What is the Safest Way to Store Ethereum?

If you own Ethereum (Ether), you’ve probably wondered whether you’re storing safely. Cybersecurity threats are constantly evolving, so whether you’re an Ethereum newbie or an experienced trader, the security of your Ether should be an ongoing priority. In this article, we’ll explain the six safest ways to store Ethereum and help you balance ease of use with the security of your Ether.

 

What is the safest way to store Ethereum?

 

1. Exchange-hosted wallet 
2. Self-hosted wallet 
3. Software wallet 
4. Paper wallet 
5. Cold storage paper wallet
6. Hardware wallet 

 

We’ll explain each of these options in greater detail to help you find the safest way to store your Ethereum.

  

1. Exchange-hosted wallet 

By far the easiest and most convenient option for storing Ethereum is to use a free Ethereum wallet hosted on a cryptocurrency exchange. Exchanges that offer a wallet service make storage highly convenient. Any purchase of Etheruem that you make will automatically be stored in this wallet.

 

Pros

• Convenient: With no private keys to remember and store, you just need a familiar username and password to access your account. 
• Full buy/sell functions: If you link your bank account to your exchange account, you can buy, trade or even sell Ethereum with ease. 
• Peace of mind: As your Ethereum wallet’s private key is stored by the exchange, you cannot accidentally lose or destroy it. 
• Secure: If you set up two-factor authentication (2FA) using an authentication app like Google Authenticator, your account should remain highly secure. Leading exchanges store a high percentage of their customers’ deposits in secure offline cold-storage wallets. 
• Free insurance: Many exchanges offer complimentary insurance on all crypto assets, although these policies do not cover user error, such as losing your details or suffering from a hack of your personal device or account.   
• Customer service: Top exchanges offer dedicated customer support via phone and email.

 

Cons

• Ownership: You don’t have full ownership of your exchange-hosted Ethereum wallet as the wallet’s private key is stored on the exchange’s servers. 
• Hot wallet:Your exchange-hosted Ethereum wallet is only accessible through a device with an internet connection. As such, it is a ‘hot wallet’ and considered a less safe way to store Ethereum long term. 
• Third Party:You are trusting the exchange’s security to protect your cryptocurrency. Therefore, long term storage of significant amounts of Ethereum in this type of wallet isn’t advisable. 

Overall, exchange-hosted wallets offer good ease of use at the expense of security. This is great if you’re looking to regularly spend or trade small amounts of Ether on a regular basis. But what if you want to store and protect larger amounts of Ether?

 

2. Self-hosted wallet

One of the most popular self-hosted wallets is MetaMask, a browser extension for Ethereum. MetaMask lets you visit the distributed web and run Ethereum dApps (decentralized apps) in your browser without running a full Ethereum node. MetaMask lets you create a lightweight Ethereuem wallet that you fully control.

 

How to get started with Metamask

If you use Google Chrome, you can download the MetaMask Chrome extension from the Chrome Web Store. MetaMask is also available for the Firefox, Opera and Brave browsers. Once installed, MetaMask lets your browser retrieve information from the Ethereum blockchain. It also lets you manage your identities and sign transactions. 

 

How to set up MetaMask

Once you add the extension to your browser and click on the fox icon, MetaMask will start. Simply enter a password of your choosing to begin. You’ll then be given a ‘seed phrase’ of 12 words. You’ll need to copy down these words and store them in a safe location. You can choose to either write these words down or save them as a file. This seed phrase is the only way to restore any account you create in MetaMask.

 

If you haven’t already bought Ethereum, simply click on the ‘Buy’ tab on your new Ethereum wallet’s interface. If you are in the U.S., you can buy Ether via Coinbase. You can also buy from ShapeShift if you already own other cryptocurrencies such as Bitcoin. 

 

If you already own Ethereum in an exchange-hosted wallet, you may want to transfer it into your MetaMask wallet. Click on the three dots in the top right-hand side to see the options. You can select to copy your address to your computer’s clipboard and then paste it later. Alternatively, you can view your wallet’s address if you wish. Click on ‘View Account on Etherscan.’  This will take you to EtherScan.io, and you can see your wallets address. Go to your exchange-hosted Ethereum wallet and click ‘Send,’ then paste the public key (address) of your new MetaMask wallet. 

 

What are the pros and cons of using MetaMask?

 

Pros

• Full ownership: MetaMask is completely owned and controlled by you. 
• Secure: Your account vault is encrypted within your browser. This means that your details are never held by MetaMask. However, with your seed phrase, you can restore your vault at any time, even on a different machine. 
• Customer service: MetaMask offers dedicated customer service support. 

Cons

• Hot Wallet: As MetaMask is stored online, it is a hot wallet and therefore considered a less safe way of storing Ethereum. However, your password and seed phrase are both fully encrypted, minimizing the security risk. 
• No 2FA: MetaMask doesn’t offer two-factor authentication (2FA) or Multi-Signature options, although all details are fully encrypted.   

