After buying your ethereum token, Ether, you will need a place to store it. That place, in the cryptocurrency space, is referred to as a wallet.
So, what is an ethereum wallet? Basically, an ethereum wallet is a software that lets you store your Ether, conduct transactions efficiently and check your balance anytime you need to.
You should bear in mind that Ethereum wallets do not work like conventional physical wallets. Like every other digital currency, ether does not exist in any tangible shape or form, and therefore cannot be stored in your wallet or anywhere else. Your wallet will only communicate with the Blockchain to facilitate transactions because all that exists are records on the Ethereum Blockchain.
Wallets have randomly generated strings of case-sensitive letters and numbers known as public addresses. Anybody who wants to send you some Ether will send it to this address, which is also known as a ‘public key,’ basically changing the ownership of the tokens.
The only thing stored in your wallet is your ‘private key,’ which is a password you need to confirm every transaction and unlock coins sent to you. An important fact to note is that you have to keep your private key a secret in order to avoid theft of your Ether. The public and private keys are paired, which means the two strings of numbers and letters should match for you to execute any transaction.
How to choose a wallet
Your own or third-party Ethereum wallet
The most comfortable way of storing your Ethereum token is doing so in a third-party wallet, for example in a wallet offered by an exchange platform. Trading Ether will be very easy this way, as keeping your token on the exchange will speed up the trading process, and of course, you will have easy access to your funds.
But, if choosing this method, you will basically give the exchange full control over your coins, as it is the company that stores your private keys. Besides, the cryptocurrency history is loaded with cases of exchanges being hacked and their clients’ funds being stolen.
The Ethereum platform lets you create a wallet for yourself, and you can choose from an assortment of options. If you make ethereum wallet, only you will have control over the private key and your funds.
Full node or not
Running a full node makes it possible for you to access the Ethereum Blockchain directly. If you don’t have a full node, you will have to connect to another node to get all the needed information and sign off on your transactions.
To get a full node wallet, you will need to download the whole Ethereum Blockchain. Basically, this changes your computer into a node, an entity that supports the whole network by updating the Blockchain through reaching a consensus transactions’ legitimacy with other nodes. This can only be done if you’re using a desktop wallet, as the Blockchain is many gigabytes in size and it is continually increasing.
Hot or cold wallet
The hot and cold wallets are the two main categories of Ethereum wallets. A hot wallet stores your keys online, and as long as you have access to the internet, you can access these key from anywhere in the world. But, these types of wallets are not the best option, as they can be easily hacked and your coins can be stolen from them. Cold wallets, on the other hand, store your keys offline and only connect to the internet when you want them to. This apparently makes them more secure and less susceptible to hacker attacks.
How to create a wallet for ethereum
The Ethereum platform provides an official wallet service known as MyEtherWallet; therefore, it is relatively easy to create your own ethereum wallet. Here’s how to go about it:
On opening the website, you will be welcomed by many safety reminders. These instructions are beneficial for your perception of how the whole thing operates and the dos and don’ts you have to follow to keep your funds safe. So, take your time to go through them.
You will be given an option to create a password and set up a new wallet. After creating a password strong and secure enough, you will be given an option to download your keystore file. You are advised to do this and store it in a safe place, as you can never be too safe in the cryptocurrency ecosystem.
The next step is crucial: save your private key. Memorize it, back it up, write it in on a sheet of paper and keep it in a safe deposit box. Do whatever you need to do to make sure it won’t get lost, and no one will be able to have access to it.
Once you’ve done that, you can unlock your wallet by uploading your keystore file, or copying and pasting your private key. There are many other alternatives for unlocking the wallet, but those are the easiest for first-time users.
Now you’re all set. All you need to do whenever you want to access your wallet is to authorize yourself on the website again. There, you can view the public address of your wallet, and the amount of Ether you have.
The guide above is centered on creating the easiest and probably the most generally-used Ether wallet. There are many more types of wallets available, all with somewhat different setting-up processes.
An Ethereum paper wallet is probably the most secure way to store your Ether. It’s basically a piece of paper with a code written on it.
