Guide to Storing ERC-20 Tokens on Popular Wallets
The success of the Ethereum blockchain has led to the creation of thousands of ERC-20 tokens that belong to meaningful and also not-so-meaningful projects. As is the case with Ethereum, the safety of ERC-20 tokens is a primary concern of every Crypto holder. There are a number of wallets popularly used within the Ethereum space, but three that stand on top are MEW (in this article being used to create a paper wallet but can be used as a web wallet), Ledger (cold storage hardware wallet), and Bitfi (hardware wallet with no storage, a private key generator).
This articles takes a dive into the process of viewing and storing ERC-20 tokens in popular Ethereum wallets; it also takes a look at the means to check the real-time value of all held tokens.
It’s important to note that ERC-20 tokens can be sent to any Ethereum wallet EXCEPT cryptocurrency exchanges. If an exchange does not presently support a token, sending that token to the exchange will — most likely — lead to the permanent loss of that token. On the other hand, if you control the keys to an Ethereum wallet, you can send any ERC-20 token to it without any preceding steps. Though, viewing the token quantity can be a bit of a process on certain wallets; while viewing the price quote can be an additional process.
Paper Wallet on MEW
MyEtherWallet, popularly known as MEW, allows holders to create an Ethereum paper wallet, which is a primitive form of cold storage (storing private keys offline). Ethereum paper wallets are great for long-term holding of ERC-20 tokens as long as the holder is able to properly create the paper wallet and secure the private key. It is not recommended for users who have little tech knowledge.
To set-up a wallet through MEW, head to https://github.com/kvhnuke/etherwallet/releases/latest to acquire a .zip folder of the wallet. After downloading the wallet, you must go offline (disconnect your computer from the internet to prevent the risk of your wallet information from being intercepted by hackers). Now, unzip the folder and click the index.html file. Your paper wallet creation process will now begin. Be sure to pick a good but memorable password for the encryption of your private key. Next, once you have the private key, carefully write it down and quadruple-check whether you’ve correctly copied each of the characters. If you copy the wrong key, you will lose access to the funds you transfer to the paper wallet.
Now you should clear all the cookies and cache on your web browser and restart your computer before reconnecting it to the internet. If you printed you paper wallet, you should also clear the memory on your printer because a copy of your paper wallet remains in printers memory and someone could potentially print out another copy. Be careful in following all safety procedures to insure that your wallet is not compromised before you even use it.
Once the paper wallet is created, you have developed cold storage for your ERC-20 tokens and ETH. You can send funds (both ETH and all ERC-20 tokens) to the address on the paper wallet from any exchange and you’ll have to use Etherscan to check your balances.
When the time comes to transact or transfer the tokens from your wallet, you’ll notice that some or all of your ERC-20 tokens will not be visible in your MEW dashboard. That’s because, before you can transact, you’ll have to use the MEW application to manually add each token to your MEW Dashboard or you’ll be unable to transact. To do this:
- On the MEW application, look at the right side of the dashboard and click “+Custom Token.”
2. You’ll receive a prompt that will request the contract address, token symbol, and decimal count of your token.
3. Repeat steps 1 and 2 till you have added all your tokens.
Once all your tokens are visible, you can make transfers. Note that MEW does not display balance’s fiat value. For that, you’ll still have to search your address on etherscan.io
Additionally, bear in mind that once you make an out-going transfer, you’ll have to destroy the paper wallet as you must connect to the internet to make a transfer. This will expose your private key and thus all the unspent tokens remaining in the paper wallet will now have to be transferred to a new paper wallet (just repeat the process described above for creating a paper wallet). Given that ERC-20 tokens are highly speculative and/or need to be regularly used in the applications that integrate them, most token holders opt for alternatives to a paper wallet as an ERC-20 token paper wallet is not practical for transacting. Thus, users who do not want to hand their private key to any third party but want to be able to make transactions with ease opt for hardware wallets.
Ledger is a popular hardware wallet and it’s often used for storing Ethereum and ERC-20 tokens. Unlike a paper wallet, that cannot be reused and has many steps that need to be followed to insure safety, the Ledger cold storage device itself stores the private key within the device. This keeps the private key offline, but the Ledger device must be protected from physical seizure or theft.
When it comes to ERC-20 tokens, hardware wallets are preferable over paper wallets as hardware wallets are designed for supporting transactions. To deposit ERC-20 tokens to a Ledger, a holder needs to acquire his/her public Ethereum address from the Ledger Live. Then, tokens from any exchange or other wallets can be transferred to the Ethereum address of your Ledger wallet.
