Ethereum is one of the most popular platforms, as many investors and developers are interested in entering the world of cryptocurrencies and blockchain development.
To participate in the Ethereum ecosystem and securely store, buy, and sell Ether (ETH) and other Ethereum-based digital assets, you need an Ethereum wallet. What’s more, some Ethereum wallets allow users to connect to smart contracts and interact with decentralized applications (dApps).
This article will dive into the basics of Ethereum digital wallets and try to understand how to choose the best wallet that satisfies your needs.
Ethereum is a decentralized platform with its own blockchain and ecosystem. Decentralization means that there is no trusted central authority that controls the network. Anyone can create various decentralized applications (dApps), smart contracts, and even new cryptocurrencies. The platform is also used to build decentralized autonomous organizations (DAOs), hold assets, and perform transactions without middlemen.
Transaction records are immutable, verifiable, and securely distributed across the network. As a result, Ethereum is widely used to track ownership of digital currencies and ERC-20 tokens. This allows all network participants to access and view all transaction data, making it easy to prevent fraud. As for your sensitive data, you don’t have to share all your details to use Ethereum. You just control your data and what is shared.
The platform has a native cryptocurrency ETH, which is required to pay for activities on the network. Ethereum is one of the largest cryptocurrencies in the world.
Eliminating intermediaries is one of Ethereum’s key advantages. Its decentralized network allows participants to get rid of middlemen, such as banks that process payments, third-party web hosting services, and lawyers who write and interpret contracts.
Another advantage is Ethereum’s existing network, which has been tested through years of operation. Ethereum has an engaged global community and the largest ecosystem in blockchain and cryptocurrency. What’s more, Ethereum’s community of developers is always on the lookout for new ways to enhance the network and create new applications.
Finally, Ethereum offers a wide range of functions, such as executing smart contracts, using digital currency, processing financial transactions, and providing data storage for third-party applications.
An Ethereum wallet is an application or computer program that allows you to securely store the information you need to access your Ether funds. Buying Ethereum on a crypto exchange and storing it there can be quite unsafe since the exchange itself can be hacked or even shut down. As a result, your cryptocurrency can be stolen or lost.
To access your assets and make transactions, you need a public key and a private key. A public key is tied to the wallet address that allows other users to send you coins. You can share your wallet address with anyone without fear that the wallet’s security will be compromised. In other words, a public key is like a bank account number.
A private key is a password to your wallet, and you can’t share it with anyone. It unlocks your wallet and provides complete control over your funds. If your private key is compromised, malicious actors can steal your digital assets. In this case, all you can do is create a new wallet with a new private key and transfer your funds to it.
If you want to send ETH tokens to another user or exchange, you need to enter the address of the receiving wallet and provide your own private key to authorize the transaction.
When using an Ethereum wallet, you should be aware that there are externally owned accounts (EOAs) and contract accounts in Ethereum.
An externally owned account is the most common type of Ethereum account. An EOA has an Ethereum address that is managed by a private key. Users can create as many externally owned accounts as they want. Moreover, EOAs can be used to create and activate smart contracts.
Every contract that exists in the Ethereum network has its own account with a unique Ethereum address. A contract account doesn’t have a private key that controls it. There is a code that defines the contract and contains predetermined triggers that are responsible for account management.
Contract accounts can send and receive Ether, and launch additional contract accounts if programmed to do so. Once a contract is launched, it cannot be changed. Therefore, the contract creator should be careful when designing trigger conditions.
There are two main types of crypto wallets: hot and cold. Let’s take a closer look at them.
Hot wallets store your private keys online, making them accessible from any Internet-connected device, such as a desktop PC or mobile device. These wallets tend to be more user-friendly and allow you to access your funds anytime, anywhere.
The cryptocurrencies people carry for daily transactions should be kept in hot digital wallets. It’s very similar to checking accounts for fiat currencies.
In contrast, cold wallets store your private keys offline. However, you can connect your cold wallet to the Internet only when you need to make a transaction. This eliminates the risk of hackers attacking and infecting your device with malicious programs to steal your private keys.
Cold wallets are usually less intuitive and can make it difficult for you to move your funds. Storing cryptocurrency offline in cold wallets is very similar to what is already accepted for fiat currencies. Just like cold crypto wallets, bank accounts and safe-deposit boxes are more secure, and people find them trustworthy places to store their savings.
