Ha! Everybody knows what a wallet is (at least I hope everyone does :P). It’s a place where people store their cryptocurrency. In the crypto world, A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin and Ethereum.
Bitcoin has been established for a significant period of time. On the other hand, Ethereum currently has the second largest market cap after Bitcoin. Because of this, many investors are now flocking to Ethereum. Naturally, this has surged demand for more secure Ethereum wallets. Therefore, we felt the need to educate those out there who were looking for some knowledge and those who are new to this ever-expanding world.
Types of wallets
Wallets can be categorized mainly on two important features –
Security – Wallet can’t be accessed easily as private key remains offline mostly.
Accessibility – Wallet access is easier
Depending on the need of the user, various Ethereum wallets are available today
Desktop - for developers
Mobile – for frequent transactions in bill payments
Web – for money transfer purposes
Exchange – investor or daily trader
Hardware and Paper – for long term investment
Storage of private key can be another way of classification of cryptocurrency wallet. It can be
Online – Desktop, Mobile
Offline – Hardware, Paper, Web
No control - Exchange
There are many different types of wallets you can use including online, offline, mobile, hardware, desktop, and paper. The classification is mainly for differentiating the medium where the private key is stored. Some wallets make it easier for frequent traders, and others prioritize security and can be a bit of a hassle to frequently trade with. There is often an inverse-relationship between accessibility and security.
Now, let’s talk about popular Ethereum wallets available.
The Ledger Nano S is one of the best hardware wallets available in the market because it is user friendly and has a screen for easy control. The Ledger Nano S stores ether offline and requires users to sign transactions with their private key in order to spend ether.
Additionally, the Ledger Nano S has an option to create a recovery seed to recover your private keys if the device is lost or broken. Users can set a 4-digit pin on the physical wallet itself, which is an extra element added to prevent keylogging. You can store both Ethereum(ETH) & Ethereum Classic(ETC).
TREZOR was the first hardware wallet invented for Bitcoin. However, now TREZOR can be used for Ethereum too with the MyEtherWallet web interface. It also stores ether offline on a secure electronic chip which can be activated only when you log in with your password.
TREZOR also uses a limited USB connection, meaning that it can even safely interact with computers that may have been compromised or infected.
It fits into your palm, it is water and tamper-proof and extremely durable (CE and RoHS certified – quality, reliability and environment standards).
Mist is the official Ethereum wallet. When you install Mist, it takes a while to get started as it synchronizes with all Ethereum nodes. Security is in the form of a password, but if you forget this there is now ay to recover your data/money.
In the wallet, you will have access to a pair of public and private keys to perform transactions. Being the official Ethereum wallet, Mist supports smart contracts.
MetaMask is one of the best desktop wallets available out there. MetaMask is a bridge that allows you to run Ethereum decentralized Apps (dApps) right in your browser without running a full Ethereum node. MetaMask includes a security identity vault, providing a user interface to manage your identities on different sites and sign blockchain transactions.
Jaxx is a multi-asset wallet which supports 13 cryptocurrencies (including ETH) and has an elegant design with robust security features. On Jaxx, private keys never leave the device, and features like seed keys enable you to restore your funds whenever required.
Also, the Jaxx codebase is auditable on their website and therefore support smart contracts. It is supported on all platforms - Desktop (Windows, Mac OS, Linux), Extension (Chrome, Firefox), Mobile/Tablet (Apple, Android).
Coinbase, a web wallet, is the simplest and easiest to use compared to other options on this list. You can buy Ethereum, Bitcoin, and Litecoin with fiat currency, and keep your cryptocurrencies secure.
Since the private keys are stored on Coinbase’s hosted servers, you ultimately don’t have any control over your keys. Thankfully, Coinbase is extremely credible, safe and trustworthy.
Their wallet works on Android and iPhone, along with your web browser. Also, any digital currency lost is covered under their insurance policy.
It is a free, open source, client-side wallet which does not rely on third-party servers to operate. Instead, everything takes place on the user’s computer, which means the service will always be accessible. This means you can generate new wallets and store your ether without having to do it on MyEtherWallet servers. This also means you are fully responsible for safely backing up your wallet. Its deals in BTC and ETH.
The interesting fact about the MyEtherWallet is that it can be used to set up smart contracts. Something that no other wallet in this list can.
Blockaction is a new and upcoming web wallet by Avarch, aimed at simplifying the users experience of transactions. It exists on the client side allowing users to generate the private keys on the local computer. They provide free offline wallet creation facility which ensures complete safety of your wallet. You don’t need to download entire node on your machine.
A user can go offline at the time of creation of wallet and connect back to the internet when password is chosen and private key is downloaded or saved somewhere safe.
They help keep track of all aspects of a transaction in real time for the users’ convenience. It supports both Bitcoin and Ethereum.
Kraken is a prominent US based Bitcoin exchange operating in the US, Canada, Japan and the European Union. It is ranked the world’s largest bitcoin exchange in euro volume and liquidity. It prides itself n fast funding and a low fees bitcoin dark pool. They also provide year round support.
