Bitcoin wallets, Ethereum wallets. Cold storage, hot storage. It’s all a bit confusing, isn’t it? Don’t worry, though — I'm here to help! I've made this guide to help you choose the best Ethereum wallet for you.
There are lots of different types of such wallets. Each one offers different advantages and disadvantages to the user. Some are easier to use but less secure. Meanwhile, others are great for storing money that you don’t want to use for a long time, but aren’t very good for daily use.
In this guide, we’ll look at the different types of ETH wallets available: paper wallets, online wallets, software wallets, hardware wallets, and mobile wallets. We’ll look at a few examples of each and talk about their security, how to set them up, and how easy they are to use.
After you’ve finished reading the guide, you’ll have learned the advantages and disadvantages of each type of wallet. You will then be able to choose the best Ethereum wallet (or, perhaps, the best wallet in general?) for you.
Table of Contents
Best Ethereum Wallet: Why is Security so Important in the Crypto World?
Security is important in the crypto world because we are dealing with value. In the physical world, we are careful about how we treat our highest valued items. This is the same in the digital world, too.
Online, we must be just as careful to protect the things we value. When you leave your bicycle in a busy street, you lock it up. If you enter your PIN number at an ATM, you hide it from other people. When we leave our cryptocurrency somewhere, we must also make sure that it is properly secured.
Security in cryptocurrency your responsibility - this is very important! There is no bank to contact if you get hacked, or your security fails. Bitcoins or Ether cannot be returned to the sender by pressing a button like they can with a normal bank transfer. In cryptocurrency, once the coins leave your wallet, they are gone forever. That's why the best Ethereum wallet must be very secure.
Cryptocurrency is special because it is decentralized. By that, we mean there isn't a single point of failure. There also isn't a single point of attack for those wishing to harm the network or its users. This makes the security of the system itself very strong. This is the case for users, too, if they store their coins correctly.
It takes a long time for a hacker to get into such a strong security system. This means cybercriminals are better off trying to break into large stores of cryptocurrency (such as exchanges) than individual wallets. Exchanges like Binance, Coinbase, and Kraken are great targets for hackers (though they all have amazing security systems in place, so there isn't much need to worry).
Once hackers have broken into an exchange, they can steal massive amounts of money. In the past, large exchanges have been hacked and users have lost money. In the future, it might happen again.
It is important to remember that hacking doesn't just happen against exchanges. Users like yourself can have their security compromised, too. For this reason, some private wallets offer better security than others, and thus, they might be the best Ethereum wallets.
We’ll cover how to stop personal security breaches throughout the rest of the article, though.
Types of Wallets: Choosing the Best Ether Wallet
Hopefully, you now understand the importance of security when it comes to choosing the best cryptocurrency wallet. With that out of the way, let us look at some types of Ether wallets.
Let’s get one thing clear. All the wallet types we will mention support both Ether tokens and ERC-20 tokens. That’s right, your Ether wallet is can be used as an ERC-20 wallet. Cool, huh?
For now, paper wallets are one of the best Ethereum wallets for long-term storage. When properly created, they are totally offline and impossible for hackers to access. The high level of security Ethereum offline wallets offers to make them great for storing large amounts of cryptocurrency for a long time.
You’re probably wondering, how to set up one of these wonderful Ethereum or ERC-20 wallets, right? Well, first, you need a clean computer. It’s best to completely wipe all the data off it before creating a new wallet. When it is totally clean, do not connect the computer to the internet until after you have finished making your paper wallet.
On a second computer, save a copy of MyEtherWallet to a USB stick. You can then open the webpage on your clean, freshly wiped the computer and securely make your Ethereum wallet key set. Once made, you can print the pages containing both your public and private key.
Don’t use a wireless printer or one that can be connected to the internet for this step. It’s also a good idea to print a few copies. Finally, delete the Ethereum wallet files from the computer. You can now use the computer as normal again.
Once you’ve made your Ethereum paper wallet, it’s time to think about storage.
When choosing where to store your wallet, remember that your new Ethereum paper wallet’s security is weakened by:
- Fire and water: It’s best to store more than one copy of the paper wallet in different places. If you’re wanting to keep Ether on the wallet for a very long time, look at other ways to write the private key down. One idea might be to engrave or stamp the characters into a piece of metal. This will stop it from being damaged by fire and water.
- Other people: If another person can see your private key, they can use your Ether. For that reason, it’s important to keep it hidden. The best way to hide it is in the safe deposit box at your bank and in a similar safe at home. If you have family members across the country that you can leave a safe with, this is a good idea, too.
- Yourself: Don’t be careless with your private key. It’s the most important thing about any Ethereum wallet. If you keep it in a safe, make sure you know the code and leave a copy of the backup key with a family member who you can trust and that lives far away.