Today, the best way to increase the security of your digital wallet and funds in the short term is to install two-factor authentication. Such security measures are especially important for custodial wallets, where a third party has control over your private keys.
Installing 2FA ensures that access to your wallet is only granted after completing two authentication steps. The process involves entering your password and providing a numerical code that is sent to a mobile device.
Two-factor authentication greatly reduces the risk of your account being stolen. With 2FA, hackers have to gain access to both your actual phone and the password.
An Ethereum paper wallet is a piece of paper with private and public keys printed on it. To access your funds, you must enter the key by hand or scan a QR code that comes with a piece of paper with the keys written on it.
The main advantage of paper wallets is that they do not require an Internet connection to store keys, so your funds are protected from hackers. What’s more, paper wallets are easier to use and more accessible than others.
However, paper Ethereum wallets may not be suitable for long-term storage of funds because paper is quite fragile and can be easily destroyed or even accidentally thrown away.
Ethereum online wallets are located on centralized services such as crypto exchanges. Although such wallets are easy to use, there is a high risk for users to lose all their digital assets.
When dealing with online Ethereum wallets, users must avoid phishing websites. They usually look like typical web resources, but they can steal your personal information, including your username and password. This allows hackers to access your account and steal your digital assets.
Software Ethereum wallets are suitable for users who want to have a secure and convenient wallet at the same time. Compared to paper wallets, software wallets are more convenient for performing repetitive transactions. Software wallets guarantee that the user is the only person in control of their private keys, reducing the risk of hacking. However, such wallets are not as secure as paper or hardware wallets.
There are many kinds of software wallets on the market. You should only trust those with open-source code since the crypto community can test it for bugs and validate that the code doesn’t allow hackers to break in. In addition, software wallets have a user-friendly interface that makes it easy to send and receive Ether.
Mobile Ethereum wallets are lightweight nodes that do not require users to download the entire blockchain to make transactions and manage their funds. Mobile wallets are applications that can be easily installed on mobile devices, just like any other app from the App Store or Google Play. Such wallets allow users to access their funds using a cellular connection.
Most popular mobile wallets support Ethereum and ERC-20 tokens and have built-in browsers that enable interaction with dApps. The main disadvantage of mobile wallets is that they are easily hacked. If you lose your phone or someone knows your PIN, you may lose access to your Ethereum funds. For this reason, it’s better to store only small amounts of ETH on your mobile wallet for daily use and back it up regularly.
Hardware Ethereum wallets are flash drives that store users’ private keys offline. You need to plug your hardware wallet into a PC and enter a password to access the keys and move your funds.
To access your funds, a malicious actor would need physical access to the device and know the password to it. Still, hardware wallets may be too expensive for users who store small amounts of crypto.
Never buy a secondhand hardware wallet or one from a third party because such wallets can be compromised to trick you. You never know who has access to the wallet and if you are the only person controlling it.
Browser extensions are used on desktop browsers to store ETH and ERC-20 tokens and interact with decentralized applications and even other blockchains. Browser wallets are considered a more secure alternative to web interfaces because they store users’ private keys in an encrypted manner on their browsers. To access the wallet, the user must enter the password.
Installing browser wallets is as easy as installing any other extension. Some browsers have built-in Ethereum wallets that streamline interaction with dApps. Browser wallets are convenient for using Ethereum-powered applications, but it’s better not to use them as long-term storage for your savings.
Desktop Ethereum wallets run on operating systems like macOS, Linux, or Windows. Such wallets allow users to send and receive Ethereum, create smart contracts, and much more. Most desktops store keys locally, so users have to use their computers to access their Ethereum wallets. For this reason, private keys are vulnerable to hacking.
Users can download a full client with the entire Ethereum blockchain or use a light client. Downloading a full client is a more secure option because it validates transactions itself, eliminating the need for miners.
Desktop wallets depend on the Internet connection, so you always need to be careful and keep your computer away from malicious software.
Once you’ve chosen an Ethereum wallet, it’s time to deposit funds into it to start using the network. You need Ether, the native cryptocurrency of the Ethereum network, to interact with decentralized applications on the platform. Ether is used to pay for transactions.
