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Guide to Setting Up an Ethereum Wallet in 2021

By Brian Nibley · October 29, 2021 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Guide to Setting Up an Ethereum Wallet in 2021

Anyone with basic computer knowledge can learn how to set up an Ethereum wallet. Doing so will be necessary to interact with the Ethereum ecosystem or send/receive ETH transactions.

There are many different types of Ethereum wallets, and different developers or manufacturers for each type. Setting up an Ethereum wallet is one small part of the answer to the question “what is Ethereum and how it works.”

What Is an Ethereum Wallet?

An Ethereum wallet is a collection of addresses that can be used to send and receive Ether (ETH), the native token of the Ethereum network.

Ethereum wallets, like all crypto wallets, fall into two broad categories: hot wallets and cold wallets. The term “hot” refers to the fact that the private keys to a wallet are held online at all times, making them potentially vulnerable. The term “cold” means that keys are held offline where they are safe from hackers or thieves — in either hardware wallets and paper wallets.

From a user perspective, the main difference between a hot and cold wallet is that hot wallets are more readily available for sending transactions.

What Is an Ethereum Account?

An Ethereum account holds a balance of ETH and can broadcast transactions over the Ethereum network. These accounts can be user-controlled (like wallets) or function as automated smart contracts.

There are two types of Ethereum accounts:

1.    Those that are externally owned and controlled by whoever holds the private keys

2.    Smart contract accounts that are deployed to the network and controlled by code

Both accounts can send and receive ETH and interact with smart contracts.

Recommended: How to Buy Ethereum

What Is an Ethereum Address?

There are two types of Ethereum addresses: externally-owned addresses and contract addresses.

An externally-owned address is an account consisting of a public and private key pair that holds user funds.

An Ethereum address is a 42 character hexadecimal string derived from the last 20 bytes of the public key of the account. 0x is appended in front of this string of characters.

For example:

0x8ba1f109551bd432803012645ac136ddd64dba72

Types of Ethereum Wallets

There are many different kinds of Ethereum wallets, each of which falls under the category of software wallet or hardware wallet.

This chart outlines the pros and cons of different types of Ethereum wallets. Below, we’ll dive into the details of each.

Web wallets

Desktop wallets

Mobile wallets

Hardware wallets

Paper wallets

Pros Easy to set up and use Easy to use Convenient for transacting on mobile devices High degree of security, relatively easy to use High degree of security
Cons Very insecure More secure than web wallets but still vulnerable Not suitable for storing large amounts of crypto Can be expensive, typically around $100 Vulnerable to fire or water damage, user error could result in total loss of funds

Software ETH Wallet

Hot wallets are by definition software wallets. There are several different types of software wallets.

Web Wallet

Web-based wallets might be the least secure of all wallets. The keys to these crypto wallets are either held in your browser itself (in the case of non-hosted wallets) or on the servers of a crypto exchange (in the case of hosted wallets).

Some popular non-hosted Ethereum web wallets include MetaMask and MyEtherWallet. Some popular hosted wallets include those provided by crypto exchanges like Binance or Kraken.

Desktop Wallet

Desktop wallets involve simple desktop programs that allow users to send and receive transactions.

Desktop wallets are a type of hot wallet hosted on a desktop or laptop computer. A desktop wallet comes with a simple user interface that enables the sending, receiving, and storing of ETH.

Mobile Wallet

Mobile wallets are stored on mobile devices like smartphones. They can be among the easiest crypto wallets to use.

A useful feature of some mobile wallets is that they allow you to import a private key balance by scanning a QR code. If you have funds stored on a paper wallet, for example, you might be able to “sweep” the balance into a mobile wallet by scanning the QR code associated with the private key of the paper wallet.

Hardware ETH Wallet

Of all the different types of ETH wallets, many crypto wallet users find that hardware wallets provide the best mix of security and usability.

A hardware wallet can store private keys offline in cold storage and quickly be brought back online to make transactions. Most popular hardware wallets support Ethereum as well as multiple ERC-20 tokens that run atop the Ethereum network.

Paper ETH Wallet

Paper wallets are a somewhat outmoded method of wallet creation. Before hardware wallets were created, allowing users to take possession of their private keys in a secure fashion, paper wallets were one of the only ways to put crypto into cold storage.

A paper wallet simply involves printing out the private and public keys to a new wallet on a piece of paper. Users can still use paper wallets, but doing so exposes them to greater risk of user error than most other methods of crypto storage.

5 Steps to Create an Ethereum Wallet

How to set up an Ethereum wallet will differ depending on the type of wallet and the manufacturer or software developer who designed the wallet.

Here we’ll cover the steps to creating an online Ethereum wallet with MetaMask. MetaMask is a popular web-based wallet and can be convenient for some online applications that require ETH transactions, like games, DeFi, or NFTs. This kind of wallet can be great for transactions but is not well-suited to holding large amounts of crypto or long-term storage.

MetaMask can be used on both desktop and mobile devices. Here we’ll cover how to install Metamask on a desktop browser.

1.    Install MetaMask. It’s widely recommended to do so on Google Chrome, as problems are less likely to result than with other browsers. In Chrome, visit the URL metamask.io. Click the “Install MetaMask for Chrome” button and add the extension to your browser.

2.    Create a wallet. Once the extension has been installed, an image of a fox should appear above a button that says “get started.” Click the button. It will ask if you’re new to MetaMask. Select “create a wallet.”

   After creating a wallet, MetaMask will ask you to share your information to improve the service. You can choose to either agree or not. Either way, you can still use the wallet.

3.    Create a password. The next step the software will take you to is password creation. Passwords should be long, unique, and contain a mix of letters, numbers, and special characters. Create a password, agree to the terms of use, and select Create.

4.    Write down your seed phrase. Now MetaMask will reveal your 12-word backup seed phrase, or the Secret Backup Phrase, as they call it. This will serve as a backup to your keys in case you forget your password. Write this phrase on paper and keep it somewhere safe.

5.    Add Ether to your wallet. ETH can be bought on exchanges like those offered by Kraken, Coinbase, or SoFi, then transferred to your own wallet.

Tips for Keeping Your Ethereum Wallet Safe

Keeping your wallet safe depends on the type of wallet you have. Here are a few quick tips for different types of wallets.

•   Web and desktop wallets: Make sure to back up your wallet regularly. If something were to happen to your browser or hard drive, the private keys could be lost, resulting in total loss of funds.

•   Mobile wallets: Backups are also important. Don’t use a mobile wallet on a wireless network you don’t know and trust. There have been cases of people having their wallet hacked while on public Wi-Fi networks like those found in coffee shops and airports.

•   Hardware wallets: Your funds will already be secure — it’s more a matter of keeping the physical wallet and backup seed phrase in a secure location. Don’t store the seed phrase on any computer and don’t share it with anyone.

•   Paper wallets: The wallet needs to be in a secure location and protected from water or fire damage. Consider laminating the wallet and keeping it inside a fire-proof lockbox.

The Takeaway

When setting up an Ethereum wallet, the correct wallet type will depend on what you intend to use your ETH for. There are different types of hot and cold wallets, each of which offers different benefits and drawbacks.

Curious about how to buy Ethereum and other crypto? When you use the secure crypto exchange at SoFi Invest®, you don’t need to figure out how to set up an Ethereum wallet. We handle the details so you can focus on trading crypto like Ethereum, Bitcoin, Litecoin, Cardano, Dogecoin, Solana, Enjin Coin, and more.

Find out how to get started with SoFi Invest.

Photo credit: iStock/tsingha25


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