I can’t repeat this enough: protect your private key. Once it has been entered into a computer or seen by another person, the wallet is useless!
If this happens, a new one must be made, and all the money sent from the old one. This way, your wallet will remain the best Ethereum wallet possible!
Advantages of Paper Wallets:
✓ Very secure when set up correctly. If you followed our steps when setting up your Ethereum paper wallet and stored your private keys securely, you now have one of the hardest-to-hack wallets around. Congratulations!
✓ Great for large amounts of Ether. Since it’s so secure, you can remain calm storing large sums on a paper wallet. Test the wallet first by sending a few dollars worth of Ether to it. When it’s confirmed, you can send the rest over.
✓ Completely free. An Ethereum paper wallet (that is just as secure as any other wallet) can be made at no cost, whatsoever.
Disadvantages of Paper Wallets:
✗ Difficult to use again and again. Paper wallets are useless if you want to send money often. Each time you enter your private key into an online computer, you have destroyed your wallet’s security, and another must be made. Your paper wallet is great for long-term storage but not for doing your online shopping!
✗ It takes a long time to set up. If you’re only storing a few hundred dollars worth of cryptocurrency, you might decide that an easier-to-use-but-lower-security solution is the best Ethereum wallet for you.
From the most secure type of wallet, to the least. Next, we will look at Ethereum online wallets.
Ethereum online wallets are those found on centralized services such as cryptocurrency exchanges. They are the least-safe type of wallet. Ethereum online wallets are useful for traders of digital currencies and little else. In general, you should keep your funds for as little time as possible in an online wallet.
Don’t be tempted to leave cryptocurrency on an online wallet if you are not a trader. You might find it easy and simple to use… until you lose your money.
It’s also important to be aware of phishing websites when using an online wallet. Phishing websites look just like the real website, but will steal your important data (usernames and passwords). The people who made the phishing site will then use your details to access your account and steal any cryptocurrency that is stored there.
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Phishing websites can be spotted from a few clues. First, check the security certificate next to the URL address bar. It should have a green word next to it (usually “secure” or the name of the company). It should have “https” rather than just “HTTP” at the start of the URL, too.
Also, look for strange letters or numbers in the URL. Scammers will often use letters like “ŗ”, “ï”, or “ė”. Can you see the extra dots above and below the letters? These kinds of phishing pages are common on cryptocurrency-related sites. Sneaky, huh?
To make sure you never visit a phishing website, type the URL of the website you are trying to use in full. You can then “bookmark” the page in your browser after checking the page’s security. This will make sure you only visit a safe site in the future. Also, use two-factor authentication whenever there is the option.
Most importantly, don’t leave any more money than you can afford to lose on an exchange. Even if you never visit a phishing website, exchanges do get hacked. Once gone, the funds on your account will be lost forever.
Advantages of Online Wallets:
✓ Great for traders. If the online wallet is based on an exchange, all the coins you can buy at the exchange will have their own wallets within one account.
✓ It can sell a position very quickly. This is a good thing if you are wanting to time the market. However, it could also lead to bad decisions and cost you money in badly-timed trades.
Disadvantages of Online Wallets:
✗ You don’t own your private keys with an online wallet. If you don’t own your private keys, you don’t own your Ether. If the exchange or wallet service suddenly disappears, your money is gone, too.
✗ Exchanges are a good target for hackers. They store large amounts of cryptocurrency at them and if a cybercriminal breaks in, it would be a big payday for them. If an exchange loses all their money because of a cyber-attack, it’s likely that you’ll lose all your money, too.
Software wallets give users a balance between security and ease of use. They are safer than exchange wallets, and it is easier to make repeat transactions with them than with paper wallets. For this reason, it makes sense to store ETH that you want to use for daily spending in a software wallet.
The main advantage a software Ethereum wallet has over an online wallet is that you keep your own private key. This reduces a lot of the risk of being hacked. However, they are not nearly as secure as paper or hardware wallets.
Software wallets can be broken into by keylogging software. They can also be broken into using malware that finds and copies wallet files from your computer. It’s possible for a hacker to send a copy of a wallet file from your computer to themselves, as well as having copied the password you used to use your wallet. If this happens, they now have access to your Ether!
There are lots of different types of software wallets. When choosing the best one for you, it’s important that the code is open-source. This allows the cryptocurrency community to test for bugs and verify that the code in the software wallet isn’t going to let hackers in.
Advantages of Software Wallets:
✓ Usually user-friendly designs. Software wallets have been made to give users the easiest way to use the Ethereum blockchain. Sending, receiving, and importing private keys should all be very simple when using any well-known software wallet.
✓ Easy to access Ether and other digital currencies. If you make a lot of purchases from online sellers using your Ether, payments can be sent quickly and simply from a software wallet.
