Ethereum Wallets & How Ethereum Wallet Works?

In this Ethereum tutorial, we will study the use of Ethereum wallets. Moreover, we will also discuss different types of Ethereum wallets. Additionally, we will cover the following topics.

Need of Ethereum Wallet
What is an Ethereum Wallet
How Ethereum Wallet Works
Types of Ethereum Wallets
Some common Ethereum Wallets
How to set up an Ethereum Wallet using MetaMask

Contents show

Need of Ethereum Wallet

Usually, people associate wallets with some type of cases used to store cash, IDs, cards, etc. An Ethereum wallet is similar to a traditional wallet, except that it allows users to access their valuables content on Ethereum.

In most cases, this valuable content is cryptocurrency. Moreover, these Ethereum wallets can be either physical or virtual.

In blockchain technologies like Ethereum, we utilize private keys to access data or crypto on Ethereum. And the main role of Ethereum wallets is to hold these keys that allow users to access their data on Ethereum.

In a nutshell, whatever we intend to accomplish with Ethereum, we need a mechanism to locate and access data stored in blocks. This is where a wallet can help.

An Ethereum wallet helps to keep a track of private keys and engage with smart contracts. And without a wallet, we cannot do much on Ethereum.

Ethereum Wallets & How Ethereum Wallet Works

Read What is Mining in Ethereum and How does Ethereum Mining Works

What is an Ethereum Wallet

We can categorize the Ethereum wallet as a software or hardware application that allows users to communicate with the Ethereum network. With the help of Ethereum wallets, users can manage their Ethers and even communicate with smart contracts.

As a result, it facilitates the user with an interface that allows user to check their balance and even interact with them. In the back, an Ethereum wallet helps to keep the user’s private keys. And these keys are utilized to sign transactions.

Additionally, an Ethereum wallet is linked to a complete node that allows to send and receive transactions on the Ethereum network.

Also, read: Introduction of Ethereum Testnets

How Ethereum Wallet Works

Now that we understood what is an Ethereum wallet, next it is important to understand how the Ethereum wallet works.

In Ethereum, each stored data has an associated address that allows the user to locate and access their data. Usually, the data stored in Ethereum are crypto assets and smart contracts.

The associated address of data helps to recognize the owner. However, in the case of crypto assets like tokens or ethers, data is exclusively accessible to the owner. Moreover, anyone can view encrypted data, but only the asset’s owner can decode it and utilize it.

Since private keys are used to encrypt data on Ethereum, any user who possesses the private key can control the data. Now to safeguard our crypto-assets, we need to protect the private keys. And the main purpose of an Ethereum wallet is to hold and protect one or more private keys.

An ideal Ethereum wallet allows users to easily access your keys while preventing others from doing so. However, all wallet services try to create a balance between accessibility and security by compromising some points.

Read Ethereum Nodes and Clients

Types of Ethereum Wallet

There are a variety of methods to maintain private keys, ranging from extremely secure to extremely accessible. And based upon these methods, there are multiple types of Ethereum wallets.

So, in this section, we will discuss different types of Ethereum wallets. In a nutshell, the Ethereum wallets are categorized into 3 main categories.

Software Wallets: It helps to store the private keys digitally in a data file.
Hardware Wallets: It helps to store the private keys in some physical device like USB drive.
Paper Wallets: It is simply a piece of paper with private keys printed on it.

Let’s discuss these different types of Ethereum in more detail.

1. Software Wallets

Software wallets are simply computer programs that can hold private keys. Moreover, it also makes retrieving and using keys simple for users.

For software wallets, we can easily access keys after setting up the user ID and password for the wallet. However, a user can also use an encrypted file for securing the keys.

Now a software wallet can also be classified into two main categories. The first is the Hot wallets and the second is the Cold wallets.

Hot Wallets

A hot wallet is another type of software wallet that maintains private keys online. Moreover, it allows the user to effortlessly access their keys and Ethereum holdings globally. And for this, we just need our login credentials and a good internet connection.

Although hot wallets offer wide accessibility but still they and not much secure. For instance, if a wallet’s credentials are hacked or stolen, for the hacker also, the wallet is easily accessible.

Additionally, we need to trust some third-party organizations for protecting keys. And this is also prone to the central point of failure.

Cold Wallets

A Cold wallet refers to a wallet that helps to store keys offline. Moreover, users only need to use their key whenever they require to access their asserts on Ethereum.

Now there are a variety of methods to keep keep the private keys offline. However, these varieties of methods do require some additional steps.

Though using cold wallets is not that easy, still, they provide greater security. With a cold wallet, a user has complete control over their keys and reduces the risk of a hacker gaining access.

Types Of Ethereum Wallet Softwares

Once a user selects between hot and cold wallet, the next step is to select a wallet client software. And in the case of Ethereum, there is multiple client software available.

Web Wallets: In this, a web browser is utilized to access the wallet. For this, we just need to use a web browser on any device with an internet connection.
Desktop Wallets: In this, a software application is been utilized to access the wallet. Now, this software can either be installed on a computer or a laptop.
Mobile Wallets: In this, a mobile application is utilized to access the wallet. Moreover, the most popular wallet software is available for iOS and Android.

