As Ethereum gains traction, the demand for wallets, the means to store and transact ether, the cryptotoken for the Ethereum blockchain grows, almost on a daily basis. In this post, we profile wallets for ether.
Ethereum Wallet Uses
If you are new to the cryptocurrency world and the importance of wallets, do check this post in the Bitcoin series, explaining features and types of cryptocurrency wallets such as multi-sig, cold storage, desktop, mobile, hardware, hosted, paper wallets etc.
Those who are familiar with Bitcoin wallets will find some similarities with the Ethereum wallet but also a slight learning curve on the user experience and concept of contracts.
Bitcoin has a specific purpose, i.e. a digital cash payments network, wallets have a simple function, allow a user to send bitcoins from one address to another using their private keys.
Ethereum, on the other hand, is designed to run any type of smart contract application, as we covered in our post on the differences between Bitcoin and Ethereum. This means that other than storing ether, users/owners have to specify the type of contract which receives their ether, with a provision for some ether to be used as gas.
The other question for those trading in ether is, how to move ether to and from an exchange to another cryptocurrency or fiat. There are different ways to achieve this in Ethereum.
Currently, most ether wallets come with some caveats, being in beta among one of them. Users have to verify that the wallet works with small amounts to begin with, and become familiar with the concept of gas fees which use up ether. Offline storage and backup are as important as any other crypto wallet.
We start off the list with Mist, Ethereum’s native wallet which has established the design and terminology for ether wallets in general.
Mist
Mist Platform
Like, Bitcoin, Ethereum also has a native support for a wallet. There are two variations geth, a command line option and Mist, a GUI desktop wallet.
Ethereum rolled out the Mist GUI wallet in beta form in October 2015, following the Frontier release. The Mist wallet has since upgraded from beta 6 to Wallet 0.7.2 (beta 16) and has ironed out several problems. A very helpful step-by-step (unofficial) guide is available on a blog by KLMoney which also sorts out some confusion between terms for wallet users.
Mist is available as a desktop download on different operating systems and installs with a full Ethereum node.
Using Mist Wallet
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| Ethereum's Mist GUI desktop wallet |
The wallet is used to create user (external) accounts and contract wallets. A user has to create an account to generate public address and private key and store their ether. Ethereum account is secured by the account password and the owner’s encrypted private key, both of which are required to access the ether stored in the account.
It is critical to backup and secure the account password and keyfile generated by Mist.
Another important requirement is to paste Ethereum’s 40 digit hexadecimal addresses rather than manually typing them – incorrect destination addresses means the ether is lost forever. The latest release of Mist uses checksum feature to flag potentially invalid addresses.
In order to use the wallet for transactions on Ethereum, a contract wallet has to be created by the account, using some ether (or gas). A contract wallet differs from account in these respects.
One, sending or receiving ether from a contract wallet will require some gas (ether) to be spent as well. Second, contract wallets can be set-up as single owner or multi-sig wallets. Multi-sig wallets have features such as daily limits and multiple owner account keys for transactions. Multi-sig wallets can have one owner account as creator.
Mist also has some unique but useful features such as identicons which are visual icons generated for an account.
Should one use an account or a contract wallet?
Accounts are preferred for use cases whether ether is being traded like a currency such as between two accounts or with an exchange, as these transactions do not require gas. Note that an address will not appear on the Ethereum blockchain until there is some transaction made, i.e. gas spent.
When ether are used to execute smart contracts via decentralized apps on the blockchain, the sender is responsible for including the cost of transaction i.e. gas. Contract wallets are required for this purpose.
Exchange Integration
Mist also integrates with ShapeShift, the instant cryptocurrency converter which makes it possible to purchase ether for an account using bitcoins or other cryptocurrencies. Unlike bitcoins, crypto exchanges which trade ether do not have a hosted/online wallets for ether. Kraken and Poloniex have hosted Ethereum presale wallets that owners can import into their accounts using the Mist wallet.
While Ethereum continues to upgrade Mist wallet with future versions including light nodes and cross platform options, third party developers are rolling out ether wallets to fill the gaps.
Client side Wallets for Ethereum
For end users who not want/need to download a full node and the familiar experience of a “bitcoin like” wallet, there a few options from other developers. Built as client side Javascript or browser extensions, these wallets allow users to transact in ether by creating the password and generating the private key. Bulk creation, import from exchanges and sending to a contract wallet are all supported. Import into Mist/geth is also supported.
Client side wallets are not web wallets or light clients, the generated wallet has to be download in JSON format to a user computer. Users are responsible storage, backup and/or maintaining a paper wallet. A QR code version is also provided in some wallets.
Some commonly used client side wallets include MyEthereumWallet which is an open source Javascript ether wallet, Kryptokit’s Ethereum wallet and EthAddress, a paper wallet generator .
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| MyEtherWallet a client side Javascript wallet generator |
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| Ethaddress, a paper wallet generator |
In February this year, Kryptokit has also recently released JAXX, a cross-platform wallet application that supports both bitcoins and ether.
Multi-sig Web Wallet: Ether.li
Mist or other client side options still require a local computer or device for storage. Although web or hosted wallets are not the best sources for long term storage, they are a convenient option to quickly access accounts or move ether online.
In March 2016, developers at BitGo, a Bitcoin start-up released Ether.li, a multi-sig web wallet with SMS two-factor authentication for ether storage. Ether.li deploys a multi-sig smart contract on the Ethereum blockchain creating a 3 account wallet (ether.li being a co-signer that authorizes the user) with 2 accounts (the creator/owner’s) needed to sign off transactions. The wallet is still listed as a proof of concept, but it has the distinction of being the first web wallet for ether.
Ethereum Wallet Dapps
A number of additional options listed on the Ether Dapps list include EtherWall which is an open source wallet that works with geth, the command line wallet interface. Consensys have released IceBox, a cold storage wallet on Lightwallet, a client side Javascript wallet, also developed by them.
Hardware Wallets: Coming in 2016
At the time of writing hardware wallets for ether are still not available in the market, but solutions are expected later in 2016. In April, Bitcoin hardware wallet maker Ledger showcased the developer edition of Ledger Blue, their upcoming hardware wallet that can run PGP and an Ethereum wallet. Digix made an announcement in January that they were developing a hardware wallet to be called Troth.
2016 and beyond: Future Developments on Ethereum Wallets
Ethereum Foundation continues to work on the roadmap for the Ethereum platform. Future releases and third party solutions should see more capabilities added to wallets and application interfaces such as cross platform support, lightweight wallets, exchanges with other crypto-tokens and added ease of use to move ether between different smart contracts.
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