The key to your digital future

Wallet

Published in

NERVE GLOBAL

3 min readOct 20, 2020

The term wallet describes the applications used to store the private key. This does not include the storage of coins/tokens, because they are located on the blockchain. Wallets give access to your funds and Ethereum applications. Only you should have access to your wallet. Think of it like an internet banking app, without the bank. Your wallet lets you read your balance, send transactions and connect to other applications.

Your wallet is only a tool for managing your Ethereum account. That means you can swap wallet providers at any time. Many wallets also let you manage several accounts from one application.

That’s because wallets don’t have custody of your funds, you do. They’re just a tool for managing what’s really yours.

Different types of wallets

Paper Wallet

Is a physical document on which the private key (or a seed) is stored, which was created by an offline generator; serves as cold storage; Tip: when sending a transaction, create a new paper wallet afterwards, because the private key had contact to the online function and the security or idea behind the paper wallet is affected .

Software Wallet

Software application protected with a password (+ other security measures that can be added individually; e.g. 2F), which contains private key; further features are the sending and immediate generation of new public keys (thus also private keys); available on the desktop or as an app; use of a passphrase is common; SPV Web and lite wallets also fall into this category; Tip: backup of the program, since the program receives private key, it will be lost in case of system crashes, possibly during operating system updates.

Hardware Wallet

Hardware that contains a private key; in combination with an application, one or more public addresses (corresponding private key) can be created; hardware is usually protected with a pin and a seed is used as a backup; pc has no access to the content of the hardware, but is used only to decrypt and provide the private key (popular providers: ledger, trezor)

Exchange

Privat key is stored by wallet/Exchange provider; user gets a user-friendly interface; trading function as well as sales (offered by some) is available; also meeting point of supply and demand; market place; tip: don’t store large amounts of money there; only use it for trading and sales and then store it in a cold storage.

How to stay safe

Centralized exchanges will link your wallet to a username and password that you can recover in a traditional way. Just remember you’re trusting that exchange with custody over your funds. If that company is attacked or folds, your funds are at risk.

Wallets will often give you a seed phrase that you must write down somewhere safe. This is the only way you’ll be able to recover your wallet. Here’s an example: