8 percentage points in the past 12 months (27% vs 19%).
A frameworks user mindset
What does framework use mean for the technology use of web developers? If a web developer is forced to configure or write an application in a particular way, it may narrow their skillset as it forms a reliance on a particular architecture. When we look at the web developer population, it seems that those who use frameworks are actually more likely to be self-driven, have technical skills, or use web technologies when compared to those that don’t use frameworks.
Framework users are more likely to have learnt how to code through self-education (66% vs 55%) and are more likely to manually download packages from npm(45% vs 36%). Similarly, they are more likely to use each of the top-ten web development technologies listed in our survey.
“Web developers who use frameworks are much more likely to have learnt to code through self-education”
Of these technologies, continuous integration/deployment (CI/CD)services are particularly worth mentioning–framework users are more than twice as likely to use these compared to non-framework users. As we’ve previously highlighted, framework users are more efficient when it comes to code deployment. However, framework users that also use CI/CD tools are 5 percentage points more likely to deploy on demand (15%) than framework users who don’t use CI/CD tools (10%).
Finally, while the share of web developers who use low-code or no-code tools has increased by 9 percentage points in the past six months (54%)–for framework users this share is 40%. This corresponds to an increase of only 5 percentage points in the same timeframe. In other words, those who are using frameworks are more likely to rely on old-fashioned coding by hand and have the skills to do so.
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The choice of programming language matters deeply to developers because they want to keep their skills up-to-date and marketable. Programming Languages are a beloved subject of debate and the kernels of some of the strongest developer communities. They matter to toolmakers too, because they want to make sure they provide the most useful SDKs.
It can be hard to assess how widely used a programming language is. The indices available from players like Tiobe, Redmonk, Stack Overflow’s yearly survey, or GitHub’s State of the Octoverse are great, but offer mostly relative comparisons between languages, providing no sense of the absolute size of each community. They may also be biased geographically or skewed towards certain fields of software development or open-source developers.
The estimates we present here look at active software developers using each programming language; across the globe and all kinds of programmers. They are based on two pieces of data. First is our independent estimate of the global number of software developers, which we published for the first time in 2017. We estimate that, as of Q3 2022, there are 33.6 million active software developers worldwide.
Second is our large-scale, low-bias surveys which reach tens of thousands of developers every six months. In these surveys, we have consistently asked developers about their use of programming languages across 13 areas of development, giving us rich and reliable information about who uses each language and in which context.
In 2020, Python overtook Java as the second most widely used language and now counts nearly 17M developers in its community. Python has continued to show strong growth, having added about 8M net new developers over the last two years. The rise of data science and machine learning (ML) is a clear factor in Python’s growing popularity. To put this into perspective, about 63% of ML developers and data scientists report using Python. In comparison, less than 15% use R, the other language often associated with data science.
Java is one of the most important general-purpose languages and the cornerstone of the Android app ecosystem. Although it has been around for over two decades, it continues to experience strong growth. In the last two years, Java has almost doubled the size of its community, from 8.3M to 16.5M. For perspective, the global developer population grew about half as fast over the same period. Within the last year alone, Java has added 6.3M developers, the largest absolute growth of any language community. Our data suggest that Java’s growth is supported not only by the usual suspects, i.e. backend and mobile development but also by its rising adoption in AR/VR projects, likely due to Android’s popularity as an AV/VR platform.
C and C++ are core languages in embedded and IoT projects, for both on-device and application-level coding, but also in mobile and desktop development, which are sectors that attract 17.7M and 15.6M developers respectively. C#, on the other hand, has maintained its popularity among multiple different areas of software development, particularly among desktop and game developers. C/C++ added 4.3M net new developers in the last year and C# added 2.8M over the same period.
Rust and Kotlin continue their rise in popularity
We have previously identified Rust and Kotlin as two of the fastest-growing language communities and this continues to be the case. Rust has more than tripled in size in the past two years, from just 0.8M developers in Q3 2020 to 2.8M in Q3 2022. Rust has added 0.7M developers in the last six months alone and is close to overtaking Objective C to become the 11th largest language community. Rust has formed a strong community of developers who care about performance, memory safety, and security. As a result, it has seen increased adoption in IoT software projects, but also in desktop and game development, where Rust is desired for its ability to build fast and scalable projects.
Kotlin has also seen a large growth in the last two years, more than doubling in size from 2.3M in Q3 2020 to 6.1M in Q3 2022. As such, it went from the ninth to the seventh largest language community during this time, overtaking Swift and those using visual development tools. This growth can largely be attributed to Google’s decision in 2019 to make Kotlin its preferred language for Android development it is currently used by a fifth of mobile developers and is the second most popular language for mobile development. Despite Google’s preference for Kotlin, the inertia of Java means that, after three years, it is still the most popular language for mobile development.
Swift currently counts 4.2M developers and is the default language for development across all Apple platforms. This has led to a phase-out of Objective C (3M) from the Apple app ecosystem. However, Objective C has maintained its place among IoT developers and increasing adoption for on-device code, and AR/VR developers, leading to a similar increase in the number of Swift and Objective C developers in the last two years; 1.8M and 1.6M respectively.
The more niche languages – Go, Ruby, Dart, and Lua – are still much smaller, with less than 4M active developers each. Go and Ruby are important languages in backend development, but Go is the third fastest-growing language community and has added more than twice as many developers as Ruby in the last two years; 2.3M and 1.0M new developers, respectively. This is likely due to the fast development cycle it offers even though it is a compiled language.
Dart has seen steady growth in the last two years, predominantly due to the increasing adoption of the Flutter framework in mobile development, with 13% of mobile developers currently using Google’s language. Finally, Lua is among the fastest-growing language communities, mainly drawing in IoT, game, and AR/VR developers looking for a scripting alternative to low-level programming languages such as C and C++.
We often come across the term “Enterprise Developers” and even more often, we ask ourselves questions about their profile, from basic demographics to purchasing decisions. But who is an Enterprise Developer? According to SlashData, large enterprise developers as those who work for organisations with between 1,000 and 5,000 employees and very large enterprise developers as those who work for organisations with more than 5,000 employees. Non-enterprise developers are those that remain.
How many enterprise developers are out there?
In Q1 2021, SlashData estimated that there are 1.5M enterprise developers working in large organisations, and 2.0M working in very large enterprises. Between Q1 2020 and Q1 2021, there was a 21% year-on-year growth in the large enterprise population, while the very large enterprise population increased by 18%. This is impressive growth, considering that the non-enterprise population showed only 10% growth over the same period. However, for the large and very large enterprise population, the immediate picture is one of stability: in the last six months, it has remained practically unchanged. Considering that the biggest tech companies an important proportion of very large enterprises have benefited from the economic situation caused by the pandemic, it is somewhat of a surprise that the very large enterprise population hasn’t increased. Perhaps there is a backlog of hiring splurges that have yet to show up in the data or these companies are remaining cautious and waiting to see how the pandemic plays out before committing to hiring more employees.
Where in the world are they located?
If we break down the enterprise populations by region, we find that 22% of software developers in South Asia are very large enterprise developers. These enterprises are likely using their global connections to capitalise on price here: the median per-hour cost for Android development in India, a large hub for app development, is $30. In North America, the rate is five times as high. For example, SAP, the largest non-American software company by revenue, has based its largest R&D lab outside Germany, in India. In absolute terms, most developers working at very large enterprises are to be found in North America (27%) and Western Europe (26%). South Asia takes third place, with 17% of all very large enterprise developers working in this region. North America, Western Europe, and East Asia are the stage for large enterprises, with 28%, 24%, and 17% of the large enterprise population respectively.
Which sectors or industries are they working on?
Most developers are involved in web apps: more than 6 out of 10 developers are involved in the sector. However, developers are often involved in more than one sector. In fact, around three-quarters of developers are involved in more than two sectors, while around 15% engage in five or more sectors. Besides web apps, enterprise developers are dominated by their involvement in the backend sector: 56% of very large enterprise developers and 51% of large enterprise developers work in this sector. This is compared to the 45% of non-enterprise developers who work in the backend sector. Enterprise businesses typically have more sophisticated needs that warrant engaging backend developers. With the myriad of resources at their disposal, enterprises are more easily able to develop large-scale, connected products with complicated backends, IoT devices, for example. Backend developers are required to achieve these goals.