It’s most significant benefit is that it neither need to be stored on your computer nor does it need to be connected to the Internet.
You can keep that piece of paper with you at all times. You can bury it somewhere in your backyard or keep it in your safe deposit box. Depending on how well you keep it, makes your Ether immune to hacker attacks and all kinds of physical theft.
To create a paper wallet, set up a new Ethereum wallet on MyEtherWallet, and click on the ‘print’ button provided for you after downloading the keystore file. The sheet of paper that will come out of your printer will hold both your private keys and your public, and QR-codes to scan them.
Mobile wallets are usually called ‘light’ clients, as you don’t need to download the whole blockchain to use them. Instead, they get accurate information about the current state of the network from miners on nodes. Those wallets come in pretty handy, basically letting you access your Ether anywhere at any time, as long as you have a mobile data connection. However, these clients are easier to hack, as they are ‘light.’
One of the best ethereum mobile wallets and the most popular at the time of writing is Jaxx. It is available for smartphones running on either Android iOS operating systems, as well as for desktop on MacOS, Linux, and Windows. The most significant peculiarity of the Jaxx wallet is that the private keys never leave the device. You don’t need to register or give any private information.
Another well-reviewed option is Coinomi. It stores your keys on your device and lets you save 18 different cryptocurrencies and 214 tokens. Furthermore, it provides instant conversion of digital currencies. Currently, it’s only available for Android, with an iOS version set to be released in the nearest future.
Desktop wallets run on your laptop or desktop computer. You can either use a light client or download a full client with the whole Ethereum Blockchain.
Desktop wallets are convenient and quite secure, and easy to set-up and use, as they can only be accessed from the computer on which they were downloaded. However, they are connected to the Internet, so you need to ensure your computer is not infected by malware or hacked. Moreover, you will be running a massive risk of losing your funds if your computer gets stolen.
Here are some of the best desktop wallets currently available:
– Exodus — A multi-currency wallet designed with an easy to use and friendly interface that stores your eys on your device. You can instantly exchange your digital currencies without any hassle, as it has ShapeShift integrated into it. However, Exodus is not fully open-source, which implies that some parts of its code cannot be checked and reviewed by the cryptocurrency community.
– MetaMask — This wallet is a Google Chrome extension which stores your keys on your device, and it is, therefore, qualified to be called a desktop wallet. It’s pretty easy to use, and you can save, send and receive Ether on it. Moreover, it lets you use other decentralized applications within it.
– Mist — You don’t have to bother about security too much when using this wallet, as it is an official Ethereum wallet. It is comparable to Exodus, but a little less user-friendly. It also has ShapeShift built into it.
Web wallets can be accessed from anywhere, as they are online wallets and use cloud storage. Moreover, they are generally faster than other kinds of wallets. They are incredibly prone to malicious hardware, cyber-attacks, hackers, and phishing scams, as your keys are stored online and often on a third-party server. Furthermore, it isn’t actually your wallet, as it’s offered by a company and the security of your funds is entirely out of your control.
MyEtherWallet is basically a web wallet, but it’s safe than other ones, as it’s fully decentralized and saves your keys on your computer. Most other Ethereum web wallets are incorporated with and provided by exchange platforms.
Hardware wallets are the ultimate cold storage of digital assets. They are much like those traditional, compact hard disks, but explicitly designed to hold digital currencies. They can be plugged into any computer you want to execute a transaction, and they create keys offline and instantly. Hardware wallets make your funds completely immune from any kind of hacking and cyber-attacks, as they are not connected to the Internet.
Most ethereum hard wallet come with backup options to guarantee you won’t lose your coins and the can be further secured with a PIN password as well as two-factor authentication. Most of the latest Hardware wallets also have a screen, which lets you verify transactions directly on the device.
Of course, they come at a price. They will surely cost you a little more than a software wallet will, but they will be worth the price, mainly if you’re saving a substantial amount of Ether. Besides, they are quite hard to find, as they are devices built with a specific purpose in mind, and are not released in massive quantities.