In this chapter you will learn what exactly is an Ethereum wallet, in which forms wallets occur and what is the best ethereum wallet per category.
You might think … a wallet? Why would a digital currency need a wallet? The reason for this is very simple, because Ethereum is decentralized; you have no bank or other party that keeps your digital currency. In other words: you are responsible for your own money!
Fortunately, it is not as scary as it seems, and working and installing a wallet is not only easy, but rather intuitive!
What is an Ethereum Wallet?
An Ethereum wallet is a digital wallet for your Ether (ETH). If you see Ether as a digital translation of physical money, you would consider an Ethereum wallet as a digital translation of an account/wallet.
Normally you would ask your bank if you can draw up an account. The bank then arranges the things around it and asks you a certain price for drawing up your account. This is not the case in cryptocurrencies; you are your own bank, as it were!
You can have as many wallets as you want; and can create and manage numerous Ethereum addresses free of charge. An Ethereum address is comparable to a bank account, which consists of two keys. An Ethereum wallet consists of a Private and Public key. Both of which look like a series of numbers and letters such as: “92611da3cec1b4c8f5005bcef1102ba3ac704454e6a77b1d297b862fc7c22209” .
The Public key is what gives a person or instance where you want to receive Ether (ETH). As the name suggests, this is a public key! The Private key is what you use to send/spend Ether (ETH) yourself. As the name implies, this key is private and therefore only for you! That is logical, of course, since you must be the only one who must be able to spend Ether.
The use of a wallet is similar to the use of a traditional bank account. The only difference is the fact that you have two separate accounts for sending and receiving your money, or in this case your Ether.
Furthermore, the process is very easy an intuitive, do you want to receive money from a friend? Or do you want to deposit Ether on your wallet that you have just bought? Then you give your audience key when you buy or with your friend.
Do you want to transfer money to an exchange or to a person? Then you have to know their public key and enter your own private key to allow the payment. In addition, it is often also possible to transfer money via QR-CODE via your mobile! But also to receive by sending someone the QR code.
Types of Ethereum wallets
There are 5 types of Ethereum wallets to choose from, each with its own for and disadvantage. It is therefore wise to first explain each type, to help you better with your choice. So let’s see where you can choose from:
‘Cold’ and ‘Hot’ Ethereum wallets
Before we dive deeper into all types of wallets; it is important to briefly distinguish between a cold storage and hot storage wallet. These are both terms that you will often see coming back in the search for a good Ethereum wallet.
Cold Ethereum wallets
Cold Ethereum wallets are wallets that are not connected to the internet. You often have this wallet physically in possession and not on a website, computer or cloud. This makes this type of storage much better protected against online attacks or other forms of deception. Given that this wallet is out of reach of, for example, hackers.
For this reason, cold storage is often looked at if one intends to keep cryptocurrencies in the long term. You can compare this type of wallet with a savings account!
Hardware Ethereum wallet
Hardware wallets are the safest way to store your Ether. A hardware wallet is a piece of equipment the size of a USB with which you can connect to your computer via a cable. You can then transfer all your Ether (but also other cryptocurrencies) to it. These wallets have a small internal computer or smart card that enables them to create offline “private” keys. This makes them extremely safe, which is why we strongly recommend them if you have a large number of Ether.
A hardware wallet can function perfectly as a daily wallet; you can set it up just as fast as doing a USB in a computer. Yet that will never be easier than using a website. As a result, they are often more popular with people who want to keep coins in the long term, or who have a large quantity that they want to keep safe from the internet.
Due to the popularity of cryptocurrencies, the demand for hardware wallets has risen, with more and more options coming out every year. However, at the moment there are only 3 wallets that clearly perform the best, and because of that have become so popular with Ethereum holders.
Paper Ethereum wallet
If you are not a fan of all that technology, then it is also possible to choose the old-fashioned paper as a wallet. Just like a hardware wallet, this is a safe offline method of storage, and you can print a paper wallet yourself at home!
The operation of a paper wallet is fairly simple. You create a paper wallet by going to a website like this . These types of websites offer you the option to generate a paper wallet with your own private and public key and their respective QR code. You can then download and print it!
You can use the public key (or the QR code) to set up Ether, or the private key (or the QR code) to extract Ether from it.
The advantage of a paper wallet is that it is not only simple but also free of charge.
The disadvantage is that a paper wallet can be stolen (stealing a hardware wallet is useless without his password). But also that paper and ink can degrade and that you immediately lose your Ether.