The opposite trend is observed in mobile apps: 40% of non-enterprise developers work in this field, while just under a third of enterprise developers do. The relatively short scope and scale of mobile app development make small business engagement in this sector achievable. For enterprise companies a mobile app, or a web app, is only one small part of a giant machine of software; but for smaller organisations, the mobile or web app might be the entire product. Web apps, backend services, and desktop apps the top three sectors enterprise developers are involved should be explored in greater detail.
Attitudes and engagement
Open source has become a ubiquitous part of developer culture, embodying the widely venerated values of sharing code, knowledge, and best practices among peer developers. These days, many open source projects are vendor or corporate owned and maintained. Developer attitudes towards contributing to these open source projects differ, but across the non-enterprise/large enterprise/very large enterprise divide these differences are subtle. Large enterprise developers are slightly more likely to contribute to corporate-owned, open source to improve their positions in the software food chain: 17% are motivated by their desire to get noticed by the company. Meanwhile, very large enterprises are slightly more likely to have developers buy into the company ethos: 20% of developers working at these organisations wish to contribute to something that has the company’s backing to succeed.
Non-enterprise developers tend to favour reasons relating to improving their skill set: 47% wish to learn to code better. Compare this to large enterprise developers, of whom 42% are motivated by learning to code better. Around one-fifth of all developers are united by the desire to build community support; while just under a third of all developers advocate for a more open software society, contributing to corporate-owned, open-source projects because it’s “something bigger than me”. However, moving from attitudes to economic engagement, the differences between large, very large, and non-enterprise developers tend to be more pronounced regarding practical engagement within an organisation.
“Those who control the money”
There are many tiers of enterprise developers: these range from those high up in a business hierarchy that makes or influences purchasing decisions, down to developers who are not involved at all in these selections. The breakdown of developers according to economic decision-making power within an organisation differs across the non-enterprise/large enterprise/very large enterprise divide.
Just over a quarter of large enterprise (27%) and non-enterprise developers (26%) are economic decision makers for their team or company, with the ability to make the final selection decision for tools, approve expenses on tools and components, and/or approve the overall team budget for tools. Not all of these economic decision-makers can approve budgets or expenses, but whether they are decision-makers for their team or company, they are all empowered to make tool selection decisions.
Comparing these segments to very large enterprises, where only 18% of developers can make purchasing decisions, demonstrates that decision-making power tends to concentrate at the top of the hierarchy in larger organisations. In agreement with this analysis, 31% of developers who work at enterprises are separate from purchasing decisions. In comparison, this drops to 25% and 17% for large and non-enterprise developers, respectively.
So are you an Enterprise Developer? Did you see yourself fitting in the data above? Then you probably are an Enterprise Developer. If you want to help the ecosystem grow, you can join our community of software creators by clicking this link.
In our most recent (Q3,2022) Developer Nation survey we took a close look at the way developers engage with the Metaverse and NFTs. We explored different levels of engagement (from simple interest to actually working on them) and explored different patterns of interest across other technologies as well as on a regional level. Today we take a look at how developers are engaging with the Metaverse and NFTs.
“50% developers are interested or involved in the Metaverse some way”
The data shows that developers appear to be more interested in the Metaverse compared to NFTs. Possibly because Developers involved in NFTs are also highly involved in other projects, especially cryptocurrencies like bitcoin.
“45% of developers involved in NFTs are highly involved in other blockchain projects and 55% are working on cryptocurrencies”
There are more developers learning about the Metaverse (50%) than they are learning about NFTs(20%). Also, developers working on the Metaverse identified Quantum Computing as the no 1 technology they wish to learn about.
Here’s a video of us discussing the infographic.
In terms of regional distribution, most developers working on the Metaverse and NFTs reside in North America.
Blockchain technology has made digital currency transactions increasingly useful, practical and accessible. However, as the number of crypto users has gone up, so has the rate of cyber theft related to cryptocurrencies. That’s why it’s important to understand how to safekeep your crypto by learning about crypto wallets, how they work and what to look for in one, whether it’s digital or physical.
