As a crypto holder, it is possible that you have Ethereum coins, especially as you have opened this article. This article contains everything you need to know about storing Ethereum and how to store it properly, protecting it from hackers.
There are lots of Ethereum wallets to choose from, each having different pros and cons. Anyways, whichever Ethereum wallet you decide to store your ether coins all boils down to your preference.
What Is an Ethereum Wallet
Think of an Ethereum wallet as an online bank account that connects users to their physical cash and aids transactions. Just as you can send, receive and manage your physical cash through an online bank, you can transact your Ether coins through a secured wallet.
An Ethereum wallet could be available either as software or hardware but is still capable of giving users access to the Ethereum blockchain. Without a wallet, you cannot manage your account on the Ethereum network.
An Ethereum account is an account that functions for Ethereum holders, enabling sending/receiving of transactions and keeping track of users’ balances with many Ethereum addresses within the blockchain.
An Ethereum account can also create smart contracts, facilitate interactions with decentralized applications (dApps), and lots more. An Ethereum wallet has an address which is a string of letters and numbers beginning with “Ox”, that is open to the public.
On the blockchain, balances of all Ethereum addresses are displayed. An example of an Ethereum address is Ox71C7656Ec7ab88b098defB751B7401B5f6d8976F. An Ethereum address is a 42-character hexadecimal string.
It is the Ethereum address that is used to send funds, just like a bank account number. The controller of the address is usually anonymous because of the alphanumerical representation of the address.
Ethereum wallets are controlled through a distinct private key or password given to a user and aid the movement of funds within the wallet.
Unlike an Ethereum address that is public, an Ethereum wallet key is private and should be known only by the owner of the wallet.
So, an Ethereum wallet is similar to a bank application or an online bank account. The Ethereum address is the same as a bank’s account number and a private key, like a user’s bank app pin or password.
Types of Ethereum Wallets
There are several types of Ethereum wallets, each designed to suit the specific needs and goals of a user.
While some are available on a desktop or mobile device, some are available on a piece of paper or hardware. Irrespective of which Ethereum wallet is available, we advise that you outline your specific needs and goals before choosing an Ethereum wallet.
Keep reading to know more about Ethereum wallets. Weigh your comfort level with the features that are more important to you before deciding.
Hot and Cold Ethereum Wallets
These are the main types of Ethereum wallets. The hot wallet is the kind available online and, as such, is connected to the internet. It can be stored on devices such as desktops, pc and mobile devices.
One of the major risks associated with a hot wallet is that insecurity is high. Hackers usually infect malware online wallets with malware. This malware is capable of either damaging or providing unauthorized access to the user’s wallet.
A hot wallet, however, has a user-friendly interface and makes transactions easy, especially for beginners.
A cold wallet is available offline, safe and eliminates the risk of insecurity. But, it is less user-friendly and makes sending and receiving of funds a little bit harder.
We usually state that Ether coins intended for holding be stored in cold wallets (similar to a safe-box deposit) and ether coins needed for short-term use and daily transactions be stored in hot wallets – all this for security purposes.
Custodial and Non-Custodial Ethereum Wallets
Custodial Ethereum wallets are regulated and managed by a central authority. Some users use exchanges, marketplaces, and lending services that support Ethereum and are provided by wallets to store their ether.
These central authorities hold the users’ private keys. And although they control the private keys that give access to wallets, users can still access funds directly.
The risk associated with custodial wallets is that users have to entrust funds and private keys to a third party that may go rogue or get hacked. These wallets are vulnerable to hackers since they are available online.
Another con of such wallets is that the government can seize users’ funds if the exchange in control goes bankrupt.
The advantage of storing Ethereum holdings in a custodial wallet is that users have peace of mind as it calls for less responsibility. Also, it is simple, easy to use, and does not require KYC for creating and storing assets.
Additionally, a lost or forgotten password doesn’t mean the wallet is gone; passwords can be reset or regenerated to regain access to Ethereum holdings.
A non-custodial Ethereum wallet allows users to control and manage their private keys without a third party influencing decisions. The disadvantage of a non-custodial wallet is the impossibility for users to recover Ethereum assets if private keys and recovery phrases are lost.
In as much as non-custodial wallets give users the freedom to handle their accounts, so much responsibility comes with that freedom. Losing private keys makes a user inaccessible to funds, and this is the biggest disadvantage of non-custodial wallets.
