A Complete Guide to Opening an Ethereum Wallet

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A Complete Guide to Opening an Ethereum Wallet

An Ethereum wallet is easy to create – just download the app and choose the right one for your needs.

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Whether you plan to invest in a currency like Ether, store your RealTokens, or dabble in tokenization, you’ll first need to open an Ethereum wallet. 

In this guide, you’ll learn how an Ethereum wallet works, what different types are available for consumers, and how to create one.

What is an Ethereum Wallet?

An Ethereum wallet is like an online bank account. It is a digital cryptocurrency wallet that allows you to store, send, and receive Ether, the native cryptocurrency of the Ethereum network. Your Ethereum wallet will also keep any other ERC20 tokens that you may have. ERC20 tokens are cryptocurrencies and other digital assets that are built on top of the Ethereum blockchain.

Unlike a bank account, however, ETH only supports peer-to-peer (P2P) payments, which means they are not connected to intermediary services. Thus, if you lose access to your ETH wallet, you cannot retrieve it or its assets.

Ethereum wallets function on decentralized applications, which are computer programs that run on decentralized networks. Because these apps don’t rely on central servers to run, account owners are entirely responsible for self-managing their funds. 

How Does an Ethereum Wallet Work?

When you create an Ethereum wallet, you will be given public and private keys. Your public key is like your bank account number – it is what you use to receive Ether from other people. Meanwhile, your private key is like your PIN – it is what you use to send Ether to other people. 

There are two kinds of Ethereum wallets:

  • Externally owned accounts (EOA): An externally owned Ethereum account is an account that is owned and controlled by a private key. Account holders use these keys to sign transactions that send ETH or interact with smart contracts.
  • Contract accounts: A contract Ethereum account is an account that uses code. This code, known as a smart contract, can be programmed to do various things such as send ETH, create tokens, or even act as a decentralized application (dApp). Contract accounts represent digital assets or identities on the Ethereum blockchain.

What Ethereum Wallet Should You Choose?

Below are the most popular wallets you can use to open an Ethereum account with their advantages and disadvantages.

Custodial Wallet

Custodial wallets store private keys with third parties like an exchange, web wallet provider, or any other organization that offers custody services.

In most cases, the user will not have direct control over their private keys when using a custodial wallet. If the third-party organization goes out of business, is hacked, or otherwise loses the user’s funds, there is no guarantee that the user will be able to get their money back.

While custodial wallets offer convenience and ease of use, they come with inherent risks that non-custodial wallets do not have.

Mobile Wallet

Mobile wallets are convenient because you can access them anywhere using your smartphone. They’re also usually more user-friendly than desktop wallets.

To use a mobile wallet, you’ll first need to download and install it on your phone. Then, you’ll have to create a wallet address, which acts as your account number – you can use this address to receive ETH from others. To send ETH, you’ll need the recipient’s wallet address.

Most mobile wallets allow you to track the current price of ETH. They also typically have built-in features like a cryptocurrency exchange and a way to buy ETH with fiat currency (such as USD).

Overall, mobile Ethereum wallets are a convenient and user-friendly way to store your ETH. They’re also relatively safe, as long as you take precautions, like backing up your wallet data and never sharing your private keys with anyone.

Web Interface

Unlike other types of wallets, a web-based crypto wallet does not require you to download or install any software – all you need is an internet connection and a web browser.

Web wallets are convenient because they allow you to access your ETH from any computer or mobile device. However, they are also more vulnerable to hacking attacks because they are stored online. For this reason, it is crucial to choose a reputable and secure web wallet provider.

Hardware Wallet

A hardware Ethereum wallet is a physical device that stores your private keys and allows you to sign transactions. Unlike a software wallet, a hardware wallet is a dedicated device that provides extra security by keeping your private keys offline.

Hardware wallets are similar to cold storage in that you store cryptocurrencies offline, such as on a USB drive or paper wallet. However, cold storage requires you to create and back your private keys up manually, while a hardware wallet does this for you automatically.

Additionally, hardware wallets usually come with built-in screens that allow you to double-check and confirm every transaction before signing, providing an extra layer of security.

Browser Extension

Browser extensions store ETH and ERC-20 tokens as well as interact with decentralized applications on software like Google Chrome or Mozilla Firefox. They store virtually limitless addresses and can interact with other blockchains. Extensions are usually safer than web wallets because they encrypt private keys. 

Paper Wallet

To use a paper-based Ethereum wallet, you’ll have to print your private keys on a piece of paper and store it physically. While paper wallets are accessible, easy to use, and secure, the risk of losing them is high. Some ETH wallet users print private keys on titanium plaques, which are sturdy and harder to lose.

A Step-By-Step Guide to Creating an ETH Wallet

Creating an ETH wallet is simple. You can easily open an account on your smartphone, tablet, or laptop with the following steps:

  1. Choose a wallet provider. There are many different wallets available, so do your research to find one that best suits your needs. 
  2. Once you’ve chosen a provider, head to their website and create an account using your primary email address. Always use a strong password, and don’t share this with anyone else. Use a reliable password manager if you’re prone to forgetting your passwords.
  3. Generate a public and private key for your wallet. Once you have your keys, you can add them to your wallet.
  4. Finally, fund your wallet with ETH. You can purchase ETH on an exchange or receive it from another user.

Conclusion

If you’re looking to diversify your assets outside of Bitcoin, opening an Ethereum crypto wallet is a good idea. However, the crypto market is ever-changing, so you should only open an ETH wallet if you’re confident you can invest carefully and intelligently. Once you decide to open an Ethereum wallet, it’s essential to choose the right one to keep your assets safe.

Are you open to exploring other cryptocurrency options? Explore our guides for the most-used wallets on Crypto News to find out what suits you best!

Frequently Asked Questions About Ethereum Wallets

What is the most secure Ethereum wallet?

The most secure Ethereum wallet is the Ledger Nano S. This hardware wallet offers a high level of security, as your private keys are stored offline on the device. Additionally, the Ledger Nano S features a built-in display so that you can confirm each transaction before it’s processed. 

What is the most commonly used Ethereum wallet?

The current most popular Ethereum wallet on the market is Metamask, available as a Chrome add-on or mobile application. You can protect your ETH wallet against hackers by using Metamask with a hardware wallet like Ledger or Trezor.

Can you trace Ethereum transactions?

While you will need keys and addresses to send and receive ETH, these transactions are virtually untraceable. Take special care never to link your key to your identity. Do not share it with anyone and keep it somewhere secure if you’re using a paper wallet. 

Is it safer to use Ethereum than Bitcoin?

While both Bitcoin and Ethereum have advantages and disadvantages, Ethereum is generally considered more secure than Bitcoin. This is because Ethereum’s smart contract technology makes it more difficult for hackers to exploit potential vulnerabilities in the network. In addition, Ethereum’s decentralized nature makes it more resistant to 51% attacks, which are a significant threat to Bitcoin’s security.