What is a crypto wallet?
Cryptocurrency wallets, or simply crypto wallets, are places where traders store the secure digital codes needed to interact with a blockchain. They don’t actively store your cryptocurrencies, despite what their name may lead you to believe.
Crypto wallets need to locate the crypto associated with your address in the blockchain, which is why they must interact with it. In fact, crypto wallets are not as much a wallet as they are ledgers: They function as an owner’s identity and account on a blockchain network and provide access to transaction history.
How do crypto wallets work?
When someone sends bitcoin, ether, dogecoin or any other type of digital currency to your crypto wallet, you aren’t actually transferring any coins. What they’re doing is signing off ownership thereof to your wallet’s address. That is to say, they are confirming that the crypto on the blockchain no longer belongs to their address, but yours. Two digital codes are necessary for this process: a public key and a private key.
A public key is a string of letters and numbers automatically generated by the crypto wallet provider. For example, a public key could look like this: B1fpARq39i7L822ywJ55xgV614.
A private key is another string of numbers and letters, but one that only the owner of the wallet should know.
Think of a crypto wallet as an email account. To receive an email, you need to give people your email address. This would be your public key in the case of crypto wallets, and you need to share it with others to be a part of any blockchain transaction. However, you would never give someone the password to access your email account. For crypto wallets, that password is the equivalent of your private key, which under no circumstances should be shared with another person.
Using these two keys, crypto wallet users can participate in transactions without compromising the integrity of the currency being traded or of the transaction itself. The public key assigned to your digital wallet must match your private key to authenticate any funds sent or received. Once both keys are verified, the balance in your crypto wallet will increase or decrease accordingly.
Types of crypto wallet
Crypto wallets can be broadly classified into two groups: hot wallets and cold wallets. The main difference is that hot wallets are always connected to the internet while cold wallets are kept offline.
Hot wallets are digital tools whose connection to the internet cannot be severed. Users can access these pieces of software from a phone or desktop computer to monitor their currencies and trade them. Some hot wallets are also accessible through the web or as browser extensions, meaning you can use them on a wide variety of devices.
The greatest advantage of hot wallets is their convenience. Your public and private keys are stored and encrypted on your wallet’s respective app or website, so unless they’re limited to a specific device, you can access them anywhere with an online connection. This ease of access makes them ideal for those who trade more often and are considering spending bitcoins.
Because hot wallets are always accessible online, they also face a greater risk of cyberattacks. Hackers can exploit hidden vulnerabilities in the software that supports your wallet or use malware to break into the system. This is particularly dangerous for web wallets hosted by crypto exchanges, which are bigger targets overall for crypto thieves.
PROS – Highly convenient, can be accessed from anywhere with an internet connection – Easier to recover access if you lose the private key than cold wallets
CONS – Less secure than cold wallets, vulnerable to a wider variety of attacks – For custodial wallets, your keys are kept on the exchange’s servers
Cold wallets store your digital keys offline on a piece of hardware or sheet of paper. Hardware wallets usually come in the form of a USB drive which lets you buy, sell and trade crypto while it’s connected to a computer. With “paper” wallets, your keys may be accessible via print-out QR codes, written on a piece of paper, or engraved on some other material, such as metal.
Cold storage wallets are deliberately designed to be hard to hack. Unless the wallet owner falls for some sort of phishing attack, hackers have no way of obtaining the owner’s keys remotely. For something like a hardware wallet, a thief would first have to obtain the USB drive used to access your crypto and then somehow crack its password.
This high level of security may lend itself to mistakes on the part of wallet owners. If you lose your USB drive or sheet of paper and don’t have your private key backed up somewhere, you’ve effectively lost access to your crypto. Compared to hot wallets, which make it possible to regain access through a seed phrase, recovering access on a cold wallet is impossible in most cases due to the two-key security system.
