Ethereum has become the subject of a lot of attraction and hype lately as it has proved to be one of the flagship crypto projects in recent years. Ethereum was introduced in 2015 by Vitalik Buterin to the market when crypto enthusiasts realized Bitcoin was a currency that could not be utilized further to develop more products.
Bitcoin and Ethereum are both cryptocurrencies, but the primary motive of Ethereum is to utilize smart contract technology and deploy decentralized applications (dApps) in the network to bring more use cases for users.
What Is an Ethereum Wallet?
Like fiat currencies, cryptocurrencies also need to be stored somewhere, but, in this case, it is a digital wallet instead of a physical one. An Ethereum wallet is a programmable software that bridges the path between your Ethereum funds and the network. Ethereum wallets enable users to store and manage their ETH funds securely. Ethereum wallet consists of an ETH address, building a smooth and convenient ecosystem for holders to send and receive ETH on the Ethereum blockchain, develop smart contracts, and utilize decentralized apps.
An Ethereum wallet address is a public address that starts with ‘0x,’ and anyone on the internet can look into your wallet balance and holdings using a public blockchain explorer. However, it is impossible to know who is behind a specific Ethereum wallet as the network is entirely decentralized. Ethereum wallets are controlled by their owners through private keys or passwords. Your Ethereum wallet also helps you store ERC-20 standard tokens, meaning that tokens built on the Ethereum blockchain can also be stored in your Ethereum wallet.
How Does an Ethereum Wallet Work?
The working module of an Ethereum wallet is not different from a Bitcoin wallet. While creating a wallet, holders are given a public key and a private key. A public key acts just like a bank account number for the wallet, meaning that it is used to send or receive Ethereum or ERC-20 tokens in your wallet. Meanwhile, a private key is like a pin or password, which is used to access the Ethereum wallet and initiate a transaction in the Ethereum network.
There are two kinds of Ethereum accounts:
- Externally owned accounts (EOA): An externally owned Ethereum account is controlled by a private key. The holders of these accounts use these keys to initiate a transaction and send ETH to another wallet address or interact with smart contracts.
- Contract accounts: An Ethereum contract account implements a code. This code is referred to as a smart contract, which is used to program various utilities, such as sending ETH, creating ERC-20 tokens, or even developing a decentralized application (dApp).
As the Ethereum wallet acts as a connector between nodes and users on the network, the nodes are mainly responsible for executing a transaction. Full nodes instantly verify a transaction without getting data from their peers but use more computational processes, such as storage and RAM usage, to execute the transaction. Light nodes use less computational resources and storage space, which eventually takes more time to execute a transaction on the network.
Types of Ethereum Wallets
Ethereum wallets are classified into different types based on the platform they are used, security, and convenience. However, Ethereum wallets are mainly divided into hot wallets and cold wallets. In this section, we will discuss different types of Ethereum wallets.
Ethereum hot wallets are those wallets that are connected through the internet in some way. These wallets are accessible from anywhere and any device, making it easier for holders to spend their funds in desired ways. However, hot wallets come with risks, too, as these wallets are more exposed to threats and hacks, risking users’ funds.
Cold wallets are just the opposite: they are detached from the internet as the private keys are stored offline. Users can access their funds without the internet, but the process is quite complicated. However, these wallets provide better security than hot wallets, as attackers don’t get access through the internet.
Ethereum wallets can be further classified into:
As the name suggests, mobile wallets are accessible through mobile devices, which makes them more user-friendly in terms of accessibility. Mobile wallets are operated by light nodes and consume less storage space as it is not required to download the entire blockchain. Mobile wallets are applications that can be downloaded through the play store or app store.
However, there are some drawbacks, too, as mobile wallets are more exposed to threats and hacks. If your mobile gets lost, it can lead to a loss of your Ethereum stored in it. Therefore, it is advised to make multiple backups to secure your funds better. Almost every mobile wallet supports ERC-20 standard tokens, and it comes with decentralized finance, too.
Desktop wallets include desktops, windows laptops, or MacBooks to run on. Desktop wallets are hot wallets that offer a simple interface for users to use crypto services. Users get the choice to either download light client or full client software for the Ethereum wallet. However, a full client is recommended as it downloads the entire Ethereum blockchain, eliminating the requirement of validation by miners. In fact, users can authenticate their transactions themselves and ensure more security. Desktop wallets offer more crypto services and advanced crypto trading tools to smoothen the experience. It also allows users to utilize smart contracts or even create one.
However, desktop wallets are not also safe as they are connected to the internet. Attackers may install malware and steal all of the funds in just a second.
An Ethereum hardware wallet is a great option in cold wallets as this wallet comes in the form of hardware that is used to store private keys physically. To access Ethereum funds, users need the hardware, which is in a USB form, and connect it to a desktop or laptop. However, hardware wallets can be costly for those users storing a small amount of Ethereum. It is suggested not to buy any used hardware wallet or from a third party as it can be pre-installed with malware, which can erase all your funds at once.
