If you’re interested in saving, trading, or using Ethereum, then you’re going to need an Ethereum wallet. If you want to buy Ethereum from Coinmama, you’re also going to need an Ethereum wallet. Really, if you want to do just about anything with Ethereum, you’ll need a good wallet?
This guide will briefly explain what an Ethereum wallet is and how it works, then covers the different types of wallets available. Later, some examples of Ethereum wallets – also frequently referred to as Ethereum clients – are presented. We’ll also give you some helpful tips on how to choose and use your new wallet safely. Let’s get started!
What is an Ethereum Wallet?
The word “wallet” is a little misleading in the context of crypto, as it leads one to believe that the crypto coins are held by the wallet itself. As with all cryptos, Ethers (ETH) aren’t actually stored inside your wallet, like physical coins in a wallet or digital files in a folder.
It would be more apt to call the wallet a “keychain.” What crypto wallets really store is a private key, a long, randomly-generated cryptographic code, which is the only way to authorize the spending of ETH from one address to another.
Think of the private key like the physical key to a safety deposit box (representing an address) in a bank vault (representing the blockchain). Only the possessor of the key can open its associated box to reallocate funds to a different box.
The main purpose of the wallet is to randomly generate and securely store your private key(s). The wallet will also sum the value of all your addresses, to reflect a balance. Additionally, wallets scan the blockchain for any changes to the status of your Ethereum addresses, so that your balance always stays current with incoming and outgoing transaction.
Ethereum wallets are also capable of managing smart contracts and, by extension, ERC-20 tokens too. ERC-20 tokens are “coins” which also operate on Ethereum’s blockchain but are distinct in value and purpose from ETH. Often these tokens represent an investment into a project, such as an ICO.
Choosing an Ethereum Wallet
There are 3 main types of wallet available:
- Hardware Wallets: these are small, pluggable electronic devices designed for the random generation and secure storage and use of private keys. Hardware wallets (HWs) provide excellent security for even the most inexperienced of users. As most HWs only cost about $100, they’re well worth the investment for those who wish to store significant value in crypto. Note that certain hardware wallets may be used in combination with wallets from the next 2 categories.
- Light Wallets: the entire Ethereum blockchain is very demanding in terms of bandwidth and storage resource, so much so that it is beyond the capacity of the average user to run. Light wallets therefore don’t attempt to store the entire chain, but rather receive updates from specialized network nodes, which do store it. Light wallets (LWs) therefore run on standard devices, including smart phones and consumer-level computers.
- Full Wallets: the complete Ethereum blockchain (currently well over 1 terabyte in size) is stored by full wallets (FWs). This offers a somewhat higher level of security as there’s no need to trust a third-party node for blockchain information. Certain full wallets allow for downloading a partial copy of the chain, which reduces their storage and syncing requirement. Generally speaking though, FWs are unnecessarily burdensome unless the intention is to interact with the Ethereum network on a deep technical level.
In most cases, the best possible choice for the average user will be the combination of a hardware and light wallet. This combo offers excellent security, convenience. The functionality of the combo depends on the particular light wallet chosen.
For those who only wish to dabble in Ethereum without investing much value in it, a light wallet alone should suffice.
Examples of Ethereum Wallets
Coinmama doesn’t wish to offer recommendations on specific Ethereum wallets. We haven’t yet conducted an exhaustive study into this subject and we believe that the safety of customer funds demands such a level of research. Please consider the wallets listed below as examples only and perform your own investigation before making any final decisions on your wallet.
Something to keep in mind is that it’s best to stick to well-known wallets with a good reputation and long history of usage. Many people have fallen foul of malicious wallets which they downloaded based only on superficial and potentially-deceptive factors; such as an attractive website or app store rating (language warning). If in doubt, ask around in the various Ethereum communities (1) (2) as an informal poll on a wallet’s reliability.
Examples of Ethereum Wallets
The popular Trezor, Ledger, and KeepKey hardware wallets are all compatible with Ethereum. These products all offer a comparable level of security at a fairly similar price. Furthermore, all these HWs support smart contracts. In addition to Ethereum, they can all be used to manage many of the more popular cryptocurrencies.
Tips: there are two very important things to keep in mind when using any HW:
- Ensure the product has not been pre-initialized. It must generate a new private key on setup. Buying directly from the manufacturer’s site or official resellers should ensure this.
- Create secure and durable backups of the wallet’s seed phrase, PIN, and optional password. Certain products, usually made out of stainless steel or similar materials, are available for this purpose.
Ethereum Light Wallets
Some popular Ethereum light wallets include MetaMask and MyEtherWallet (MEW). Both are browser-based wallets which plugs into the most popular internet browsers. They’re both open source wallets. MEW also supports Ethereum Classic (ETC).
These two LWs allow you to do just about everything from within your regular browser, including sending and receiving ETH, interacting with smart contracts, and managing ERC-20 tokens. Both MetaMask and MEW are compatible with the Trezor and Ledger hardware wallets.
Ethereum Full Wallets
For full Ethereum wallets which you install on your computer, Ethereum Wallet (which comes with the Mist browser, suitable for interacting with dApps) and Geth (short for “Go Ethereum”) are popular choices. Mist is in fact based on Geth but offers a simplified interface for using it. Geth is probably most suitable for programmers.