You can buy Ether on centralized exchanges and withdraw it to your crypto wallet. You need to send the funds to a public wallet address, which is essentially similar to the international bank account number (IBAN) in the traditional financial system.
Every transaction on Ethereum includes a transaction fee that is paid to network validators who help maintain the integrity of the network. The amount of the fee may vary depending on the demand for block space on the blockchain. Block space is the amount of space available in each block of data added to the network. Digital wallets help users estimate network transaction fees based on the current demand for block space to avoid overpaying.
EOAs use messages to communicate with each other and with smart contracts. Transactions are inherently signed data packages that store messages that can be sent between accounts. Such communications are “wrapped” in transactions that are funded with Ether.
In addition, contracts can share messages with other contracts. This requires a transaction that first creates a new contract so that the contract can then be triggered.
Users tend to be quite confident about the safety of their funds while they are stored in a bank account. There is little chance that a third party will access their bank account and steal money.
However, when dealing with crypto wallets, such scenarios are possible, and users should avoid them to protect their funds. The Ethereum community insists that users triple-check everything to make sure they are always sending money to the right address, interacting with the applications they want, and writing down the private key as they should.
It is crucial to know if the service you are dealing with is audited and legitimate, and if security experts have reviewed its code. Just search the web for the name of the service and add “audit” or “review”.
To avoid phishing resources, you can bookmark your web wallet and decentralized applications that you use frequently. Some browser extension wallets have a database of phishing schemes and resources and automatically block dangerous websites to protect users. Regular backups can also protect your funds if something goes wrong with your browser or hard drive.
Another best practice is to avoid using mobile crypto wallets on a wireless network you don’t know and trust, e.g., in airports, shopping malls, etc. If you have a hardware wallet, keep it and the backup seed phrase in a safe place, and don’t share the phrase with anyone. And if you have a paper wallet, protect it from water and fire damage.
You can buy Ethereum tokens directly on Coinbase and then stake them, all in one place. You can buy Ether tokens the same way you buy stocks, with a market order or a limit order. Before ETH can be redeemed, the shard chains must be fully developed. Therefore, your ETH will be staked until the end of ETH 2.0.
On the contrary, Binance tokenizes Binance Ethereum (BETH) for users. It represents your staked ETH on a 1:1 basis, allowing you to continue trading and withdrawing your locked assets.
No matter where you stake ETH, its value will rise and fall depending on the market price on most staking platforms.
Guarda is a multi-asset crypto wallet that allows users to securely send, receive and store Ethereum and Ethereum-based tokens. The wallet is available on multiple platforms, including Android and iOS, desktop and web applications, and a Chrome browser extension. It also has an intuitive, easy-to-use interface and offers customer support.
Guarda is a non-custodial crypto wallet, which means that owners have complete control over their funds and don’t need a third party to store their private keys. The wallet ensures user security as it doesn’t require any personal information. Guarda is one of the most protected crypto wallets and there haven’t been any reports of security breaches.
Trust Wallet is a multi-asset mobile crypto wallet that supports over 4.5 million digital assets, including ETH. Although it can’t be directly converted to cold storage, the wallet allows users to buy, exchange and participate in stakes directly from the app. Trust Wallet is free to download and easy to use.
What’s more, users can access Ethereum dApps and manage their digital assets, including NFTs, through the built-in mobile browser. Trust Wallet doesn’t store your private keys, providing users with a high level of security and privacy.
MyEtherWallet (MEW) is an open-source web wallet for sending, receiving, and storing Ethereum, Ethereum Classic, and ERC-20 tokens. This wallet is free and you don’t need to install anything on your computer. In addition, there is a mobile MEW app for Android and iOS that allows users to access their wallet from anywhere.
The private key for MyEtherWallet is stored in an encrypted file on your computer, ensuring the highest level of security. The wallet supports smart contracts and allows users to exchange ETH for BTC and vice versa. However, MEW doesn’t provide customer support in case of lost funds, so users should be careful with their recovery passwords.
Trezor is a hardware wallet that is compatible with Linux, macOS, and Windows. It is used to store and trade Ether, ERC-20 tokens, Bitcoin, Litecoin, and other cryptos. The wallet is a flash drive device that connects to a computer or phone via a micro-USB. It also includes two-factor authentication, encryption, and other security features.