They are a US-based digital asset exchange offering maximum security and advanced trading features. The vast majority of customer deposits are stored offline in air-gapped cold storage. They only keep enough online to facilitate active trading, which greatly minimizes risk and exposure.
When looking for a secure cryptocurrency wallet, keep an eye out for the following four features:
Private key is accessible to you only and not exposed to internet.
A reputed development team is behind the wallet and it has community support.
It has simple user interface.
Compatibility with different operating systems.
Save yourself the trouble and find a wallet that suits your requirement. Ensure Security and backup.
It’s silly to lose all your coins because you stored you lost private key, so ALWAYS back up your wallet.
Add 2FA security to your wallet to prevent from theft, wherever available.
Subscribe newsletters of your wallet provider to stay updated with any upgrade or threat announcement. The more you know, the better off you will be in investing and protecting your cryptocurrencies.
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What is a Smart Contract?
Smart Contract can be defined as a virtual agreement of a transaction/exchange of goods or assets that may or may not involve money. Its main role is for two parties to conduct a business transaction/trade, that can be digitally self-executed and self-enforced, acutely eliminating the need for a ‘middleman’. This would transfer power away from those who currently manage or verify transactions – a seismic change to the way the world currently operates.
The origin of a ‘smart contract’ predates Bitcoin. The term was actually first coined by one of the alleged creators of Bitcoin, Nick Szabo back in the 1990’s.
What it means
The traditional contract like those created by legal professionals today, rely heavily on middlemen or third parties be it for validation, review or authentication. There is also risk of loss, destruction or theft. A smart contract eliminates all that.
The blockchain technology makes the same problem autonomous. Since it is based on a decentralized ledger, there is no chance of theft as several copies exist on various computers that host the blockchain. Any change induced by a party, results in the other party(s) being alerted instantaneously! A Smart contract saves time, conflict and is cheaper as the middlemen are cut out and hence no commission expenses.
The mutually agreed upon contact is coded onto the blockchain. The code is law! The parties involved remain anonymous but the ledger containing their contract is public. They conduct business by exchanging private keys. It can also be pre-programmed to execute the bill upon an expiration date or when a summit price is reached. Regulators of the blockchain keep track the transaction to ensure smooth operation in real-time.
“Smart contracts … guarantee a very, very specific set of outcomes. There’s never any confusion and there’s never any need for litigation.” - Jeff Garzik, Bloq
How it works
Since the business to be conducted is digital, it is very important that the code adheres to the requirements of the interested parties. Therefore, the logic must closely match those.
Usually Ethereum is used to code such programs as it provides the most modifiability of all blockchain platforms. But the basic principle is still the “If…this…else…this” statement. Pretty straightforward however the connotations may vary and hence it can be more complex.
The code is then encrypted using cryptography and then spread to other computers using Distributed Ledgers of the blockchain. Any changes in the code made by either or all parties is visible to all as the ledger is public.
The first party then initiates the transaction and the instruction is sent to the network for execution. No party can determine the outcome as the control of the program is not in their hands.
Let us take an example to understand it better….
Suppose you wish to buy a car from a man on the other side of the world. You set up the contract on the blockchain maybe in Bitcoin(BTC). The blockchain holds your money in escrow, while the private key (maybe the registration papers of the car, or other formalities) arrive from the seller. If the ‘key’ doesn’t arrive before the expiration date then as per condition of the Smart contract your money is refunded. See, so simple and fast.
We’ve talked about a financial situation. But the same can be extended to healthcare, real estate, management and general trade. Given below is a sample code for a basic smart contract on the Ethereum blockchain.
Sample code taken from https://www.ethereum.org/token
From the above discussion, we can clearly see the advantages of a Smart Contract: Speed, Safety, Accountability, Accuracy and is cheap all the way.
Key features of Smart Contract
Accuracy – smart contract come without the errors that may occur in manually filled out forms and no loss during transportation of assets/business. You’re the one making the contract. No need to deal with brokers, etc.
Accountability – decentralization and immutability of the blockchain is the main reason for its ever-increasing popularity. Parties involved are always in the loop; they are always made aware of what is happening when and when. The ledger on which it is stored can be viewed by anyone.
Safety – the data is stored across the entire network. So, it isn’t possible to hack/steal the data as there are copies on various other systems. It would take an exceptional hacker to break through the cryptographic encryption of the blockchain
Speed – the time that is wasted in physically writing all the forms and waiting for the middlemen to ascertain and complete all the formalities is non-existent here.
Perfection is still miles away….
Smart contracts are far from perfect. What if there are errors in the code? What if your intentions were correct but the logic applied in the program is incorrect? How will the government levy taxes on such transactions/sales? Who will keep a check on these contracts? The regulators mentioned above may be faulty or corrupted.
The future of smart contracts looks to be a combination of both digitisation and physical paper. The blockchain will be used to set up and conduct the contract, whereas paper will be used to substantiate all the claims made by the involved parties.
Nothing is set in stone but the future of our world looks to be very interesting indeed. Blockchain and the smart contracts will sure change the shape of the world.
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