What is an Ethereum wallet?
An Ethereum wallet is an address that holds your ether (the cryptocurrency used on the Ethereum network). In this way it’s like a bank account that holds your Ethereum. Wallets come in many forms, each offering distinct features. There are offline wallets such as paper and hardware wallets, mobile wallets that come with a downloadable app, and web-based wallets that are accessible via a web browser.
Why are they called wallets?
Just like a regular wallet that stores currency, an Ethereum ‘wallet’ stores cryptocurrency. It achieves this by recording movement of Ethereum on the blockchain, a public ledger. The wallet facilitates the sending and receiving of ether, and records all the ether you own. Think of it like an internet banking app, but one that also allows for offline storage.
How do they work?
Ethereum wallets are comprised of two ‘keys’: a public key and a private key. These keys function like your bank account details, allowing you to receive and send funds from your account. The public key, which is also known as the wallet address, is the address that allows other people to send Ethereum to your wallet, and can be equated to an account number. This address is publicly available, so anyone can view it.
On the other hand, the private key functions like your bank account PIN number. You will need it whenever you want to send Ethereum to another account. Just as the name implies, the private key is confidential and should only be known to the owner.
When sending Ethereum, it’s usually not necessary to know the private key or use it for any transactions. This is because web-based wallets and mobile wallets store the key on your behalf in an encrypted form, allowing you to send Ethereum to another public address. However, if you are using offline wallets, such as paper and hardware wallets, you will be responsible for keeping both the public and private keys to yourself.
Do I need a wallet in order to use Ethereum?
In most cases, yes. In order to hold ether, you’ll need to have a wallet to store the cryptocurrency. On the other hand, if you’re using CFD platforms to trade over the price of ether, you do not need one as these platforms give you the option of trading without taking ownership of the cryptocurrency. A wallet is only necessary if you want to buy, store, or use ether.
What kinds of Ethereum wallet are there?
There are five main types of Ethereum wallets that you can consider. Here’s a brief look into the differences between them:
- Online wallet. Also known as a web-based wallet, this is a wallet that allows you to access your ether via a web browser. The private key is usually hosted by your provider, and they are solely responsible for its security. Good examples of web-based Ethereum wallets are MyEtherWallet or Coinbase.
- Mobile wallet. This is similar to an online wallet, only that it’s stored on a native mobile phone application. Examples for mobile wallets include Jaxx, BRD, and Abra.
- Desktop wallet. This is effectively a wallet that you can download and install on your PC. It stores the private key on your computer, giving you control of your funds and their security. Examples of good desktop wallets include Exodus, Mist, and Electrum.
- Hardware wallet. This is an electronic device that’s specifically built to hold ether. It stores your private key completely offline, guaranteeing the maximum protection of your coins from online attacks. Some of the most widely-known manufacturers of these wallets include KeepKey, Trezor, and Ledger.
- Paper wallet. This is basically a piece of paper with both the private and public keys of ether addresses printed on it. Just like the hardware wallet, it keeps the ether completely offline, making it a great choice for those looking to hold their coins for long-term. Some of the best places that allow you to create a paper wallet include ETHAdress and WalletGenerator.
What is a ‘cold wallet’?
A cold wallet is simply a wallet that keeps your private key offline. It’s not connected to the internet, so your funds cannot be accessed by cyber hackers and malware that’s developed to gain unauthorised access. This kind of a wallet is useful for those looking to hold their coins for the long-term.
How do I choose which wallet is right for me?
Well, it depends on what your intentions are. If you are looking to hold your coins for a long period, it is recommended that you get a secure offline wallet such as a hardware or paper wallet. On the other hand, if you intend to do daily trading or sell your ether regularly, a mobile or an online wallet is probably the way to go. So, evaluate your needs first, and then choose an option that’s not only convenient for you but also secure.
Are payments between wallets anonymous?
Absolutely. When you make a transfer to another wallet, what is displayed on the blockchain (public ledger) is the public key (wallet address). It’s not possible to trace this address back to the owner of the wallet.
How does a wallet keep my Ethereum secure?
In order to access your wallet and move ether, you will need a private key. The only available information on the blockchain will be your public address, which only allows people to send ether to your wallet. This makes it imperative that you keep your private key safe.
How much do Ethereum wallets cost?
Usually, nothing. Most online/desktop/phone wallets are completely free to use. You just need to create an account and start using right away. However, if you prefer to use a hardware wallet, you will have to spend between £20 and £200 on the device, depending on the features you are looking to have incorporated. In most cases, devices with more features, such as a hardware wallet with a display screen will be more expensive.
Should I use an Ethereum wallet?
Definitely. You will need to use a wallet for any Ethereum transactions apart from CFD trading. Depending on your goals, you might need to check between different Ethereum wallets for the best fit. If you want to trade or sell your coins on a regular basis, a mobile or online wallet would be a great choice. If you want to invest your ether for long term, you would be better off with offline wallets such as hardware and paper wallets.
Where can I get an Ethereum wallet?
Right here. Our reviews will help you find the best Ethereum wallet for your needs. We have all the information you need in order to find the best type of each wallet, coupled with instructions on how to build your own paper wallet. Have a browse through our guides to set yourself up within a matter of minutes.