Note that certain hardware wallets may be used in combination with wallets from the next 2 categories. As most HWs only cost about $100, theyвЂ™re well worth the investment for those who wish to store significant value in crypto. Hardware wallets (HWs) provide excellent security for even the most inexperienced of users. Hardware Wallets:В these are small, pluggable electronic devices designed for the random generation and secure storage and use of private keys.There are 3 main types of wallet available: Often these tokens represent an investment into a project, such as an ICO. ERC-20 tokens are вЂњcoinsвЂќ which also operate on EthereumвЂ™s blockchain but are distinct in value and purpose from ETH. Additionally, wallets scan the blockchain for any changes to the status of your Ethereum addresses, so that your balance always stays current with incoming and outgoing transaction.Д®thereum wallets are also capable of managing smart contracts and, by extension, ERC-20 tokens too. The wallet will also sum the value of all your addresses, to reflect a balance. The main purpose of the wallet is to randomly generate and securely store your private key(s). Only the possessor of the key can open its associated box to reallocate funds to a different box. Think of the private key like the physical key to a safety deposit box (representing an address) in a bank vault (representing the blockchain). It would be more apt to call the wallet a вЂњkeychain.вЂќ What crypto wallets really store is a private key, a long, randomly-generated cryptographic code, which is the only way to authorize the spending of ETH from one address to another.

As with all cryptos, Ethers (ETH) arenвЂ™t actually stored inside your wallet, like physical coins in a wallet or digital files in a folder. The word вЂњwalletвЂќ is a little misleading in the context of crypto, as it leads one to believe that the crypto coins are held by the wallet itself.

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