MetaMask is a highly secure way of storing Ethereum and sending it to other addresses. While MetaMask offers ease of use and solid user-side encryption, as with any hot wallet, storing large amounts of Etheruem isn’t recommended.

 

3. Software wallet

A popular alternative to self-hosted wallets such as Metamask is to use a software wallet such as Atomic Wallet. Various software wallets are available for all the main operating systems and mobile systems, however, Atomic Wallet offers a good selection of choices including Windows, MacOS, Ubuntu, Debian, Fedora, Android, and iOS.

 

Atomic Wallet lets you store Ethereum and over 300 other coins and tokens on your computer or device. As with all software wallets, Atomic Wallet is fully owned and controlled by you. This gives you responsibility for your own private key but also carries the risk that should this information be lost or compromised, your Ethereum will be irrecoverable.

 

Pros

• Convenience: Store Ethereum and more than 300 coins and tokens, including Bitcoin. 
• Security: Private keys are generated from a mnemonic seed and stored on your device. 
• Speed: The custom token feature lets you add any Ethereum-based token in seconds. 
• Atomic swap exchange: This feature can help you save on fees, compared with other wallets. 
• Instant exchange: Atomic Wallet is compatible with Shapeshift and Changelly making instant exchanges possible.

 

Cons

• Security: You must safeguard your private keys by saving them on an offline device or encrypted hard drive or flash drive. 
• Device security: As software wallets are stored on a computer or mobile device, their security is dependent on your overall security precautions.

 

4. Paper wallet

Paper wallets are a highly secure way of storing Ethereum over the long term. To generate a paper wallet for free, simply head to generatepaperwallet.com and move your mouse to generate a random pattern. In a few moments, the private key and receiving address for a new Ethereum wallet will be created, along with QR codes for each. You can print this out and store this safely in a secure location such as a fire-proof safe or bank security deposit box.

Alternatively, you can copy these details to a secure device such as an encrypted hard drive or USB flash drive.  

 

Pros

• Ownership: Paper wallets give you complete ownership of your Ethereum. 
• Security: As the private key is stored on an offline device, the security risk is much lower. 

Cons

• Security: With paper wallets, is entirely your own responsibility to protect your private key and guard against theft, loss, or accidental destruction. There is no way to recover your Ether if you lose your details.    

5. Cold storage paper wallet

In cryptocurrency parlance, a ‘hot wallet’ is any cryptocurrency wallet that is connected to the internet while a ‘cold wallet’ is stored offline or on a device that is never connected to the internet. Paper wallets are only considered to be ‘cold wallets’ if they are created offline.

 

One of the best options for creating a cold storage Ethereum paper wallet is to use MyEtherWallet (MEW), a free, open-source interface that lets you interact with the Ethereum blockchain and generate Ethereum wallets.

 

How to create a cold storage paper wallet on MyEtherWallet (MEW)

You can run MEW offline on your local computer and generate a wallet here to create a cold storage paper wallet. Click on ‘Create a New Wallet’ and click on ‘By Mnemonic Phrase’. This will generate a 12-word password or random words (you can adjust this to 24 words if you’d like). You can write these words down, or click on the printer icon to print them out. There is also the option of adding a password if you wish. 

 

Click on the confirmation tab and enter the missing words from your Mnemonic Phrase. Click verify and then you can choose how to access your wallet, either via MEWConnect, MetaMask, a hardware wallet, or by using software. This method gives you a way of creating a cold storage paper wallet for Ethereum that is kept completely offline.  

 

6. Hardware wallet 

Hardware wallets are small physical devices that store your private keys offline. They connect to a computer or laptop via the USB port and are a form of cold storage as your transactions are signed offline, even though the device is connected to the internet.

 

Popular manufacturers include Trezor, Ledger, and KeepKey, among others, and their products help protect your Ethereum wallet’s private keys. They do this by storing your keys on a PIN-protected chip and signing your transactions offline within an isolated environment.

 

Hardware wallets work in conjunction with the other types of wallets mentioned earlier, besides many more.

Some popular options include: 

• MetaMask, 
• Atomic Wallet 
• MyEtherWallet 
• MyCrypto 
• EtherDelta 
• Mycelium on Android 

Connecting an Ethereum wallet to your hardware wallet and following the set-up instructions will create a secure way to store Ethereum without revealing your wallet’s private key. Each time you connect your hardware wallet to a computer, you’ll need to enter your 4-digit PIN via the device’s embedded touch screen. This lets you check and secure your payments without revealing your personal data.

 

Using a hardware wallet is the best overall method for securing your Ethereum. It gives you the convenience of a hot wallet with the security of cold storage.

 

Conclusion

If you’re looking for the safest way to store Ethereum, you need to constantly keep your guard up. New cybersecurity threats are constantly emerging, and it pays to be vigilant. Don’t be another statistic; take action today to shore up your Ether.