A paper wallet is the creation of a cold wallet. Paper wallets are the real way to secure your funds using cold storage as it is the proper implementation of cold wallets. These wallets simply print users’ Ethereum wallet private keys and public keys on paper and secure the funds better. A paper wallet’s main advantage is its creation, as it only needs a pen and paper to store Ethereum.
However, paper wallets can not be held for the long term as they are fragile in nature. Therefore, it is advised to print multiple papers as an alternative when one is destroyed.
Mine Free Ethereum on RollerCoin
RollerCoin is a free place to start your mining simulator where you can mine free Ethereum just by playing exciting games and owning a virtual Ethereum mining rig. Through RollerCoin, you can make Ethereum easily as it offers tempting opportunities to grow your Ethereum portfolio. You can be the boss of your virtual mining world and enjoy playing 8-bit arcade games to upgrade your mining profitability. As you dig in, RollerCoin offers you multiple ways to withdraw your Ethereum to your Ethereum wallet or reinvest in buying more upgrades to boost your mining potential.
How to Set up an Ethereum Wallet?
Before digging in further, it is essential to know how to get an Ethereum wallet. There are a few steps to create an Ethereum wallet, and those are as follows:
- Install software: You can get a wide range of Ethereum wallets available on the internet. To get your Ethereum wallet, you need to download the software on your mobile or desktop. However, it is advised to download a trustable Ethereum wallet for better security.
- Create a wallet: Once you have successfully downloaded the software, you need to install it and follow further instructions, such as providing basic information. In the application, you need to navigate to the wallet section and create an Ethereum wallet.
- Create a password: The next step will be creating a strong password for your Ethereum wallet. The password should be unique and contain mixed letters such as symbols and numbers etc. After that, you need to agree to the terms and conditions, and your wallet for Ethereum is created.
- Write down your seed phrase: If it is a decentralized wallet like Metamask, then you need to write down your 12-word backup seed phrase, which can be used if you forget your password.
- Add Ether to your wallet: Once you have done all the processes, you are all set to add Ethereum to your wallet. You can buy Ethereum from popular exchanges like Binance, Coinbase, etc.
Physical Ethereum vs. Banks
Physical Ethereum doesn’t have any inherent value as they are only the physical representation of your Ethereum holdings. These are secured by tamper-proof seals, which makes it impossible to steal your private keys to your Ethereum wallet. Most banks don’t offer crypto services as it is considered one of the ways to execute money laundering-related crimes. Moreover, banks have the tendency to protect their ecosystem, which gets eliminated by offering crypto services. As there is no proper regulatory framework, banks don’t provide crypto services. However, we can expect a change if the crypto market evolves and forces the government to conduct several operations.
Ethereum Wallets Protection
Keeping funds in a bank account is safe, but when it comes to cryptocurrency, it creates a tendency to be hacked or stolen. Besides storing your Ethereum fund, it is essential to secure your fund. Experts advise cross-checking every Ethereum transaction while initiating, as any wrong input will lead to losing your Ethereum funds.
It is worth mentioning that users need to be more cautious while clicking on links on the internet offering attractive returns on your Ethereum as it may contain malware that can give access to your Ethereum wallet to fraudsters. It is recommended to bookmark web browsers so that you don’t get lost in any other fake websites.
How to Cash out Your Ethereum Wallet?
It is impossible to get cash from your Ethereum wallet whenever you want. However, you can sell your Ethereum holdings through p2p (peer-to-peer) trading offered by several crypto exchanges. If you have made an Ethereum wallet in a decentralized network like Metamask, you need to transfer your ETH funds to a crypto exchange. Once your ETH funds arrive at the exchange, you can navigate to the p2p trading section and start searching for a buyer. Once a buyer is matched, you can sell your Ethereum and get the preferred fiat currency deposited in your bank account.
What Is the Best Way to Store Ethereum?
To securely store your Ethereum funds, you need to find the best way to store Ethereum funds. A cold wallet can be an excellent option if you want complete security and control over your Ethereum funds. A hardware wallet should be the first choice in terms of providing enhanced protection, as it is the top priority of Ethereum’s whale investors. You can also make cold wallets like Metamask and Trust Wallet.
Ethereum stands out as one of the dominating digital assets after Bitcoin. It currently sits at the second position in the market cap after Bitcoin. Like fiat currencies, Ethereum is a digital coin that also needs to be stored in a secure place. In recent days, the crypto boom has driven several cryptocurrencies to the top, along with attracting the attention of scammers and fraudsters. Therefore, it is vital for Ethereum account holders to store their funds securely. This article briefly discusses how to use an Ethereum wallet, how to store Ethereum securely, etc. It is expected that this article will pave the way for a more secure process of keeping your Ethereum funds.