Ethereum Wallets: What are they and how do they work? Beginner’s Guide

Do you want to start investing in Ether but don’t know where to start? You are in the right place, because in this article we will tell you everything about Ethereum Wallets.

According to experts, Ether is the future of blockchain technology, due to being a scalable, versatile and easily adaptable cryptocurrency.

Here we share the definitive guide about Ethereum wallets and some tips to choose the right one for you. Let’s go for it!


What is an Ethereum wallet?

Ethereum wallets are applications that allow users to interact with their Ethereum account. Banks and other financial institutions have applications that customers can use to make banking transactions with their mobile devices.

Think of Ethereum wallets as the cryptocurrency counterpart of those banking applications.

To use Ethereum you will need an Ethereum wallet that will give you exclusive access to the purchase of Ether (ETH). It will allow you to store your funds, make transactions easily and check the balance of your account.

You can change wallet providers at any time. This is because Ethereum wallets do not have the custody of your funds, but you are the owner.

Wallets are just a tool to manage what is really yours.

Main concepts of an Ethereum wallet

Not all Ethereum wallets have the same features.

Let’s review the points to keep in mind when choosing one to manage your investment:

  • Some wallets only allow users to send Ether between addresses, while others have more functionality, and even allow users to create smart contracts, which are self-executing agreements written in code.
  • Ethereum has two types of accounts:
    • External property accounts, which consist of pairs of public and private cryptographic keys, and prevent counterfeiting by demonstrating that the real sender actually signed a transaction.
    • Contract accounts, which implement a smart contract on the network with a single Ethereum address controlled by the code.
  • Ethereum wallets can be called:
    • Light nodes: They are a small application that does not have a complete copy of the block chain, they need full nodes to get that information.
    • Full nodes: They require the user to download the complete block chain (blockchain) on their device. It allows users to verify transactions on the network instead of getting data from others about what is happening on the block chain.
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What is a cold wallet?

A cold wallet or cold purse is a cryptocurrency storage system that works offline, specifically on external physical devices.

They can connect to the network, but they don’t need a continuous connection for their use, so they’re highly secure.

Their disadvantage is that they’re less intuitive systems, so they’re usually recommended for more experienced investors.

What is a hot wallet?

A hot wallet or hot purse are those that store private keys on devices that are always connected to the Internet, like computers or cell phones.

They allow you to make transactions quickly and easily, but they’re more prone to computer attacks, so they’re not recommended for managing large sums of money.

Ethereum Wallet Types

There are different types of Ethereum wallets, which vary according to support, functionality, and security.

Your choice will depend on your experience with this type of transaction, the amount of ETH you want to manage, and your goals.

The types of Ethereum wallets are:

  • Mobile Wallet
  • Software Wallet
  • Web Wallet
  • Hardware Wallet

Mobile wallet

They are mobile applications that are used to manage cryptocurrencies. Its main attribute is that it allows you to manage and access funds from anywhere, so they are ideal for use in daily investment. They are free, you just have to download them from the app store, and slightly insecure because they are constantly connected to the internet.

Software wallet

They are desktop applications to interact with your account from the pc or computer through Windows, macOS or Linux. They are free and easy to set up and use. Their security is relative: they are protected because they can only be used on the computer where they were downloaded, but as the device is connected to the internet it is always susceptible to being hacked.

Web wallet

They allow you to access the account through a web browser. They are free, usually much faster than other wallets and very intuitive, so they are usually used by small investors and beginners. Its main weakness is that they are less safe, since the private keys are stored on a third-party server.

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Hardware wallet

They are physical devices (for example, the size of a USB) that allow you to keep cryptocurrencies offline. Storage is offline and access is encrypted by the team, so it is the most secure wallet. They are not free, they must be purchased from specialized companies and usually have a high cost. This type of wallet is recommended for storing medium to large investments.

Is it a good idea to hold Ethereum?

Holding means acquiring a cryptocurrency and holding it for a long period of time in the hope that its value will simply increase over time.

This is the opposite strategy to cryptocurrency trading, which involves buying and selling frequently.

Holding is the most popular type of investment used in the virtual market among inexperienced investors, as it does not require much knowledge to carry it out.

You simply have to acquire the asset and wait for the opportunity to sell it at a higher value to make a profit on that investment.

According to experts, when investing in cryptocurrencies, Ethereum is the second most reliable currency, only surpassed by Bitcoin.

However, holding ETH as a strategy must take into account many factors, such as:

  • The type of project
  • Market acceptance
  • The level of investment
  • The ability to recover

The future projection of the asset, which is the critical point when betting.

The cryptocurrency market is new and unpredictable, and asset values ​​tend to fluctuate constantly.

One person can buy ETH at a certain value, and in just one year that value can triple. Or it can also happen that its value decreases quickly as has already happened, although this is not the trend.

In short, to mitigate the uncertainty we advise you to investigate and inform yourself.

The idea is not to miss opportunities, but cryptocurrencies have enough volatility to at least have to be attentive and proceed with caution when investing.

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