Ethereum is one of the cryptocurrencies well-known outside the crypto space, and for a good reason. Unlike some competitors, it serves many purposes besides being a worthy investment tool. For instance, it enables the creation of dApps or smart contracts, allowing participants to transact with each other in a secure and optimised way without needing a central authority.
With the full launch of Ethereum 2.0 and cryptocurrencies being back in their game, it’s only natural to wonder how to store it once you purchase it. Last year was difficult for cryptocurrency traders, partly due to the FTX collapse and the Terra Luna Crash. But 2023 started on a positive note, with Ethereum’s price jumping from $1,200 at the beginning of January to $1,623.12 at the end of February.
Expert opinions and predictions vary, which is no surprise since the market is so volatile and prices fluctuate daily. But what’s certain is that devs behind the Ethereum blockchain work to improve its scalability and security. Future events, like the Shanghai Upgrade scheduled for March, might bring some noteworthy changes and hype around the coin. As traders may remember, the Merge wasn’t an event to impact Ethereum’s price fluctuations, but the forthcoming one might be more than a non-event.
If you want to add ETH to your investment portfolio this year, you should decide how to store it. Read on to determine what storage option suits your needs and additional tips to keep your tokens safe.
What Are Ethereum Wallets?
Ethereum wallets are applications enabling interaction with your Ethereum account, or hardware that stores the data needed to access your crypto funds. Simply put, it resembles an internet banking app. It allows you to check your ETH balance, conduct transactions, and connect to other apps.
Your wallet has a private key that functions like a password to your banking app, and should be kept safe and never shared with anyone. You also have an address that resembles the account number for your banking app, formed from a string of letters and numbers starting with “0x”.
A wallet can be hardware or software, depending on your needs. There are some types of Ethereum wallets available that serve different functions. For instance, some are downloaded on your desktop or mobile, while others are held offline on pieces of paper or hardware.
Let’s understand what makes the following types of Ethereum wallets unique.
Desktop wallets run on operating systems like Linux OS, Microsoft Windows, or macOS. They’re ideal if you like to handle your finances on desktops. Since most of them store keys locally, you’ll need to use your computer to access your Ethereum wallet.
With such wallets, users may use a light client or download a full client that includes the entire Ethereum blockchain. Downloading a full client is often a favourite option as it implies that miners validate transactions themselves, eliminating the need to feed accurate data and resulting in improved security.
Besides sending and receiving ETH, this type of wallet also offers several advanced features that allow you to run a full node or create smart contracts, giving it more functionalities.
Web interface wallets are popular alternatives to desktop or mobile wallets. They are websites that allow you to interact with the Ethereum blockchain after you connect your wallet to the interface. You will use a web browser to connect with your accounts. These wallets employ cloud storage, meaning they’re good options if you want to access your funds on the go. Cloud storage makes data accessible via the internet, using enormous computer servers housed in data centres.
Web interfaces can be risky, as you’ll trust your keys to a website. However, some are considered more trustworthy than others.
Browser extensions can store both ETH and ERC-20 tokens and are used to communicate with decentralised apps, all while supporting a virtually limitless number of addresses. They’re convenient for experienced users, since they can connect with different blockchains.
Browser extensions are considered a more secure alternative to web interfaces since they store and encrypt your private keys on a browser. You will need to protect your wallet with a password to access them, increasing security.
Installing them is easy, just like installing any other browser extension. Several browsers already have Ethereum wallets, making it much easier to connect with DApps.
Hardware wallets are cold wallets, or pieces of paper you use to store your private keys offline. They’re password- or PIN-protected; you need to connect them to a computer to move funds.
What makes them safe is that a malicious party would need to know the password protecting the funds and have physical access to the device in order to access your tokens. However, they can be expensive, especially if you have a small amount of Ether to store.
Attention! Avoid buying a used hardware wallet or one from a third-party vendor. After they’re used for the first time, they might be compromised to trick you into believing that they’re sending currencies to a wallet that’s wholly under your control when, in fact, the initial owner might still have access to it.
Paper wallets involve printing out private keys on a piece of paper. Because of their fragile nature, it is critical to take care of where you store them, so they are not damaged, destroyed, or lost. Alternatives include more expensive titanium plaques, which may be resistant to natural disasters, given the material they are made of.
Extra – the popular custodial crypto wallet
Many Ethereum or crypto owners generally store their small amounts of digital currency in a custodial wallet, meaning the wallet provided by the exchange they use to purchase cryptocurrency. These wallets are very user-friendly and easy to use, and you won’t have to stress about securing your keys since a third party does it for you.
Nevertheless, because you are entrusting access to your funds to a third party, the best advise is to only keep modest amounts of Ethereum and use non-custodial wallets for larger sums.