PROS – More secure than hot storage wallets due to offline storage – Many hardware wallets are supported by hot storage wallets
CONS – Transactions take longer on average – Nearly impossible to recover currencies without a backup of your digital keys
How to set up a crypto wallet
Setting up a cryptocurrency wallet is a generally straightforward process that takes no more than a couple of minutes. The first step is to determine the kind of wallet you want to use since hot wallets and cold wallets have different set up processes. Then, you’ll need to do the following:
For hot wallets…
Download the wallet. Make sure the wallet is legitimate before downloading any software. Crypto scams are becoming increasingly common and it’s important to know if the company behind a wallet actually exists. For web wallets, verify that you are on the correct website and not on a fake version of it built to steal your information.
Set up your account and security features. If you are using a non-custodial wallet, this is when you’ll be given your private key, a random 12 to 24-word string of words. If you lose or forget these, you will not be able to access your crypto. You can enable added security tools, like two-factor authentication and biometrics, during or after the set up process. The process for custodial wallets is a bit more involved, and you’ll have to undergo a verification process called Know-Your-Customer (KYC) to validate your identity.
Add funds to your wallet. For non-custodial wallets, you may have to transfer crypto from elsewhere, as not all wallets allow you to buy crypto with fiat currency directly. As for custodial wallets, you’ll need to fund them using a credit or debit card before you can purchase crypto, in some cases.
For cold wallets…
Purchase the wallet online. When buying a cold wallet, avoid third-party resellers. Buy the product directly from the developer to avoid issues, such as the device being tampered with beforehand.
Install the device’s software. Each brand has its own software that must be installed onto the hardware device before it can be used. Make sure to download the software from the company’s official website. Then, follow its instructions to create your wallet.
Deposit your cryptocurrency. You’ll need to transfer crypto into your hardware wallet from elsewhere, such as from a crypto exchange. Some wallets may have an incorporated exchange that allows you to trade crypto while the device is connected to your desktop computer or mobile device.
What to look for in a crypto wallet
When looking for a crypto wallet, it’s very important to first ask yourself:
How often do I trade? Will you be trading cryptocurrency daily or just occasionally? Hot wallets are better for active traders due to their speed and practicality. However, active traders may also benefit from a cold wallet by using it as a kind of savings account, keeping the bulk of their currencies there.
What do I want to trade? Are you looking to buy and store Bitcoin or are you interested in different types of cryptocurrency, like altcoins and stablecoins? The crypto wallet you pick should support the currencies you wish to trade and will ideally accommodate any other coins you may want to trade in the future.
How much am I willing to spend? Are you planning on accumulating large amounts of crypto? Hardware wallets are ideal for this sort of activity, but unlike hot wallets (which are mostly free), they require an upfront payment to own the wallet itself. Some hot wallets have higher crypto trading fees but offer faster transactions or greater functionality.
What functionality do I need in a wallet? Do you plan on doing anything specific with crypto beyond simply trading it? For example, traders who want to make money with their crypto passively should look for wallets that allow for crypto lending, staking and deposits.
After exploring the above questions, we put together some general suggestions for what to look for in a crypto wallet:
Supported currencies – The rule of thumb for supported currencies is “the more, the better.” Unless you’re interested in solely trading Bitcoin, we suggest you opt for a wallet that supports at least a few of the more popular altcoins.
Accessible interface – An accessible, intuitive user interface is always welcome, regardless of whether you’re a crypto veteran or a newbie. Look for wallets that don’t make you jump through hoops to start basic trading.
24/7 customer support – Although more useful for newer traders, having customer support available throughout the day is always a plus. This is especially true for wallets that undergo frequent updates and may suffer from bugs or visual glitches.
Hardware wallet compatibility – Anyone who is seriously thinking about getting into crypto should consider getting a hardware wallet. Even people who don’t trade frequently should consider a hardware wallet to safeguard their most important assets. Investors with a hot wallet that’s compatible with at least one brand of hardware wallet have an advantage, since they can default to the model(s) supported by their wallet and transfer their crypto back and forth as needed.
Investing in crypto prudently
Cryptocurrencies are a new and exciting financial asset. The idea of a decentralized currency independent of the banking industry is enticing for many. The wild price swings can be a thrill, and some coins are simply amusing.