In addition, Trezor stores your digital assets on a secure electronic chip that is activated with a unique PIN. Users can also access dApps by integrating the wallet with desktop applications. Trezor offers online customer support and data analysis tools.
Exodus is a multi-asset cryptocurrency wallet available on desktop and mobile devices. The wallet allows users to trade, store and manage Ethereum-based tokens, NFTs, Ethereum, and other cryptocurrencies. Exodus is free to download and has an intuitive user interface. When you open the wallet, there is a pie chart that shows your entire portfolio.
Exodus allows users to earn staking rewards, trade cryptocurrencies on its built-in exchange, and receive interest payments by depositing their assets in a DeFi lending protocol. The wallet doesn’t store your private keys, giving you full responsibility for your funds. What’s more, Exodus offers features like seed key backup and one-click email recovery.
MetaMask is a web-based wallet that allows users to access an Ethereum wallet through a browser extension or mobile app. With MetaMask, you can interact with dApps to participate in token stakes without having to install the full node. It is a non-custodial wallet that stores users’ private keys in encrypted form in the browser but never transmits them anywhere.
MetaMask allows you to buy, sell and store ETH and Ethereum-based tokens, including NFTs. The wallet keeps an eye on phishing resources, adds them to a database, and immediately notifies you if you have interacted with a website from the database.
Ledger Nano S
Ledger Nano S is a hardware wallet that supports various ERC-20 tokens, Bitcoin, Ethereum, and other cryptocurrencies. It lets you store your digital assets and private keys offline. The device comes with a small OLED screen that allows you to manage your transactions.
Although Ledger Nano S is one of the cheapest Ethereum wallets, it includes two-factor authentication, a PIN code, and recovery seed functionality. You can also integrate Ledger with MyEtherWallet to send, receive and store tokens. It is compatible with macOS, Linux, and Windows.
Ledger Nano X is another hardware crypto wallet that supports ETH, all tokens on the Ethereum blockchain, and other cryptocurrencies. You can integrate it with MyEtherWallet to streamline coin management. Ledger Nano X includes features such as battery and Bluetooth that increase mobility.
However, it takes some time to move your funds from the hardware wallet to a cryptocurrency exchange, which can lead to missing potential trading opportunities. Still, Ledger offers top-notch security and a recovery sheet, which is necessary if you forget your PIN.
Coinbase is a web cryptocurrency wallet with a user-friendly interface where users can buy, sell, and store digital currencies, including Ethereum, Bitcoin, Dogecoin, etc. It’s a custodial wallet, so you don’t have control over your private keys. Coinbase offers a mobile app for iOS and Android devices, allowing users to trade and manage any digital currency in one place.
To start using the wallet, you need to sign up on the Coinbase website by entering your email address and other personal information. Next, you will be given a public address that will be used to transfer your digital currencies. Finally, you can store your coins securely as Coinbase supports two-factor and multi-signature authentication.
Mist is the official Ethereum desktop wallet created by the Ethereum developers. It is compatible with Linux, macOS, and Windows. Mist allows users to purchase Ether and Bitcoin directly from fiat currencies. It also supports Ethereum-based tokens and many types of ERC-20 tokens.
The wallet is easy to install and has a user-friendly interface. You don’t have to provide any personal information when installing Mist. The wallet allows you to store your private keys on your side. However, it takes a lot of time to load Mist because it synchronizes with the entire blockchain.
Argent is a non-custodial mobile wallet that supports Ethereum and ERC-20 tokens. You can configure a wallet using your phone number and email address. Argent allows users to buy, store and exchange tokens directly in the app. Users can purchase crypto with a credit card, bank transfer, or Apple Pay.
Argent has a built-in browser that provides access to various decentralized applications, including DeFi platforms for borrowing and lending cryptocurrency. What’s more, Argent is a partner of the Compound platform, which means users can earn interest on Ethereum using the app.
Coinomi is a multi-chain wallet that supports Ethereum, Bitcoin, Tether, and many other cryptocurrencies and tokens. The wallet is easy to install and available on desktop and mobile devices. Coinomi offers top-notch security and an intuitive user interface.
The wallet is non-custodial, meaning that private keys are encrypted and stored on the user’s computer. Coinomi allows users to buy, store and sell their digital assets directly in the app.
