How does a wallet work?
– this information was taken from www.myetherwallet.com because it’s very useful. In exchange, go ahead and use them (but beware, it’s a wallet for technically minded folk).
Comparison with a bank – a wallet is not a bank account:
- When you open an account with a bank or exchange, they create an account for you in their system.
- The bank keeps track of your personal information, account passwords, balances, transactions and ultimately your money.
- The bank charge fees to manage your account and provide services, like refunding transactions when your card gets stolen.
- The bank allows you to write a check or charge your debit card to send money, go online to check your balance, reset your password, and get a new debit card if you lose it.
- You have an account with the bank or exchange and they decide how much money you can send, where you can send it, and how long to hold on a suspicious deposit. All for a fee.
- a wallet can do some of it for you (some give you a nice user interface and backups, others don’t) – that’s why they are free or charge small fees for exchanging cryptocurrencies
- FOR EXAMPLE: myetherwallet.com is AN INTERFACE, not a bank:
- When you create an account on MyEtherWallet you are generating a cryptographic set of numbers: your private key and your public key (address).
- The handling of your keys happens entirely on your computer, inside your browser.
- We never transmit, receive or store your private key, password, or other account information.
- We do not charge a transaction fee.
- You are simply using their interface to interact directly with the blockchain.
- If you send your public key (address) to someone, they can send you ETH or tokens. ??
- If you send your private key to someone, they now have full control of your account. ??
- They CAN NOT:
- Access your account or send your funds for you.
- Recover or change your private key.
- Recover or reset your password.
- Reverse, cancel, or refund transactions.
- Freeze accounts.
You and only you are responsible for your security.
- Be diligent to keep your private key and password safe. Your private key is sometimes called your mnemonic phrase, keystore file, UTC file, JSON file, wallet file.
- If lose your private key or password, no one can recover it.
- If you enter your private key on a phishing website, you will have all your funds taken.
If MyEtherWallet can’t do those things, what’s the point?
- Because that is the point of decentralization and the blockchain – not to rely on a company, but you control it yourself
- You don’t have to rely on your bank, government, or anyone else when you want to move your funds.
- You don’t have to rely on the security of an exchange or bank to keep your funds safe.
- If you don’t find these things valuable, ask yourself why you think the blockchain and cryptocurrencies are valuable. ??
- If you don’t like the sound of this, consider using Coinbase or Blockchain.info. They have more familiar accounts with usernames & passwords.
- If you are scared but want to use MEW, get a hardware wallet! These keep your keys secure.
How To Protect Yourself from Phishers
Phishers send you a message with a link to a website that looks just like MyEtherWallet, EtherDelta, Paypal, or your bank, but is not the real website. They steal your information and then steal your money.
- Use the EAL or MetaMask Chrome Extension to block malicious websites.
- Always check the URL:
- Always make sure the URL bar has
MYETHERWALLET LLC [US]in green.
- Do not trust messages or links sent to you randomly via email, Slack, Reddit, Twitter, etc.
- Always navigate directly to a site before you enter information. Do not enter information after clicking a link from a message or email.
- Install an AdBlocker and do not click ads on your search engine (e.g. Google).
How To Protect Yourself from Scams
People will try to get you to give them money in return for nothing.
- If it is too good to be true, it probably is.
- Research before sending money to someone or some project. Look for information on a variety of websites and forums. Be wary.
- Ask questions when you don’t understand something or it doesn’t seem right.
- Don’t let fear, FUD, or FOMO (fear of missing out) win over common sense. If something is very urgent, ask yourself “why?”. It may be to create FOMO or prevent you from doing research.
How To Protect Yourself from Loss
If you lose your private key or password, it is gone forever. Don’t lose it.
- Make a backup of your private key and password. Do NOT just store it on your computer. Print it out on a piece of paper or save it to a USB drive.
- Store this paper or USB drive in a different physical location. A backup is not useful if it is destroyed by a fire or flood along with your laptop.
- Do not store your private key in Dropbox, Google Drive, or other cloud storage. If that account is compromised, your funds will be stolen.
- If you have more than 1-week’s worth of pay worth of cryptocurrency, get a hardware wallet. No excuses. It’s worth it. I promise.