ETH STORAGE ESSENTIALS
- The most basic means of ETH storage is an externally owned account (EOA).
- An EOA is simply a pair of public and private keys.
- The creation of a new EOA requires no fees to be paid.
- Wallets are software, hardware or services that store public and private keys and enable interaction with the blockchain.
- Running a full node, which is software used to validate transactions and relay them to the network, also enables basic wallet features.
- Alternatively, ETH can also be stored at a crypto exchange.
What is Ethereum (ETH)?
First let’s get into what ETH is. Its primary role is to power a wide variety of transactions on the blockchain. It is the native cryptocurrency of Ethereum – one of the world’s most popular open-source, public, blockchain-based computing platforms.
Its scripting functionality, for example, makes it a popular platform for deploying smart contracts, developing decentralized applications and launching ICOs.
However, while fueling transactions on the blockchain network is ETH’s primary role, it is certainly not the only one. ETH also happens to be a highly-traded asset, so much so that it is one of the world’s leading cryptocurrencies by market cap and among the most traded by volume.
Regardless of how you plan on interacting with the Ethereum blockchain – either deploying smart contracts or using DApps – you need to have a certain amount of ETH to compensate for transaction fees. While there are other options for storing your ETH, the minimum requirement is an Ethereum account.
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Accounts and wallets
The most basic approach to storing ETH and tokens is an externally owned account (EOA). In essence, an externally owned account is nothing more than an asymmetric key pair, namely a public key and a private key. It is therefore a similar concept to an address in the Bitcoin protocol. As such, it is the minimum requirement for storing, receiving and sending ETH. In addition to ETH, an account can also be associated with ERC-20 tokens.
Alternatively, ETH can also be stored in a contracts account (also referred to as smart contract). However, while an externally-owned account is controlled by a pair of public and private keys, a contracts account has no private key. Instead, it is associated with code. Once deployed to the blockchain, a smart contract can be called upon anytime to execute the functions for which it was written.
The disambiguation between accounts and so-called wallets is often blurry, which is due to a lack of consensus on defining the term. After all, a combination of a private and public key is enough to obtain an account and start using various functions. Thus, certain service providers advertise ETH accounts as wallets.
Nevertheless, the expression “wallet” usually refers to a software program (though it could also be a hardware device with pre-installed software or a service) that stores asymmetric key pairs and interacts with the blockchain, acting like a portal to enable the owner to send or receive cryptocurrencies, in this case ETH.
Account and wallet creation
There are different ways of creating ETH user accounts. Perhaps the simplest and most secure way of creating an account is by using an online wallet service, which enables the management of, and interaction with, different Ethereum accounts.
When creating an account for most online wallets, you would need to create a password. Since this password is the only way to maintain access to their newly-created user account, it is vital that the user writes down or prints out this password and stores it in a safe location. With wallets like these, there is often no “Forgot your password?” button to bail a user out. Further, a computer breakdown prevents access to the user account, even if the user has not lost their password.
Aside from validating transactions and relaying them through the network, full nodes (software that fully validates transactions and blocks) also have the functionality of lightweight clients, providing basic wallet features. Thus, nodes can transmit their own transactions.
An Ethereum full node can be installed on different operating systems, including Windows, OSX and Linux. Setting up a full node can be done by means of Geth, Parity command-line interfaces, or other tools for installing the Ethereum client on your computer.
Geth will detect your operating system and attempt to install the Ethereum client. To set up a full node, a relatively strong system with the following specifications or better is recommended (at least during the sync process):
- Approximately 140 GB of storage space, preferably an SSD disk, (if using Parity, which enables pruning) to download the full Ethereum blockchain, plus additional space as the blockchain increases with time,
- 12 GB of RAM for the mempool,
- A fast CPU during the syncing process.
As an alternative to privately-owned wallets, you can also keep your ETH at a crypto exchange, which keeps and secures all of their clients’ assets in joint wallets. However, for the vast majority of cryptocurrency exchanges, this is a bad idea.
One of the first things we all should learn when we enter crypto is: “not your keys, not your coins”. If an exchange gets hacked, your crypto is almost always lost too. With crypto exchanges, there are none of the guarantees that apply to savings deposits for fiat money.
Nevertheless, reputable cryptocurrency exchange platforms like Bitstamp take great security precautions to safeguard the funds of their users. If you want to buy, sell or trade ETH, storing at least a portion of your assets at the exchange is necessary.
We keep 95% of all assets in cold storage for safety reasons. We also take every possible precaution to ensure that our platform remains secure and reliable. So you can store your ETH here at Bitstamp without worry.
And did you know you can stake your ETH right here at Bitstamp too? So you can earn passive income by holding your ETH with us today!
These are just some of the reasons why we have maintained our status as the world’s longest standing cryptocurrency exchange.
To start staking and trading your ETH at Bitstamp, all you have to do is register your free account. Let your journey begin!