An Introduction to the Different Types of Ethereum Wallets

Editor's note: This article comes from Ethereum enthusiasts (ID: ethfans), author:Eric Conner, translation: A Jian, reproduced by Odaily with authorization.

This article wants to categorize the ways we store and manage Ethereum assets.

What is an Ethereum wallet?

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- This article shows the difference between these two accounts with vivid pictures -

While the diagrams above illustrate the underlying technical principles, they are only the basis for combining into different money management methods. According to the use of these two types of accounts, wallets can be divided into the following categories:

• Software EOA Wallet
  

• Hardware EOA Wallet
  

• Single Signature Smart Contract Wallet
  

• Multi-signature smart contract wallet
  

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Software EOA Wallet

To date, the vast majority of accounts created on the Ethereum network are accounts with external owners. EOAs are generated for free, and after generation, users can get a public key (a string of characters starting with "0x") to receive funds. The user will also get a private key, which is usually presented in the form of 12 sequential words (the so-called "mnemonic") to ensure that the user can migrate and restore the account.

Users must ensure that they have backed up the mnemonic, and that the mnemonic is not known to others, because the mnemonic means complete control of the account, and they can restore control of the account after backing it up, while others have mastered it. You also have full control over the funds in the account.

(Translator's Note: The process of sending a transaction by a user is actually a process of signing the transaction data with the private key, but in order to protect the user from the risk of exposing them by frequently entering the private key and mnemonic, the software usually saves the private key It is an encrypted file that requires the user to enter the password "password" when signing is required. This is the "password" that users often use when using the wallet on a daily basis. It is not a private key itself, but a barrier for the private key. It must be used with The combination of specific encrypted files is the private key. Users should avoid confusion when backing up the private key)

Most wallets that manage EOA support users to create and manage any number of accounts.

Pros: easy to generate

Disadvantages: Mnemonics must be kept, and the function is limited

Examples: MetaMask, MyCrypto

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Hardware EOA Wallet

Hardware wallets may only be used to generate external owner accounts, and their private keys are never exposed to the Internet environment. When a user generates an account on a hardware wallet, the key is generated within the secure enclave. When the user wants to initiate a transaction, he completes the signature on the hardware wallet device, and then broadcasts the transaction to the network. This process will not expose the private key. While hardware wallets are an excellent solution for storing funds offline, they are not as portable or easy to use as browser extension wallets like MetaMask.

Advantages: easy to generate, better security

Cons: Same as EOA software wallets, but harder to access

Examples: Ledger, Trezor

Single Signature Smart Contract Wallet (Singlesig)

EOA is by far the most popular form of wallet, but smart contract wallets are showing momentum. The contract wallet is similar to EOA in that the user will also have a public key and a private key, but the smart contract wallet itself is controlled by code, and it can provide many advanced functions that EOA cannot provide, such as using tokens other than ETH To pay transaction fees (Gas fees), social recovery account function, and so on. A single-signature only contract wallet means that it has only one owner (EOA), and only the signature of the account can trigger its transaction function.

Advantages: better handling fee experience, more advanced account recovery function, two-factor authentication

Disadvantages: There are potential code risks, and the handling fee may be more expensive than EOA

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Multi-signature smart contract wallet (Multisig)

A multi-signature wallet is also a smart contract wallet, so it can provide the same functions as the single-signature smart contract wallet mentioned above, except that it requires the signature of multiple accounts in the reserved account to authorize the transaction (in N M signatures in the reserved account are enough to authorize the transaction).

Assuming your company has 3 shareholders, then you can design the smart contract wallet so that the signatures of all 3 accounts can be used to issue a transaction. This ensures that no one can steal all the money without permission.

The account reserved by the multi-signature wallet can be either an EOA or a smart contract account. So a person can also control a multi-signature smart contract wallet with multiple EOA or single-signature smart contract wallets.

Just think of Multisig as a smart contract wallet that provides additional security measures.

Advantages: Like a single-signature smart contract wallet, it comes with more security and team management functions

Cons: Same as a single-signature smart contract wallet

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Managed Wallet

Custom wallets are also a subset of EOA wallets, a bit like hardware wallets, except that custom wallets require you to trust a third party to manage your funds and keys. Although this is a bit contrary to the concept of "no private key, it is not your coin", it also has some advantages for large companies or coin holders. One of the biggest benefits is insurance against lost coins.

Pros: Like all EOA wallets, there is insurance

Cons: Same as all EOA wallets, plus no full control over your own funds

Example: Coinbase Custody