When it comes to transacting, Ledger provides partial improvements over paper wallets. Ledger does not have native support for ERC-20 and so it must be connected to your computer and used together with MEW which is not a Ledger application but rather a third-party website.
The benefit is that since a hardware wallet prevents the private key from entering the online environment, transactions can be made without users having to transfer all unspent tokens to a new wallet. To transfer ERC-20 tokens, MEW can be used in conjunction with a Ledger by allowing the MEW dashboard to access the Ethereum private key on the Ledger wallet.
After you’ve clicked “Access Wallet” on MEW’s main page, select the “Hardware” option for wallet access.
After you have unlocked the Ledger wallet with your pin, open the Ethereum application. Now, connect your Ledger to your computer.
Now, on the MEW dashboard, select Ledger on the following prompt.
After this, you’ll be presented with a wide variety of options of wallets associated with your Ledger, select the “Ledger ETH” option and then choose the unlock option on MEW. You’ll next be presented with the standard MEW transaction dashboard.
Here you can make transactions and approve them via the Ledger wallet. However, only ETH will be available for transactions and so you must add each token one by one. Do not be worried if you have transferred tokens to the Ledger wallet. The tokens are held by your address but they will not show up until you have added the token to your dashboard.
Now, as was the case with MEW, holders will need to add custom tokens from “+ Custom Token” option on the right side of the dashboard. Holders will be presented with this prompt, which must be filled to view the token balances.
Once you have added all your custom tokens, you can transfer them.
However, Ledger Live isn’t optimized for out-going transactions of ERC-20 tokens. MEW does not show the dollar-value of tokens either. Thus, the dollar value of balances has to be checked via an external Ethereum scanner application, like Etherscan.io. Note that Etherscan.io does not display the dollar-value of every token.
Now, holders may wonder what’s the point of a hardware wallet if they need to access MEW to make transactions; might as well stick with a paper wallet. The difference is that with a hardware wallet, holders can transfer tokens without exposing their private key. Once the transactions are complete, the hardware wallet can be disconnected without a concern for the remaining balance. With a paper wallet, once a transaction is made, the unspent tokens become vulnerable if they are not transferred to a new paper wallet.
Bitfi is a new type of hardware wallet that functions as a private key generator. The wallet can be used for “storing” many coins including Ethereum and ERC-20 tokens (storing is in quote marks because thats actually not correct because the Bitfi wallet does not store anything). The difference is that, unlike a standard cold storage hardware wallet, Bitfi is a new technology that does not use cold storage, rather it has not storage whatsoever.
There are no private keys within a physical device. Instead, its algorithms ask the user for a salt & passphrase to calculate a private key for a transaction and this private key comes into existence for a fraction of one second. Thus, the wallet does not expose private keys in any online environment, nor does it expose private keys to any person or entity that physically seizes the device.
To receive ERC-20 tokens, Bitfi users can retrieve their ETH address from the Bitfi device or the online Dashboard. Once tokens are received, their dollar-value will be instantly visible in the wallet.
For out-going transfers, users will need to login to the Dashboard; https://bitfi.com/knox. Once logged in, the Dashboard will give users the option to add ERC-20 tokens.
Once the “add new token” button is clicked, the users are presented with the following prompt.
Then you simply enter the contract address for the desired token and then a wallet for that token is instantly created. Once a token is added, users can transfer ERC-20 tokens from the wallet. Since the device doe not store any private keys, in order for the transfer to go out the user will need to type in their salt and passphrase which will then calculate the private key to release the funds.
The dollar-value of balances can also be viewed from the Dashboard.
MyEtherWallet is the go-to source for creation of paper wallets for ERC-20 tokens. However, tokens need to be transacted repeatedly and therefore it is not practical to store them in paper wallets. Thus, many holders opt for hardware wallets for secure storage of ERC-20 tokens. For the time being, Ledger Live does not facilitate transfers of ERC-20 tokens.
Thus, Ledger users must download the Ethereum application from Live and then connect their device to MEW for transfers and then use Etherscan.io for net wallet balances. On the other hand, Bitfi natively supports every ERC-20 token just as any coin like Monero or Bitcoin. At this moment it is the most convenient and intuitive option for transacting and holding ERC-20 tokens and checking the fiat value of balances.