Hot Ethereum wallets
Hot Ethereum wallets are wallets that are connected to the internet, on a cloud or on a computer. As a result, they immediately have a big advantage over “cold” wallets; their ease of use. You have easy access to your wallet and therefore make and receive payments much faster.
The disadvantage is that this form of storage does reduce the safety of your Ether. The reason for this is actually very simple, you trust a third party. If something goes wrong because there is a leak in their system and they are hacked by this; is your wallet and is not safe there.
Because of this, “warm” wallets are more suitable for smaller amounts of Ether.
Ethereum desktop wallet
A desktop Ethereum wallet is made to be downloaded and installed on a computer, tablet or laptop. They are both “hot” and “cold” in the sentences that they are usable on computers that are as connected as not connected to the internet.
An exclusive desktop Ethereum wallet is almost impossible to find. Most modern variants also offer possibilities for applications such as mobile and even via their online website. An example of this is jaxx.
Ethereum online wallet
As we have told the previous wallet, only desktop wallets are virtually no longer for your Ether. However, there are more and more Ethereum wallets available that operate on a cloud or online.
Of course, the advantage is clear, your Ether is always easily accessible and a lot of trouble is handled by a third party! This is often the best option for keeping Ether for small quantities that you are actively using or using. The easiest online wallet to use is Coinbase, where you also immediately receive $10 bitcoin when you use our link.
Ethereum mobile wallet
What if you do not often sit at your computer but use your mobile more often? No worries, also mobile there is a wallet available to store your Ether.
Besides the dexterity, you are also able to use your mobile camera to easily make payments through the QR codes!
Ether wallets for your mobile phone are rather mini-wallets. It would cost an incredible amount of data usage if your mobile phone constantly had to update the blockchain from Ethereum. As a result, your mobile phone does not use the entire blockchain but reliable nodes within the chain.
This makes it possible to simply make and receive payments on your mobile phone without taking up a lot of memory. The disadvantage is of course that you have to rely on a third party.
We strongly recommend keeping not large amounts on “hot” wallets for a long time, but there is nothing wrong with using smaller amounts.
Ethereum debit card
If you just want to do your shopping, an online or mobile wallet is not yet convenient enough. Then it is certainly possible to use a debit card for your Ether and use it to make purchases in a store. Just like you would with your normal bank card!
How do I safely use my Ethereum wallet?
Most wallets offer the possibility to encrypt them with a password. Make sure you choose a good password that can not be easily guessed or hacked. Hackers are able to crack a lot of passwords with computers. Contrary to popular belief, in the world of cybersecurity there is no complexity of a password that counts; but the length!
We, therefore, recommend that you choose a phrase as a password that you can easily remember. An example of such a password is “Thisisareallygoodpw.”; this example would cost a computer two years to crack.
Make enough backups
You can easily make backups of your wallets. This is often also offered as an option within the wallet!
Making backups of your wallet that you store in several places is important. It is also the safest way to be sure of the safety of your bitcoins.
If applicable, use multisig
You will probably wonder; what is multisig? Multisig stands for multi-signature transactions or in other words a transaction that requires multiple signatures. This means that in the event of a transaction, several parties must provide confirmation before the transaction is actually executed.
This is an extra layer of safety that can prevent someone from being able to sit on your Ethereum just like that. But it is also a great feature for people who want to share an Ethereum wallet for a business purpose. You have the assurance that no one can spend money without the other person’s permission.
TIP: You can also use multisig with multiple devices. This means that you do not need extra people to keep your Ethereum wallet safe, but just yourself on multiple devices; such as an iPad and telephone, you must approve your transaction.
A large amount of Ether? Then go offline
As we have discussed before in this chapter. There is nothing like an offline storage space when it comes to safety of your Ether. No one can come to your Ether, and you are certain that your money is safe during a cyber attack.
If you have to store a large amount of Ether, having a hardware Ethereum wallet is highly recommended, and almost not optional!
Frequently Asked Questions
Ethereum is a Blockchain and is therefore enormously safe here. Especially because a wallet does not really store the Ether, but rather the transactions within the network.
The security of your wallet itself depends on how you handle it. You have the responsibility yourself to keep your private key for yourself. Since these are the only way to access your wallet, it is up to you to keep them safe and not lose them.
All transactions and wallets within the Ethereum Blockchain are naturally open to viewing for everyone. Yet all wallets and transactions are anonymous, because a wallet is nothing more than a series of numbers and letters. A wallet does not contain any personal data where someone can link your wallet to you.
It is true that at the moment your wallet comes into contact with a bank account, because you deposit or receive money from a wallet. The anonymity is naturally gone quickly again.
Because of this aspect, Ethereum is also called pseudo-anonymous.