Ethereum is one of the most popular blockchain platforms of 2017. Released in 2015, the Ethereum platform features smart contracts and lightning fast transactions. The token used to run the Ethereum platform is called Ether.
For the purpose of this article, we are going to use Ethereum and Ether interchangeably. Like Bitcoin, Ethereum uses a public and private key system. The public key being similar to an email address and the private key being similar to your password.
The holder of Ethereum is responsible for protecting their private keys.
Mining hardware is incredibly expensive and it is foolish to store mining profits on exploitable software and hardware. It was recently discovered that the Jaxx software wallet stored private keys unencrypted.
Ethereum Hardware Wallet
One of the oldest and most secure ways of securing cryptocurrency is by using paper wallets. The problem with paper wallets, is that a lot can go wrong when creating them. For example, a paper wallet created on a computer connected to the internet is technically a hot wallet.
This is because paper wallets make the private key visible. There is no way to know who may be snooping around your computer while it is connected to the internet.
The better option is to use a hardware wallet. The two most popular Ethereum hardware wallets are the Ledger Nano S and the Trezor.
These wallets function as external USB drives that store your private keys and encrypt them using a mnemonic backup phrase. This makes storing and securing your Ethereum user friendly. Because even if you lose the hardware wallet, you can always restore your Ethereum using the mnemonic backup phrase.
A mnemonic backup phrase is usually a list of easy to remember words that can be stored in multiple locations.
The Ledger Nano S is the easiest to use, of the two, because it features it’s own Chrome app. The downside is that delivery has been slow.
Trezor, the oldest of the two, secures your private keys using the open source website MyEtherWallet. There is a bit of a learning curb connecting MyEtherWallet with Trezor, but the upside is that Trezor is a solid Bitcoin hardware wallet as well. The Ledger Nano S can be configured with MyEtherWallet as well.
Trezor has been around a long time and during the Bitfinex hack, it was joked that it could have been prevented by using a Trezor hardware wallet. No matter which hardware wallet you choose, both are going to be better than storing your coins on an exchange, your computer or your phone.
For more information, see our full article on trezor vs Ledger Nano S
How does one become a holder of Ethereum?
A person can convert fiat to Bitcoin and buy Ethereum with Bitcoin via an exchange. A popular option is a company called Coinbase. Alternatively they can mine Ether themselves with using ethereum mining hardware, or an ethereum cloud mining service.
An upside of building an Ethereum rig is that it can be configured to mine other cryptocurrency as well. If you’ve built your own rig you need to decide whether you want to mine on your own, or collaborate with others as part of an ethereum mining pool.
Using an ethereum mining calculator, one can determine exactly how profitable your mining will be.
A popular method of storing cryptocurrency online is in a software wallet. Check out our full article on finding the best altcoin wallet for more info.