Ether (ETH) is an open-source decentralised cryptocurrency that is based on the Ethereum blockchain. ETH is one of the most popular tokens built on the Ethereum network and therefore, this guide will shortlist some of the best Ethereum wallets in 2021. Given the variety of options, selecting the right Ethereum wallet can be difficult for new users. While most exchanges will provide wallets to their users; for long term storage, a dedicated Ethereum wallet is a better option.
This guide will help you go through the complete procedure of selecting the best Ethereum wallet for managing your digital assets.
Compare the best Ethereum wallets
Users must evaluate different Ethereum wallets based on their features such as ease of use, security, interface etc. Here is a list of some of the best Ethereum wallets along with their features and advantages.
Understanding An Ethereum Wallet
An Ethereum wallet is basically an application or software programme that allows you to interact with the Ethereum network. Ether is a digital currency that you can buy and manage in your Ethereum wallet.
Cryptocurrency transactions are private and it is difficult to reverse a transaction and trace funds in case of a mishap or fraud. Therefore, it is important to store ETH tokens safely in an Ethereum wallet. While you can store ETH tokens on an exchange but an exchange can be hacked and you can lose access to your funds.
An Ethereum wallet contains the private and public keys which are used to identify and perform transactions. A public key is linked to the wallet address and functions as the account number while a private key is the password of your wallet. The private key must be kept secret as it enables users to send and receive digital currency by interacting with the blockchain.
If you need to send the ETH tokens to a friend or an exchange, you will need to input the address of the receiving wallet and authorise the transaction by using your private key. Similarly, to receive ETH, you will need to share your wallet address with another party.
Most Ethereum wallets allow users to store not only Ether but also other tokens built on the Ethereum network.
Advantages & Disadvantages of Using an Ethereum Wallet
How To Choose an Ethereum Wallet?
Given the many options available for Ethereum wallets, it can be confusing for new users to identify the best Ethereum wallet. Different wallets are built for different purposes and a user must select the wallet that meets his/her needs.
First and foremost is security. Paper wallets offer the highest level of security but can be difficult to use for a new user. But paper wallets cannot be hacked and therefore, are a secure option for experienced users.
The next feature a user must keep in mind while selecting an Ethereum wallet is the ease of use. The wallet must have a simple interface and must be user friendly. The cryptocurrency market changes rapidly and therefore, the wallet must allow a user to transfer funds quickly at the click of a button.
Most users tend to diversify assets and a wallet that offers support for multiple tokens will be the best option especially if you are aiming to invest in more than just one asset and not just Ether.
The best Ethereum wallet should be compatible with different platforms and operating systems so that it can give you the flexibility to manage your funds and balance.
Ethereum wallets come in different types. The three main types are hardware, software and paper wallets. Wallets can be also divided into two wide categories—Cold and Hot wallets.
A hot wallet is always connected to the internet. It ensures quick transactions but it also exposes the wallet to hack and fraud. Most software wallets are hot wallets. A cold wallet on the other hand does not require constant connectivity and needs to be connected to the internet only while transacting. Paper wallets and some hardware wallets are examples of cold wallets.
A hardware wallet resembles a USB drive and stores private keys in a physical medium. To access the key, the physical device can be connected to any desktop computer or laptop. Most hardware wallets also have physical buttons to manage access to the device. Hardware wallets are expensive but portable and easy to use. The advantage of hardware wallets is that they are highly safe and secure. Only you can access your assets. Any third party cannot hack a hardware wallet unless it gains physical access to the device. However, hardware wallets need to be connected to gain access to the funds.
Software Ethereum wallets are programs that store private keys and enable users to transact easily. Once you have your wallet set, you can access your digital assets using the private key or a password. Software wallets are hot wallets. While you retain control over your funds if you use desktop wallets or mobile wallets since the private key is stored on your device, you can still lose access to your funds if the computer or mobile is hacked or compromised through malware or virus.
Web wallets are software wallets that allow access using a web browser. Mobile Wallets are applications specifically designed for mobile phones. Desktop wallets are software programmes that run on a computer or a desktop.
Software wallets allow easy access to users and might be useful for traders who need quick access to their funds at all times.
A paper wallet is the safest of all wallets. A paper wallet is just a piece of paper that stores the user’s private keys. If you choose a paper Ethereum wallet, you will get a printed piece of paper containing the private and public keys, along with a QR code. To access your digital assets, you can either scan the QR code or input the key manually. Paper wallets are losing their popularity because paper tends to be fragile and over time, the ink on the paper can fade away or the user can lose it or it can get wet or torn etc.
3 Steps To Using an Ethereum Wallet
Step 1: Choose an Ethereum Wallet
Users must first consider the security and safety of each wallet. Depending on the requirements, other features such as ease of use and portability can also be considered. Each wallet is built for different users so select the one that is most suited to your needs based on the features outlined above.
Step 2: Setting up an Ethereum Wallet
The process will vary depending on the device and platform but it will require installation of the wallet app or programme. Simply download the programme and install it on your device. You can then create a password and generate the keys associated with the wallet.
Step 3: Start using Ethereum Wallet
Now, you can start using the wallet. Simply use your private key to send ETH tokens to another party and share your wallet address to receive funds. Remember to never share the private keys and store them safely.
As Ethereum gains popularity and attracts the interest of investors, storing tokens safely will require using a wallet. Ethereum wallets can help to safely store the tokens. Choosing the best Ethereum wallet in 2021 requires evaluation of different features such as ease of use, security, support for various tokens etc. This guide discussed the various features of Ethereum wallets along with their advantages and disadvantages.
Frequently Asked Questions
Yes, Ethereum is accepted as a legal cryptocurrency in most jurisdictions but check your local laws and regulations.
You can sign up online for hot wallets (web and mobile), or you can buy and set up a hardware wallet.
You can do this with the private key assigned to you when creating the wallet. Hardware wallets require a pin or password for access.
No, addresses can change depending on your wallet provider.
You need to share only your wallet address for transaction, never share your private key.
It’s best to use a wallet provider that gives you access to the private key since it offers more security because a private key completely controls a wallet.
Yes. You should store your private key in secure locations and have backups.
No, you can’t. The funds are lost forever once you lose your private key.