Mobile Ethereum Wallets
These wallets are light nodes. Before we go further, a light node is a feature of Ethereum wallets that requires users to download a small portion of the blockchain. The mobile Ethereum wallet, as a light node, is a small application that requires requiring small spaces on mobile devices like smartphones.
Mobile wallets can be downloaded on Android using the google play store and on iPhones using the apple app store. You definitely need an internet connection on your mobile devices to access these wallets.
To know the state of the network at any given moment, mobile wallets depend on the discreet information provided by miners.
The cons associated with mobile wallets is inaccessibility to funds when the mobile device is lost or stolen. But backups can protect your information and keep your wallet safe from loss.
Mobile wallets are typically hot wallets since they are connected to the internet when the device is on. They are also mostly non-custodial wallets as the user owns the smartphone and is in the sole custody of the private keys.
The biggest advantage of a mobile wallet is its portability and availability when the user needs it.
- Desktop Ethereum Wallets
Desktop wallets are available on laptops and computers. Some Ethereum wallets support operating systems like Linux, mac, and windows. A perk about the desktop wallet is that it is non-custodial, meaning that the user is in control of his/her private keys with no involvement of third parties.
Most desktop wallets always protect the user’s password and provide recovery phrases to help recover Ethereum wallets once the laptop is stolen or damaged.
Also, users with this kind of wallet can download an entire Ethereum blockchain if they want. This helps to validate transactions without the help of a miner.
This type of wallet does not just enable sending and receiving of funds; they also give users the permission to create smart contracts and download an entire blockchain, effectively providing users with more functionalities within their wallets.
Desktop wallets are not hot wallets because they are not connected to the internet, meaning they are less vulnerable to hacking.
Website Ethereum Wallets.
Web interfaces Ethereum wallets let users interact with the blockchain when their wallet is connected to the internet.
They are a popular alternative to both desktop and mobile wallets. Web browsers connect wallets with users’ accounts.
This type of wallet makes use of cloud storage to store users’ data. Cloud storage takes advantage of large computer servers built into data centres that physically store data and allow easy access to customers whenever needed.
A website wallet is a hot wallet because it is connected to the internet, which means that keys are stored online.
To send and receive funds, a user must log into a website with their private keys in storage. Because this data is stored in the cloud, it makes the wallet more insecure, as anyone can gain unauthorized access to your account.
Web wallets are easy to operate because there is no need to download, install or setup. It is also possible for users to access the wallet from any location and device, but it could be risky at times since it is controlled by a third party (the website).
A user is not totally in charge of his/her private keys. A website wallet can be vulnerable to hacking as a user ID, and password is easy to access, but they are still some trustworthy websites with no record of system breach by hackers.
Some attacks that website wallets can be vulnerable to include phishing and domain name system (DNS) in which users’ activities on the website is redirected to a hostile server that collects users’ data like login details to access their information.
- Hardware Ethereum Wallets
Here, private keys are stored offline and, as a result, are referred to as cold wallets. Hardware wallets are bits of hardware that are connected to a computer for Ethereum transactions to occur or for the protection of pin/password.
It is less vulnerable to hacking as hackers would need to have the device in hand and know the password before accessing funds. However, the cost of getting a hardware wallet is super high, especially for users interested in storing small Ethereum assets.
We usually advise that the cost of hardware wallets shouldn’t be a reason for users to go ahead and purchase an already used hardware wallet or buy from a third-party seller.
This is super risky and could cause a loss of funds within a short period of time. It’s best to buy a hardware wallet that has never been used and from the right source too.
- Paper Ethereum Wallets
Yes, private keys can be stored on a piece of paper only accessible to the owner except it becomes stolen or lost. They are cold wallets since they have no business with the internet.
They are basically private keys that control funds printed on a piece of paper. This type of wallet is inexpensive and very accessible as what is needed is a small piece of paper and a pen.
We do not offer advice that paper wallets be used for long term holdings as the paper could get lost or stolen quickly if not handled with extreme care. But if having a paper wallet for long-term holding is what you want, we advise having alternatives like titanium plaques.
A titanium plaque is more like flat paper and is capable of storing pass keys for Ethereum wallets. They can also withstand damage as they are fireproof, bulletproof and waterproof. We recommend ColdTi as a titanium plague for Ethereum holders.
