Chapter 4: Ethereum Wallets
Wallets are user-friendly interfaces that connect to blockchain networks. Wallets manage your private keys, which are the keys to your cryptocurrency vault. Wallets allow you to receive, store, and send cryptocurrencies.
Custodial vs Non-Custodial
There are two types of wallets: custodial and non-custodial. A custodial wallet refers to a wallet where a third party controls the cryptocurrency on behalf of the user. A non-custodial wallet means the user has complete control and ownership of their cryptocurrency, adhering to the belief held by many in the blockchain industry that you should "be your own bank."
Using a custodial wallet means you trust an external entity to securely hold your cryptocurrency. This can be convenient, as you don't have to worry about the security of your private keys, but only about the security of your account credentials, much like protecting your email. However, trusting a third party to hold your cryptocurrency exposes you to the risk of losing your cryptocurrency due to mismanagement or hacking by the custodian. Instances of custodial wallets losing users' cryptocurrencies are not uncommon, with the most famous example being Mt. Gox, which lost 850,000 bitcoins worth over $450 million in 2014.
With a non-custodial wallet, you do not trust any external entity, but only yourself to ensure the security of your cryptocurrency. However, using a non-custodial wallet shifts the burden of asset security onto you; you must be capable of securely storing your private keys. If you lose your private keys, you also lose your cryptocurrency.
At CoinGecko, we believe in the principle that "not controlling your private keys means not owning your cryptocurrency." We think you should learn all the best security practices and trust that only you can ensure the safety of your cryptocurrency.
Which wallet should I use?
There are many cryptocurrency wallets available on the market. For the purposes of this book, we will introduce two DeFi-friendly wallets to help you easily start interacting with the Ethereum network.
Mobile Users: Argent
Mobile users might consider using the Argent wallet. Argent is a non-custodial wallet that offers ease of use and high security, which are typically hard to achieve together. Argent accomplishes this through Argent Guardians. Argent Guardians refer to verifiable people, devices, or third-party services that can verify your identity.
Examples of Argent Guardians include family and friends who are also Argent users, other hardware/Metamask wallets, or two-factor authentication services. By leveraging a small circle within this trust network, Argent has rethought the necessity of having a paper backup of recovery phrases when recovering accounts.
If you believe your wallet has been compromised, Argent Guardians allow you to lock your wallet and immediately freeze all funds. Your wallet will automatically unlock after 5 days, or you can request an early unlock from Argent Guardians.
You can also set additional security measures to enhance the security of your wallet, such as daily transaction limits. This helps prevent hackers from stealing funds from your Argent wallet if they gain access. When your daily transaction limit is reached, you will receive a notification, and any transactions exceeding the limit will be delayed for over 24 hours. Of course, you can authorize legitimate large transactions that exceed the limit with the help of Argent Guardians.
The Argent wallet provides users with free transactions and covers all Ethereum gas fees that need to be paid to the network. With the Argent wallet, you can easily interact with DeFi Dapps directly within the wallet without needing other applications or devices.
Tip
Currently, using the Argent wallet requires a waitlist. If you want to jump the queue, you can register using this link (non-sponsored): https://argent.link/coingecko
Argent: Step-by-Step Guide
Step 1
- Go to https://argent.link/coingecko
- Download the app to your phone
Step 2
- After downloading, choose a unique Ethereum domain name for your Argent wallet
Step 3
- Argent will ask if you want to add your phone number for increased security and verification.
Step 4
- Next, Argent will ask for your email for verification.
Step 5
- You will enter a waitlist. If you want to jump the queue, you can register using this link https://argent.link/coingecko
- Once your wallet is ready, you will receive an email notification.
Step 6
- You can start depositing or sending cryptocurrency to others. Consider adding additional Argent Guardians to enhance the security of your wallet.
Desktop Users: Metamask
Desktop users might consider using Metamask, a web browser extension available for Chrome, Firefox, Opera, and Brave browsers. Similar to Argent, Metamask is a non-custodial wallet that also serves as a bridge for interacting with the Ethereum network.
You can store your Ether and ERC20 tokens in Metamask. As a bridge, Metamask allows you to use all decentralized applications (Dapps) on the Ethereum network.
Without using an interaction bridge like Metamask, browsers cannot access the Ethereum network unless you run a full Ethereum node and download the entire Ethereum blockchain, which is over 400GB. Technically, MetaMask achieves this by injecting a JavaScript library called web3.js, developed by Ethereum core developers, into your browser page, allowing you to easily interact with the Ethereum network.
Metamask makes it very convenient to interact with DeFi Dapps on the Ethereum network from your laptop or PC. Since it requires users to sign for every interaction and transaction executed on the network, it is secure to some extent.
However, you must take measures to ensure the security of Metamask. Anyone with your password or recovery phrase (a secret phrase given to you when you register your wallet) will have complete control over your wallet.
Most DeFi Dapps can be accessed using Metamask. In the following chapters, we will provide a step-by-step guide on using Metamask.
Metamask: Step-by-Step Guide
Step 1
- Go to https://metamask.io/
- Download the extension for your browser
Step 2
- After downloading the extension, click "Get Started"
Step 3
- Click "Create a Wallet" and then click "Next"
Step 4
- Create a password
Step 5 (Important! Please read carefully!)
- You will receive a set of backup recovery phrases;
- Do not lose it;
- Do not show it to anyone;
- If you lose the recovery phrase, you cannot recover it;
- If someone else has it, they can access your wallet and do anything.
Step 6
- You will be prompted to fill in the given backup recovery phrases to confirm that you have recorded them
Step 7
- Congratulations! Your wallet has been created! You can use it to store Ether and ERC20 tokens.
Step 8
- Here is your wallet's public key or Ethereum address
- If someone wants to send you tokens, they can scan your QR code
Recommended Reading
- Argent: The quick start guide (Matthew Wright)
https://medium.com/argenthqargent-the-quick-start-guide-13541ce2b1fb
- A new era for crypto security (Itamar Lesuisse)
https://medium.com/argenthq/a-new-era-for-crypto-security-57909a095ae3
- A Complete Beginner's Guide to Using MetaMask (Ian Lee)
https://www.coingecko.com/buzz/complete-beginners-guide-to-metamask
- MyCrypto's Security Guide For Dummies And Smart People Too (Taylor Monahan) https://medium.com/mycrypto/mycryptos-security-guide-for-dummies-and-smart-people-too-ab178299c82e