Atomic Wallet is a non-custodial multi-currency wallet available for desktop and mobile devices. It supports Bitcoin, Ethereum, Ripple, and other cryptocurrencies and ERC-20 tokens. Atomic Wallet allows you to buy, exchange, manage, and store digital assets in one secure interface. What’s more, you can buy crypto with your bank card.
The wallet doesn’t have two-factor or multi-sig authentication, and there is no customer support.
Electrum is a desktop Bitcoin cold wallet compatible with Linux, macOS, and Windows. Users can connect Electrum to hardware wallets such as Ledger or Trezor to improve coin management. The wallet gives users complete control over their funds as private keys are encrypted and stored on the user’s computer. Electrum never shares private keys with its servers or anyone else.
The wallets are always up and running with no downtime as the servers are decentralized and redundant. Users can recover their funds using a secret recovery phrase given to the user during installation and setup of their Electrum wallet. Users can also store their coins in multi-sig wallets and share permissions to spend them.
Jaxx is a mobile multi-asset wallet that hosts various cryptocurrencies such as Ethereum, Bitcoin, Dash, and many more. The wallet is available for Android, iOS, Linux, macOS, and Windows devices. Jaxx also has an extension for Chrome and Firefox browsers. The wallet has an intuitive interface and is easy to use.
Your private keys are usually created on the local device and never leave it. Jaxx offers robust security features and allows you to recover your funds with seed keys if necessary. However, the wallet doesn’t have two-factor authentication and doesn’t support fiat currencies.
To be considered an excellent Ethereum wallet, it should be easy to use, have an intuitive interface, offer top-notch security features, and allow its owner to interact with the entire Ethereum ecosystem.
Let’s dig a little deeper and talk in more technical terms. The best Ethereum wallet should be non-custodial, allowing you to keep your private keys on your side and have complete control over your funds. Although users need technical knowledge to purchase, store, and trade cryptocurrencies, an Ethereum wallet should streamline all processes and make them as beginner-friendly as possible.
In addition, an Ethereum wallet should provide storage for all types of Ethereum-based tokens, such as ERC-20 tokens, which include Ether (ETH) and NFTs. Furthermore, a good wallet should allow you to interact with decentralized applications (dApps) within the Ethereum ecosystem, such as DeFi protocols and play-to-earn (P2E) games.
But the rest depends on you. It is always a good idea to avoid suspicious resources, write down your password and keep it safe, and back up your private keys and store them on a piece of paper, flash drive, another server, etc.
Now that you know the basics, it’s time to create an Ethereum wallet.
1. Choose an Ethereum wallet
The first step is to select your preferred wallet and visit its official website. Look at the beginning of the URL to make sure you are not visiting malicious resources.
2. Install and set up the Ethereum wallet
Next, you will need to install your wallet. You can find the download button and installation instructions on your chosen wallet’s official website. Some wallets allow users to watch video tutorials.
3. Create a password
To protect your wallet, you need to create a password that is different from your private key. The password should be long, unique, and contain a mixture of letters, numbers, and special characters. A strong password is hard to remember, so don’t forget to write it down somewhere safe.
4. Download and securely store your private key
The wallet will remind you to download your private key. You can’t share it with anyone, as it will give that person full control over your Ethereum wallet.
The safest option is to store your private key on an external hard drive with no Internet connection. This way, hackers or viruses won’t be able to compromise offline storage. Be careful and try not to lose your private key, as it can’t be recovered.
5. Unlock and use your Ethereum wallet
Use your private key to unlock your Ethereum wallet. You will need to type or paste the private key into the appropriate field and click unlock. After that, you can trade, store, receive, and send Ethereum. To get started, buy some Ether and transfer it to your wallet.
If you’re willing to diversify your digital assets, opening an Ethereum wallet is a good idea. Still, the crypto market is always on the move, so you should only open a digital wallet that you trust. Once you decide to invest in Ethereum or its tokens, it’s important to choose the right one that will keep your digital assets safe.
Each Ethereum wallet has its strengths and weaknesses, so you need to thoroughly review different wallets before choosing one. The most important criteria are security, compatibility with diverse platforms and operating systems, ease of use, solid development, and any other features you find useful.
If you have any questions or bright ideas, don’t hesitate to contact our blockchain experts. We’ll help you turn your ideas into reality.