Features of Ethereum Wallet
Yes, Ethereum wallets are available in different shapes and sizes, all having distinct features. Some wallets are programmed only to permit users to send ether coins between addresses; some wallets allow this and other functionalities within the wallet.
To set up an Ethereum wallet, a user has to download, install the wallet and write down a recovery phrase/passkey. Every Ethereum wallet has this feature. This private key is important for carrying out transactions, and the recovery phrase gives access to both the wallet and the private key. As long as a user remembers both the phrase and key, accessing Ethereum assets is not a problem.
Most Ethereum wallets have decentralized applications that run on blockchains. These applications greatly benefit users as they eliminate a central authority’s control and inference.
The advantages of dApps in Ethereum wallets include flexibility of development, lack of censorship, smart contracts, and safeguarding user privacy.
Externally owned accounts and contract accounts are the two main types of Ethereum accounts. Externally owned accounts are designed to have public and private keys as the basis for making genuine transactions.
When users use private keys to sign transactions, it just means they are in control of the funds available in the account.
The benefits of this type of account include the free creation of accounts, capable of initiating transactions, and permission for ETH transfers between different accounts.
In contract accounts, instead of public or private keys, a smart contract is used throughout the network. A smart contract is a program (s) that is stored on the blockchain and only acts when predetermined conditions are met.
Smart contracts automatically execute, control, or record activities on the network according to an agreement. The creation of a contract account is not free because a network storage network is deployed. Also, new transactions cannot be created on their own.
Irrespective of the differences between the two accounts mentioned above. Ethereum accounts have four main features, which are nonce, balance, codeHash, and storage root.
Most Ethereum wallets support the ERC (Ethereum request for comment)-20 token standard, and some don’t. the ERC-20 token standard determines a list of rules for creating and transacting fungible tokens on the Ethereum blockchain. Smart contracts support this feature, and not all Ethereum wallets have this.
Also, not every Ethereum wallet can connect to a credit, debit card or bank account. These cards and bank accounts allow users to buy Ethereum and other cryptocurrencies directly into their wallets.
This feature is very convenient but not supported by all wallets. Transactions involving bank account transfers calls for a lower charge.
Another feature allows users to hold non-fungible tokens (NFTs), which provide unique identification data on the blockchain. There are lots of features to determine which type of Ethereum wallet you can choose.
You can use different wallets, such as mobile, desktop or even paper, to access a private key at the same. It all boils down to personal preference.
How to Keep Your Ethereum Assets Safe?
It is necessary to be on the lookout for hackers and malware if you consider your holdings important. Users do not fret at times when it comes to the cash saved in their bank accounts, but it is only sensible to take fundamental steps to ensure the cash is secured. That is the same for cryptocurrencies.
Always cross-checking and confirming that the address you are sending funds to is correct is one of the most important measures to take to ensure that your funds are protected.
Sending to the wrong address can mean loss of funds. In most cases, it is impossible to recover such. Ensure that you are familiar with the application you intend to work with and that private keys are written down.
Recording the address of the website wallet and the websites of the decentralized applications you regularly use is a good practice for crypto holders. By doing this, it is easy to know the original site from the phishing site.
Numerous browser extension wallets have a record of phishing sites already saved within. Such wallets can be installed into your web browser to change, secure or add functionality.
It is available as a small icon on the top of your web browser, and clicking it exposes you to a larger interface with extra functionality. Browser extensions are known to obstruct websites that users do not need just for security purposes.
Acknowledging the legitimacy and audition of service (such as lending, investing, or exchanging Ethereum) when working with DeFi protocols is important to make sure that the professionals handling security have the code under review.
When DeFi projects are coded properly, insecurity risks are reduced. To know if the codes have been reviewed, search for the name of the service and the word “audit” or “review” on the web.
Avoid schemes, especially giveaways requesting for Ethereum in return. Before carrying out any transaction or being part of any project, confirm its originality.
Conclusion
Ethereum is a great coin to invest in, other than bitcoin. Most of the wallets available support Ethereum, and it is left to you to decide which is best for you. This article has covered everything needed to know about Ethereum wallets, Ethereum addresses, features of Ethereum wallets, and so much more.
