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Crypto Security

9 min

Creating and using an Ethereum wallet: how it works

An Ethereum wallet is the key to your interaction with the Ethereum network. It enables you to access your ETH, other tokens and coins, manage your assets and use DApps. In this guide, you'll learn how wallets work, how to create an Ethereum wallet and what to look out for when choosing one. Whether it's an app or hardware – we’ll show you the available options and how to use your wallet securely.

An Ethereum wallet manages the keys that let you securely handle your ETH, tokens and coins on the blockchain and confirm transactions.
Depending on your needs, you can choose between wallet apps, hardware wallets or browser extensions, which vary in security and usability.
Creating a wallet only takes a few steps – what matters is that you know and understand key terms like seed phrase and wallet address.
Your assets remain protected only if you store your keys securely, recognise phishing and use trusted devices.

What is an Ethereum wallet?

An Ethereum wallet is a digital application or device that lets you manage ETH and other tokens and coins based on the Ethereum standard. It doesn't store the assets themselves but the keys that allow access to them. You need a wallet to confirm transactions, create your Ethereum wallet address and interact with applications on the Ethereum blockchain – such as decentralised applications (DApps) or smart contracts. The wallet is therefore the central interface between you and the Ethereum network.

Every Ethereum wallet is based on a key pair: the public and the private key. The public key generates the Ethereum wallet address, through which you can receive ETH and tokens and coins. The private key, on the other hand, is strictly confidential and is used to confirm transactions and secure access to your assets. The combination of both enables you to communicate clearly with the Ethereum network – without revealing your identity.

How does an Ethereum wallet work?

An Ethereum wallet gives you access to your ETH and other tokens or coins that are stored on the Ethereum blockchain. The wallet itself doesn't store assets but manages the keys that let you access them. All transactions and token balances are on-chain – that is, directly on the blockchain. The wallet simply provides the necessary tool to securely manage these values and carry out transactions.

This is how an Ethereum wallet works in detail:

Key generation: when creating an Ethereum wallet, a key pair is generated, consisting of a public and a private key (private key and public key).
Create address: your Ethereum wallet address is generated from the public key and is used to receive ETH, tokens and coins.
Manage access: the wallet stores your keys locally – in an app, a browser plugin or on a hardware device like a Ledger or a Trezor.
Carry out transactions: to send ETH or interact with DApps, the wallet creates a transaction and confirms it using your private key.
Security and protection: since access to your assets is through the private key, securely handling your wallet is especially important.

How do I create a wallet for Ethereum?

If you want to manage ETH or interact with Ethereum applications, you'll first need a suitable wallet. Setting it up only takes a few steps – provided you understand the key terms. Most important are the private key, which gives you access to your assets, and the wallet address, through which you can receive ETH. Just as crucial is the so-called seed phrase: a backup that lets you restore your wallet at any time. Choosing the right type of wallet is the first step.

Here’s how to create an Ethereum wallet:

Choose wallet type: decide whether you want to use a mobile wallet app, a browser extension or a hardware wallet.
Install or connect wallet: download the wallet onto your device or connect the hardware to your computer to start setup.
Set up wallet: when launched for the first time, the wallet automatically generates a new key pair – that is, a public and a private key.
Secure seed phrase: write down the displayed seed phrase offline and store it securely, as it's your backup in case of loss or device change.
Use Ethereum wallet address: after creating your Ethereum wallet address, you can use it to receive ETH or interact with DApps.

How do I use an Ethereum wallet?

Once your Ethereum wallet is set up, you can use it actively on the Ethereum network. It not only acts as a digital storage space for your ETH and tokens and coins, but also as a tool to confirm transactions and interact with decentralised applications. Depending on the wallet type, this works through an app, a browser or an external device. To use your wallet securely and efficiently, it's worth knowing the key features and terms from the world of crypto.

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Keys, addresses and more – these are the terms you should know

To use your Ethereum wallet securely, you should be familiar with these basic terms:

Public key: the basis of your wallet address and publicly visible, used to receive ETH and tokens and coins
Private key: allows access to your assets and is used to confirm transactions
Ethereum wallet address: a unique string of characters used to receive transactions and identify yourself on the network
Seed phrase: a combination of 12 or 24 words that lets you recover your wallet
Key pair: consists of a public and private key and securely connects your wallet to the blockchain
DApps: decentralised applications you can access directly through your wallet, for example for staking or decentralised trading

Types of Ethereum wallets

There are different types of Ethereum wallets that vary in usage, security level and use cases. Which wallet is best for you depends on how often you want to use ETH, how much security you need and whether you prefer working on a smartphone, computer or with an external device.

