In our first installment, we talked about what Ether is, how you get it, and some of the risks that come with storing it on an exchange. In this article, we are going to focus on secure ways to store your Ether. Wallets can be kept either online or offline. We will look at a few ways to use them.
Practice Safe Transactions
Ether addresses are not the easiest things to remember, and there are still some differences between account addresses and wallet addresses, especially in Mist. When you are making a transaction, it is important to double and triple check the address you are sending it to. Even if you doing a Copy and Paste of the address, make sure you got the whole address. Once a transaction is sent, there is no going back.
When you have a larger transaction to make, or sending value to an address for the first time, its a good idea to send a very small amount to confirm the amount goes through. Once you are sure the amount has successfully transacted, then you can reconfirm all the addresses are still good and send a larger value.
As we mentioned in part 1, there is no insurance on the accounts, and there is no oversight of your transactions. If something didn’t go through correctly, there is very little recourse to get your funds back. Remember, storing your value is your responsibility, but using it correctly is also your responsibility.
How to store the keys?
There are a number of wallets available to store your ether. Wallets typically give you full control over all the public and private keys which make for a much more secure method of storing value. The official Ethereum wallet, Mist, is one of the best ways to store your valuable Ether. Available for download from the Ethereum github page, Mist is available for Window, Mac and Linux.
We have written quite a bit about the Jaxx wallet recently. While it is still in beta right now, it shows a lot of promise to be one of the de facto choices for wallets. It is available across platforms on mobile and desktop and can be synced across all the instances you have running. As of the time of writing, they still suggest only using small amounts that you are willing to lose while it is still in beta, but this wallet shows some of the best potential for Ether storage while on the go.
Peerther is a mobile app for Android that we have previously reviewed on our site. It provides a very simple to use interface for your mobile Android device to send and receive Ether. It does not involve any sign in or account set up, so it is important to keep a record of your public and private key offline in the event something happens to your phone. There is an iOS version in the works and should be ready soon. Peerther is one of the early adopters of mobile Ethereum wallets, and is available in the Google Play store right now.
One of the safest ways to store any cryptocurrency is in what is referred to as “cold storage.” This method is when a wallet is created without any connection to the Internet. A great example of this is creating a paper wallet, where a print out shows both the public and private keys. As these codes are not found online, they can be kept in a physical safe or other secure storage and moved back online when needed.
A very useful tool for creating paper wallets is MyEtherWallet.com as it lets you generate a public and private Ethereum key that you can print out and store offline. It is all client-side software, so nothing is ever stored on the servers at myetherwallet.com. All the addresses are generated and stored locally. The website can be loaded up and then the computer can be taken offline so you can generate the addresses.
You can create a single address or bulk generate many addresses based on the same password entered. Not only does it generate copies of the keys, it also generates files that can be imported into an Ethereum wallet and stored on a secured drive.
Like Jaxx, MyEtherWallet.com has a Chrome extension, which is in beta, that makes storing, spending, and collecting Ether value much easier. A chrome extension keeps all the keys stored on the local client instead of being stored in the cloud.
Paper wallets are one way to secure Ether in cold storage. By keeping them in a safe place, they are protected from malware and intrusion. The best way to create a truly secure address is to create it on an “air gapped” computer. The term air gapped simply means a computer that has no connection to the Internet or any other network. It is a stand alone computer with software installed on it to generate the Ether addresses and maintain the keys.
Sometimes having a dedicated computer offline just for Ether is impractical, but you still want to keep your keys safe and available. A encrypted USB is a good option to keep your keys on and in a safe area. There are a number of hardware encrypted USB drives available from a number of manufacturers including Ironkey, Apricorn, and Kingston. Hardware drives are more secure than software based drives. They have a hardware chip built inside that handles all the encryption and offloads it from the computer its connected through. Hardware encryption does not need software updates and helps protect against various forms of attack.
Hardware wallets are something you will see in the Bitcoin world, but at the moment are not available for Ethereum. There are projects in the works from Jaxx to release a new hardware based wallet for both Ethereum and Bitcoin later this year. There is a project in the works to make a Trezor wallet interact with Ethereum transactions at quorumwallet.com. As Ethereum picks up, we should see an increase in interest for hardware based Ethereum wallets.
Ultimately, the security of your cryptocurrency is yours alone. Your most powerful tool is knowledge. Keep your private keys private, and what ever you do, never forget your passwords!
It is very difficult to prevent all possibility of losing your funds, but the more you know and the more preventative measures you put into place, the better chance you will have of keeping your coins.