MetaMask: Everything to Know

By  Beluga Research July 13, 2023

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Summary

  • MetaMask is special "wallet" software for storing cryptocurrency
  • The wallet is known as "non-custodial" because users are responsible for storing the private keys, which similar to a password
  • Using MetaMask provides users access to the world of cryptocurrencies, NFTs, decentralized applications and more
  • MetaMask is accessible due to its availability across devices but also requires users to be versed in security practices in order to properly use

Overview

MetaMask is a non-custodial wallet for buying and selling cryptocurrencies, collecting NFTs , using decentralized applications (Da pps ), joining different online networks and more.

MetaMask is the most popular "non-custodial" wallet on the market today. Non-custodial means that users hold the private keys to the crypto held in a MetaMask wallet. As of 2023, MetaMask has more than 20 million monthly users. Its parent company, Consensys, is valued at over $3.2B.

A Brief History

MetaMask was developed by ConsenSys , a blockchain software company founded by Joseph Lubin. Before starting ConsenSys, Lubin was one of the founders of the Ethereum .

Shortly after the public announcement of Ethereum in 2014, Lubin started ConsenSys to simplify the experience of using cryptocurrencies - with one of the flagship products being MetaMask.

ConsenSys has raised over $726M to date from leading investors such as ParaFi Capital, Softbank, Anthos Capital, Microsoft, Temasek, Electric Capital, Dragonfly and many others. The Company is based in Texas and employs over 850 people as of 2023.

What is MetaMask?

MetaMask is a non-custodial wallet for digital assets. It allows users to connect with a variety of different blockchains to store, manage and interact with both digital assets and dApps . It is most commonly used as a browser extension that is downloaded and accessed through an internet browser. MetaMask also has a mobile app that can be downloaded and used on iOS and Android.

After downloading the MetaMask browser extension, users can either create a new account or import an existing one to get started. In the application, users can receive, buy/trade digital assets including cryptocurrencies, NFTs, etc as well as connect and interact with dApps on the blockchain.

Each wallet has a unique address associated with it that is used for sending and receiving crypto. MetaMask began with only supporting the Ethereum network, but has expanded to other networks.

Getting Started

  • Wallet management. MetaMask acts as a digital wallet to securely store, send and receive ether and ERC-20 tokens, which is the standard issued on certain networks.
  • dApps interaction. MetaMask enables seamless connection with decentralized applications (dApps) like decentralized exchanges, lending platforms, games and more.
  • Token swapping. MetaMask integrates with decentralized exchanges (DEX) like Uniswap and others, allowing easy swapping of one cryptocurrency for another.
  • Token sales. MetaMask allows participation in token sales by interacting directly with smart contracts, enabling purchasing and receiving of newly issued tokens.
  • DeFi yield. MetaMask facilitates participation in decentralized finance (DeFi) protocols, enabling lending or staking assets to earn interest.
  • NFT Marketplace Access. : With MetaMask users can participate in Non-Fungible Token (NFT) marketplaces, where you can buy, sell and trade unique digital assets.
  • Account Management and Security. MetaMask provides features to manage multiple Ethereum accounts, import or export wallets, and set password protection.

Unique Aspects

There are two primary types of hot wallets available: Custodial like Coinbase Wallet, and non-custodial wallets, like MetaMask.

  • Custodial Wallets. These wallets, like Coinbase Wallet , are typically provided by centralized cryptocurrency exchanges. When creating an account with a custodial wallet, the exchange takes care of storing private keys, the secret codes that allow access and management of cryptocurrencies. While this makes managing cryptocurrency much more convenient, users are ultimately trusting an exchange to safeguard assets. This can be problematic with some risk, as seen with FTX and others. However, custodial wallets often have more user-friendly interfaces and provide customer support services.
  • Non-Custodial Wallets. These wallets, such as MetaMask, provide full control over private keys. Instead of relying on a centralized service, users generate and store keys. This means users have sole ownership and responsibility for digital assets. Non-custodial wallets are often favored by those who prioritize security, privacy, and maintaining control over their funds. While the user interface may be slightly less polished compared to custodial wallets, non-custodial wallets like MetaMask offer a wider range of features and the ability to interact with decentralized applications (Dapps) on the blockchain.

Advantages

  • Device accessibility. With availability across many devices, MetaMask can be used virtually anywhere. It is primarily used as a browser extension while browsing the internet. MetaMask can be installed from various app stores for Google Chrome, Brave, Firefox and Microsoft Edge. There is also a mobile app for both Android and iOS that can sync up with the browser extension.
  • Lots of compatibility. The wallet allows users to manage and interact with different Ethereum networks, such as the Ethereum Mainnet, testnets, and other compatible blockchains. This is important because oftentimes projects will test different components across different networks in order to establish trust and safety in a particular service.
  • Support for multi-chain. Because of the transaction constraints on blockchains, it's very important for a wallet to support several different networks. MetaMask supports Avalanche , Fantom , Polygon , Arbitrum , Optimism , among others. Essentially, any Ethereum Virtual Machine, or EVM, network is supported.

Disadvantages

  • Security Threats. As with any digital wallet, there is a risk of cybersecurity threats. It's crucial to ensure MetaMask is downloaded from the official website. Keeping software and browser extensions up to date to protect against potential vulnerabilities is really important. Additionally, it's important to be aware of phishing attempts - only enter wallet information on trusted websites.
  • Loss of Private Keys. MetaMask gives full control over private keys. However, this also means loss or theft of private keys may mean losing access to funds. It's essential to securely back up recovery phrases and keep them in a safe place. Be cautious of sharing private keys or recovery phrases with anyone. It can lead to unauthorized access to your wallet.
  • Smart Contract Risk. When interacting with decentralized applications (Dapps) through MetaMask, there is a risk of smart contract vulnerabilities. Smart contracts are code-based agreements, and if there are bugs or vulnerabilities, they can be exploited, potentially leading to financial losses. It's advisable to conduct thorough research on Dapps before using them and be cautious when providing permissions or interacting with unfamiliar contracts.
  • Regulatory and Compliance Risk. Cryptocurrency regulations vary across jurisdictions. It's important to understand and comply with relevant laws and regulations in each country or region when using MetaMask. Stay informed about any updates or changes to regulations that may impact your usage of cryptocurrencies - this area of blockchain is continually evolving.