Get To Know Your Ethereum (ETH) Hardware, Web And Mobile Wallets
Trading cryptocurrencies is a great way to make a profit. However, once you get them, you need a safe place to store them. This place is what we call a crypto wallet, which is a software that allows you to store your funds, make transactions, and keep an eye on your balance with ease.
As a piece of software, crypto wallets are not like wallets used for fiat currencies, and most of them do not need a physical form. Some do, but we will talk more about them later. Most wallets, however, are nothing more than records that exist on the blockchain. Therefore, different wallets can easily interact with one another in the form of transactions.
They have their public addresses that are generated randomly and are represented by strings of numbers and letters. That way, if you wish to send some crypto, like Ether, you can use this public key, or address, to send the coins to someone else. If the wallet is empty of coins, it only contains the private key which belongs to its owner. This is a tool used for signing off on each individual transaction, as well as for unlocking those coins that are shared with the owner. This is something that the owner needs to keep secret, or they will get robbed of their crypto.
In most cases, the private key is paired with the private key, and the two need to match in order for a transaction to be successfully carried out. Now that we know what the wallets are and how they work let's get into the specifics. We will now explore different types of Ethereum wallets, and see what are their strengths and weaknesses.
Get To Know Your Ethereum Wallet Types
1) Hot And Cold Wallets
Wallets can mostly be classified into two categories — hot and cold. Hot wallets are the online (web) wallets, which can be accessed from any device, any place, and at any time. All you need is an internet connection, and you will have access to it. Cold wallets, on the other hand, are offline (hardware) wallets. They can connect to the internet when you need to make a transaction, but other than that, they do not have a constant connection to the internet. The thing about these wallets is that hot wallets are very practical, but also much easier to hack, while the cold wallets are less practical, but much, much safer.
2) Full Node Wallet
The full node allows users to access ETH blockchain directly. If you are not in possession of a full node, then you have to connect to an another one in order to verify transactions. This type of wallet requires that you download the complete blockchain, which will turn your computer into a node. This can only be done with the help of a desktop wallet, since the blockchain is constantly growing, and will require a lot of space for expansion.
3) Third-Party Wallet Or Your Own Wallet
Using third-party wallets is one of the easiest ways to get into the wallet game. This includes wallets provided by one of the crypto exchanges or independent wallets by other developers. That way, accessing the funds is pretty easy and effective and can lead to even faster trading than other methods. However, this option will require an immense amount of trust in the party that provides the wallet, since they are the ones who are managing your private key.
Additionally, the Ethereum platform also allows you to make a wallet yourself, and then use it as you see fit. That way, you will be in full control of all the keys. Creating one is easier than it might seem, thanks to Ethereum's wallet service “MyEtherWallet“.
Once you get to the website, you will see numerous safety reminders, which you should read carefully in order to understand the process and what to do to make the safest possible wallet for yourself. After that, there will be an option to make a password and continue with setting up your personal wallet. Next, you will have to download a Keystore file.
At this point, you have to remember that keeping your private key safe is your biggest priority. You will need it for unlocking the wallet when you wish to access it, but you must keep it a secret from everyone else. Copy and paste it into the keystore file, and then upload it in order to unlock the wallet. This is pretty much you need to do, and if everything is done correctly, your wallet should now be set up and fully functional.
4) Paper Wallets
A paper wallet is a term for a wallet whose private key is in your possession but written down on a regular piece of paper. This basically means that it doesn't exist in a digital form, and as such — it cannot be hacked. This is one of the safest ways to protect your wallet, and if you take extra precautions to hide the paper with your private key, you won't have to live in fear of having your funds stolen.
5) Mobile Wallets
Finally, there are mobile wallets, that are usually referred to as ‘light clients'. You do not need to download the blockchain to use them, but instead, they get their information about the blockchain's network status from the miners. They can let you access your coins as long as you have a cellular connection, but are also easy to hack and steal from.
A good example of such a wallet is Jaxx, which comes for desktop and smartphone alike. The good thing about these wallets is that your private key never leaves your phone. The bad thing is that, if your phone is hacked, lost, or stolen, you can lose everything you have.
Get To Know Your Ethereum Wallet Types Conclusion
Hopefully, this has cleared things up about the different kinds of wallets that you can use for storing Ethereum. Obviously, the safest wallets are the cold ones, since they are located on a different piece of hardware that requires physical access in order to get to the money stored on it. However, this wallet is not constantly connected to the internet, which makes it slightly less practical.
Hot wallets are easier to access, but they pose a risk since anyone can get to them if they get their hands on your private key. Paper wallets protect the private key pretty good, so that might be a decent way to use a hot wallet. Now that you know all of this, the choice of which one to use is entirely up to you.