Consider the story of Dogecoin. A portmanteau of Bitcoin and Doge, the currency was a hit on Reddit, a popular social network forums site, and quickly generated a market value of $8 million. DOGE hit an all-time high on May 8, 2021, reaching a market capitalization of more than $90 billion after Elon Musk and Reddit users involved in the GameStop short squeeze turned their attention to it.
For a more sobering example, take a look at Bitcoin — the grandparent of all cryptocurrencies. Bitcoin has experienced multiple crashes throughout its lifespan, but its most recent one has left a lasting impression in mainstream culture. Reaching an all-time high of more than $65,000 in November 2021, its market value has declined as part of a general crypto price drop, briefly dipping under $20,000 in June 2022.
While entertaining, the fact remains that cryptocurrencies are unpredictable assets and should be traded with caution. It’s important to consider the following dangers when asking yourself, “should I invest in cryptocurrencies?:”
Crypto is volatile. A cursory glance at the historical price of Bitcoin is enough to see massive peaks and depressions throughout its lifespan. Just recently, Bitcoin fell under $20,000 in June after having surpassed a value of $69,000 for a single coin in November 2021. The same goes for any other major cryptocurrency. These dramatic changes are not normal compared to the pace at which mainstream assets move.
Crypto isn’t backed by anything. Most coins do not have a natural resource, such as gold, silver or other metals, that is used to track their value. They’re not backed by the government and don’t track the growth potential of enterprises the way stocks and bonds do. This increases crypto’s volatility as a whole.
Cryptocurrencies are also speculative assets, which are riskier due to large fluctuations in price. Many active traders invest in them with the hope of making a big profit after their value dramatically increases in the near future — hopefully before a crash.
Crypto is unregulated. Governments and institutions worldwide are still grappling with how to regulate cryptocurrencies, asking: Do we need specific legislation to regulate crypto assets? Who should regulate crypto? Should it be regulated at all?
While this lack of regulation responds to the nature of crypto and its ethos of freedom, a lack of adequate regulation means consumers are not protected against many crypto crimes and scams. Ultimately, crypto must be studied and handled carefully, as its future remains uncertain.
Personal finance experts and advisors recommend investing no more than 5% of your portfolio in risky assets like crypto. Beginners should also refrain from riskier crypto trading practices, such as lending and staking currencies to generate revenue.
Crypto Wallet Glossary
Blockchain: A blockchain is a type of ledger that records digital transactions and is duplicated across its entire network of systems. The shared nature of blockchain creates an immutable registry that protects users against fraud. Cryptocurrencies are traded on the blockchain.
BTC: BTC is the currency code used to represent Bitcoin, which was created by Satoshi Nakamoto as the first decentralized cryptocurrency. Read our article on what is Bitcoin to find out more.
Foundation for Wallet Interoperability (FIO) Network: The FIO was established in the “pursuit of blockchain usability through the FIO Protocol.” The FIO protocol is meant to improve the scalability of the blockchain and develop a standard for interaction between various crypto-related entities.
Hierarchical Deterministic (HD) account: HD accounts may be restored on other devices by using a backup phrase of 12 random words that’s created when you generate the wallet.
Light client: Also called light nodes, light clients implement SPV, a technology that does not require downloading an entire blockchain to verify transactions. Depending on the currency, a full blockchain could be anywhere from 5Gb to over 200Gb. Thus, light clients tend to be faster than regular clients and require less computing power, disk space and bandwidth. Mobile wallets almost always use light clients.
mBTC: A common exchange value, mBTC is short for millibitcoin, which is one-thousandth of a bitcoin (0.001 BTC or 1/1000 BTC)
Multi-signature: Multisig for short, wallets with this feature require more than one private key to sign and send a transaction.
Open-source: Software that is considered “open-source” has a source code that may be studied, modified or redistributed by anyone. The source code is what programmers use to adjust how a piece of software works.
Seed phrase: Newly opened crypto wallets randomly generate a string of 12 to 24 words known as a seed phrase. Users with non-custodial wallets must keep this phrase and are recommended to write it down in a safe location, since it stores all the information needed to recover access to their wallet and funds.
With all the information in this post, I believe you’re on your way to becoming an expert on crypto wallets and the measures you can take to avoid cyber theft. Until next time!