Disadvantages of a Software Wallet:
✗ Malware and keyloggers are dangerous to software wallets.
✗ It can make users lazy with security. Backups are needed. These must not be stored on a computer. The storage of backups raises the same weaknesses as a paper wallet (fire, water, other people). If your hard drive fails, will you be able to access your private keys to restore your wallet on another machine? (Hint: the answer here should always be “yes”!)
Some cryptocurrency users like to keep their Ether on a mobile wallet. This offers an easy way to store it, because they can use their Ether when they’re away from their computer. However, mobile wallets have the same risks as software wallets. They are only as secure as the mobile phone itself. Both Ethereum wallet android and iOS Ethereum wallets are available.
So, maybe a mobile wallet is your best Ethereum wallet?
Malware and keyloggers can infect your mobile device. Also, if someone knows the PIN code to your phone, depending on the type of mobile Ether wallet, they can often see the private key, even if the wallet itself is protected by a password. For this reason, only small sums for daily use should be stored on a mobile phone-based software wallet.
One of the most popular methods of storing cryptocurrency is the hardware wallet. Examples of Ethereum hardware wallets include the KeepKey, Trezor, and the Ledger series. These aim to combine the security of a paper wallet with the usability of a software wallet. People who own them often say that they are the best Ethereum wallets possible.
A hardware wallet often looks like a USB pen drive. They store your private keys inside. A four-digit PIN code is used to access the Ether wallet on the device. If the hardware wallet is lost or stolen, it can be restored using a seed phrase (24 words).
One important point about an Ethereum hardware wallets is that they are expensive. Some say that the cost of a device that properly secures cryptocurrency is worth it. I agree. Before we look at the security flaws of a hardware wallet, though, we can talk about the advantages of using one:
✓ It offers much better security than an online wallet and a bit better security than a software wallet.
✓ Allows funds to be sent to and from the device. Doing this often will reduce its security though.
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Security Flaws on Hardware Wallets
Even though some people think hardware wallets are the best Ethereum wallet to store cryptocurrency, there are some disadvantages to using it. Even if some of these points are unlikely, they still make the device less secure!
✗ Firmware needs installing. The hardware wallet device needs to use firmware. A smart attacker could force the device to be updated with a malicious program or copy data from the device and send it to the hacker.
✗ The computer being used to access the Ether on the hardware wallet might be infected with bad software already. If the user is absolutely sure it can’t have bad software installed, it must have never been connected to the internet. In this case, the computer itself offers better security than the Ethereum hardware wallet device.
✗ The seed phrase and the pin are the most important pieces of information. Both need to be stored in the same way as a private key does for other solutions. Someone else knowing your seed phrase is just as bad as someone else knowing your private key. They can access the funds on the hardware wallet.
✗ Has the device been tampered with? If you buy your hardware wallet from the company that made it, this is much less likely. However, it’s still possible that someone working at the company has added a malicious version of the software to the device. For obvious reasons, you should never buy a hardware wallet from an unknown person or shop.
These are just some of the main weaknesses of hardware wallets, such as the Trezor and Ledger series. This blog post will give you more information to use when your friend argues that their KeepKey is the greatest thing ever!
As you can see, no storage solution offers users complete security to be the absolute best Ethereum wallet yet. However, there is a way to strengthen the security of Bitcoin or similar cryptocurrencies. You can use a multi-signature wallet. To send money from a multi-signature wallet, multiple people must request access to it using different data. This increases the security of any wallet by quite a lot.
Since Ethereum transactions are more complex than Bitcoin ones, there are more opportunities for attackers. If you’re interested in learning more about multisig wallets, check this blog post. The important point is that current multisig Ethereum wallets can be hacked.
Did you know?
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If you’ve stayed with me, you should now know all about the different types of wallets available and which is the best ETH wallet for you. You know the security flaws of each and which use cases each is best suited to. Ultimately, the best Ethereum wallet will depend on how much you are wanting the store, and for what amount of time.
If you have made a big investment and you want to leave it for over a year, a paper wallet is going to be the best decision possible. Don’t cut corners when setting it up. Follow the instructions above carefully and you will have a wallet that is just as secure as an expensive hardware wallet.
If you’re really worried or can’t store private keys at a trusted friend or relative’s house, you can use the metal stamping idea or a similar, more permanent solution for recording private keys.
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If you are looking to store Ether for day-to-day use, a hardware or software wallet is going to offer the right balance of usability and security. Whilst they are great for storing small to medium amounts of cryptocurrency, they aren’t very good for large sums.
Finally, if you like to trade often, you can use an online wallet based on an exchange. This is the riskiest category. The potential weaknesses of an online wallet are far more than they are with any of the other types we’ve mentioned. If anything happens to the site itself, you can pretty much say goodbye to all your funds.
The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.