An overview of the most important wallet types:

Software wallets (mobile and desktop): wallet apps for Ethereum or desktop versions score for user-friendliness, are generally free and ideal for daily access, but offer less protection than hardware solutions since keys are stored on an internet-connected device
Hardware wallets: these physical devices store your keys offline and are considered especially secure, but are better suited for users with larger amounts or long-term storage of ETH and other crypto assets
Browser extensions: browser-based wallets are integrated directly into the web browser and are especially convenient for using DApps, but offer lower security than hardware wallets since they operate online
Paper wallets: this method stores the private and public key offline on paper, protecting them from online attacks, but is difficult to use in daily life and more suitable for experienced users focused on long-term storage of coins and tokens

Use cases for Ethereum wallets

An Ethereum wallet can do far more than just store ETH. It's your gateway to a wide range of applications within the Ethereum ecosystem and is used in various areas. Depending on your needs, you can use your wallet for the following purposes:

Store ETH and tokens:

The most fundamental function of a wallet is the secure storage of ETH, coins and ERC tokens. Your assets remain on the blockchain – the wallet merely manages access through your keys.

Manage NFTs:

Wallets let you receive, view and, if necessary, transfer non-fungible tokens (NFTs) – digital collectibles based on Ethereum. Many wallet apps now offer built-in NFT views.

Use DeFi protocols:

Your Ethereum wallet allows you to sign into decentralised financial applications, for example to provide liquidity, take out loans or trade tokens.

Staking via DApps:

If you want to stake ETH or other tokens and coins through a decentralised application (DApp), you'll need a compatible wallet that provides access to the appropriate protocol.

Access Web3 applications:

Wallets also serve as login tools for Web3 apps – applications that run directly on the blockchain. In this way, your wallet replaces traditional accounts and passwords.

Security and Ethereum wallets

An Ethereum wallet gives you full control over your digital assets, but it also makes you responsible for their protection. To securely manage ETH, tokens, coins and key information like your wallet address or private key, you should understand and apply a few basic security measures.

Never share your private key: anyone who knows your private key can access your ETH, tokens and coins without restriction.
Secure your seed phrase offline: write down your seed phrase and store it safely and offline, as it is the only way to restore your wallet.
Avoid phishing: always check the correct web address and never enter your wallet data on unknown or unsafe sites.
Understand anonymity: transactions on the Ethereum network are publicly visible, but not directly linked to your identity.
Use secure devices: only use a wallet on trusted and well-protected devices with up-to-date software.

Conclusion: what to consider when choosing an Ethereum wallet

Finding the right Ethereum wallet mostly depends on your personal needs. Security, user-friendliness and compatibility with your devices and applications play a key role. Think about how you want to use or buy Ethereum and choose a wallet that's suitable both for getting started and for continued use with ETH. Those who understand the key functions and ensure secure storage of their keys are well prepared for entering the world of Ethereum and crypto.

Frequently asked questions about Ethereum wallets

Are Ethereum wallets secure?

Ethereum wallets are considered secure – provided you use a trusted solution and carefully protect your private key and seed phrase. Security largely depends on the wallet type and provider: hardware wallets generally offer more protection than wallet apps alone. Comparing different wallets can also help you find the best Ethereum wallet for your needs. Regardless of the type, how you handle your wallet is crucial – such as recognising phishing and using secure devices. The protection of your ETH, tokens and coins thus depends greatly on how carefully you manage your keys and recovery data.

Which hardware wallet is suitable for Ethereum?

For securely storing Ethereum, hardware wallets are suitable as they store your private keys offline. This way, you protect your ETH and other tokens and coins from unauthorised access.

Modern hardware wallets support a wide range of cryptocurrencies, can connect to various wallet apps and offer features like password protection or recovery options via the seed phrase. Some models are particularly user-friendly, while others stand out for their high security standards. Which wallet is right for you depends on your individual requirements for security, usability and compatibility.

What is the best wallet for Ethereum?

There is no one-size-fits-all answer – the best Ethereum wallet strongly depends on how you want to use ETH. If you interact with DApps regularly or need quick access on the go, a mobile wallet app for Ethereum can be a good fit. For long-term storage or larger holdings, a hardware wallet may offer more security.

What's important is that the wallet matches your needs: look for ease of use, good security features and ensure the wallet is also suitable for buying Ethereum. Comparing different providers can help you find the right solution for your needs.