2. Hardware Wallets

The software wallets offer great accessibility but, security is a big issue while using them. On the other hand, hardware wallets offer great security in comparison with software wallets.

Hardware wallets allow users to store their private keys in a physical chip. Moreover, users can easily connect these hardware chips to personal computers or laptops for accessibility.

So, until the hardware is not connected, the private keys of a user are safe. Furthermore, an attacker will need to physically steal a user’s wallet device to access credentials.

However, there are some disadvantages of accessibility and redundancy while hardware wallets. So, whenever users need to access their assets, they need to connect their hardware to a computer. And, this procedure can be tedious for regular users.

3. Paper Wallets

As the name signifies, a paper wallet is just a sheet of paper with private keys printed on it. And we can consider paper wallets as the safest form of wallets.

The majority of the key creation options allow users to print their keys. So, a user can easily print the set of public-private keys and even a QR code for each key.

However, to access the Ethereum assets, a user either needs to provide the keys from the paper or use the QR code.

Moreover, a paper wallet is useful until it is kept hidden. Anybody who can get their hands on the paper can simply use it to access the assets.

Read Enterprise Ethereum Alliance

Some common Ethereum Wallet

Till now, we have learned about different types of Ethereum wallets that a person can use. Now, in this section, we will look at some commonly used Ethereum wallets.

MetaMask: Metamask is a tool we can easily download as a browser extension. It is available for Firefox, Chrome, and even Brave browser. Metamask simply allows users to open their Ethereum in a browser itself. Moreover, it also allows developers to communicate with Ethereum test networks.

Exodus: Exodus is the best Ethereum wallet for beginners who have never used one before. It comes with several qualities that set it apart. We can run it on Linux, Mac OS X, and Windows operating systems. Moreover, Exodus also offers a smartphone app that we can download and use anytime.

Mist: Mist is the only official Ethereum wallet available on the market. It is an open-source tool and it is free to use for everyone. However, to utilize Mist, we need to download and install the Ethereum full node. And the size of an Ethereum full node is in terabytes. Moreover, It’s only accessible as a desktop wallet at the moment.

Ledger Nano: The Ledger Nano is a well-known hardware wallet that allows users to protect their keys in a physical device. Moreover, Ledger Nano utilizes BOLOS operating system that is integrated inside a secure chip. This is considered by some to be the greatest Ethereum wallet available.

Jaxx: Jaxx is another wallet service available in the market. Moreover, it is available as a browser extension and a desktop application for various operating systems. And it supports a wide range of cryptocurrencies including Ether and Bitcoin.

Also, read, How to Setup Private Ethereum Blockchain on Windows

How to set up an Ethereum Wallet using MetaMask

Till now, we have seen that there are many options available for an Ethereum wallet. Once we select a wallet based on our requirements, the next step is to install and set up a wallet.

Now, in this section, we will discuss how to install and set up the MetaMask Ethereum wallet. And for this installation, we will be using the Chrome browser. Here are some steps that we can follow.

1. Intalling MetaMask in Chrome

First, open a Chrome browser and move to the official MetaMask download page.
On the download page, select Chrome category and click on “Install MetaMAsk for Chrome“.

The above step will navigate to the Chrome web store. On the store page, click on the “Add to Chrome” button and also confirm the pop-up.
Once the MetaMast extension is been installed, it will navigate to a MetaMask Welcome page.

Note: If the Welcome page doesn’t appear, click on the MetaMask Chrome extension icon.

2. Create an Ethereum Wallet

On the Welcome page, first, click on the “Get Started” button. After this, click on the “Create a wallet” choice. Also, agree to the MetaMask license agreement.

Create a Ethereum wallet using MetaMask — Create an Ethereum wallet using MetaMask

Once we agree to the license agreement, MetaMask will automatically create an account and ask to set a new password for your account.
So, after setting up the password, tick-mark the Terms of Use, and click on “Create.”

Create a Ethereum wallet account — Create an Ethereum wallet account

3. Get Ethereum Balance in MetaMask

Once the new account has been created, we have to generate a secret recovery phrase for our wallet. This phrase will act as a master key for our wallet.
After getting the secret recovery phrase, we are ready to use the MetaMask wallet. Now, simply click on the MetaMask extension and log in using your password.
Now to access the Ethereum wallet and balance simply click again on the MetaMast extension.

Note: At this moment, it will be accessing the balance from the Ethereum Mainnet

4. Use Test networks in MetaMask

To shift from Ethereum Mainnet to test network, again click on the MetaMask icon and click on “Ethereum Mainnet“. And then click on “Show/hide test networks“.

Ethereum Wallets tutorial — Enable test networks for MetaMask

This will navigate to a setting option where we need to enable the “Show test networks” option. By enabling this, we will get multiple test networks options.

enable test networks in MetaMask — Enable test networks in MetaMask

Next, simply click on Ethereum Mainnet, and from the list select “Ropsten Test Network.”

With the above steps, we have successfully installed the MetaMask chrome extension. And created an Ethereum wallet account using MetaMask.