All DearMEW articles are based on real user questions, edited for privacy, clarity, and flow.

Dear MEW,

Every time I say my coins are in my wallet or on my Trezor or on my account, my crypto-savvy friends jump in to inform me that my coins are not actually there, but rather on the blockchain. What does that mean? Where are my funds, actually?

Lost in Blockchain Semantics

Dear Lost in Blockchain Semantics,

Even as wallet service providers and purveyors of blockchain knowledge, we can relate to your plight all too well. In general, nomenclature in the crypto space can be baffling. We would like to simplify matters by using words from the familiar world of traditional finance, but we are also concerned about communicating misleading or plainly wrong information to users.

For example, we don’t want to say that your funds are in your wallet or in your Trezor, because this implies your funds will be lost if you lose your hardware wallet or your wallet service provider goes out of business. In fact, that’s not the case.

Once you have your seed phrase (or private key), you can use any compatible web, mobile, or hardware wallet to restore access to those funds. In other words, the coins are always and only on the blockchain, and you can manage them by accessing through a variety of interfaces.

Another example: we don’t want to say that your funds are on an account, because that implies similarity to a bank account. However, as we and other non-custodial wallets in the space say over and over, we are NOT a bank.

That means we can’t provide some of the services that banks can, like restoring passwords, freezing transactions, or managing accounts. Because your funds are on the blockchain and subject to the rules of the blockchain, there is nothing a service provider like MEW can do about the fact that all transactions are final and irreversible, or that you need to have ETH for gas on Ethereum.

Ok, so funds are on the blockchain. You always have access to them. That’s good.

But what does that mean? Where are your coins, exactly?

Where are they when you own them, where are they when you give them to someone else, and where are they when you still own them but use an exchange to trade them? And if they are not in a wallet or on an exchange, how do you define their current location?

After centuries of using physical money, from seashells to gold pieces to dollar bills, it’s difficult to grasp that cryptocurrency never moves. Rather, the ownership of tokens is reassigned when they are transferred between addresses.

Think of it as real estate. The property doesn’t move, but a verified document – a smart contract in Ethereum’s case – indicates ownership. When you send this property to someone, what you are actually doing is reassigning ownership.

Why does all this nuance matter, in the end? Because we want to say what we mean and mean what we say in crypto, without giving the wrong expectations, bad or good. With time, better word choices are sure to emerge as developers and users come up with more intuitive ways of describing the blockchain technology.

Finding the way out of semantic fog together,

MEW

One of the most powerful use cases for Ethereum technology is the introduction of Dapps, which are decentralized applications built on smart contract technology that offer services without the need for third parties or centralized servers. Most wallets can interact with any Dapp directly through the use of contracts, but certain wallets are built specifically for easier Dapp functionality.

The ‘Browlet’ or CX Wallet

Currently, the most popular Dapps according to DappRadar are related to gaming and betting (not including DeFi Dapps like MakerDAO). These services are web based and can heavily depend on time-sensitive actions, but relying on these interactions through the direct use of smart contracts does not help facilitate mass adoption. Enter the browlet, a wallet hosted directly in the browser as an extension that can integrate and interact directly with Dapps.

One example of a browlet is MEW CX. This type of browlet hosts the entirety of its original interface, MEW, in a convenient extension right on the toolbar. It also offers extra features, like QuickSend, the ability to save wallets locally, and State of the Dapps integration. You can use it seamlessly with Dapps hosted on websites, like CryptoKitties or MyCryptoHeroes. You can also use a burner account, which is a temporary wallet, if you only want to window shop some Dapps before fully committing. If you’d like to learn more about using MEW CX, check out this guide from the MEW Knowledge Base. Other examples of browser extension wallets include MetaMask and Dapper.

There are other types of browlets that are built right into specific browsers. For example, Brave and Opera offer Web3 wallets built right into their infrastructure. However, native wallets like these can monopolize their audience, making it difficult to use other browlets because of conflicts with permissions. The user is then limited to the functionality of that specific wallet’s features.

The main difference between a browlet and a web-based wallet lies in their security offerings, and where they’re hosted. Web-based wallets will generally offer more options for wallet access, including hardware wallets and different Ethereum-based networks, while browlets are a one-stop access method that’s only tied to the Mainnet and/or Ropsten Ethereum networks. Some browlets, like MetaMask, do offer limited hardware wallet capabilities (currently offering Ledger or Trezor connection), but they still require that their users create a wallet in their system before offering access through other methods.

Browlets are critical for mass adoption, as they offer a convenient and easy way to access real use cases directly without the need for additional knowledge. They are the closest we’ve gotten as a community to providing a sense of user identity through a wallet, without the need for KYC or any actual identifying personal information. They’re also forerunners in the adoption of Web3, which is helping direct the entire internet to a more decentralized, user-centric landscape.

Web3, what’s that?

If we’re going to explore Web3, we should first define the beginnings of the internet –  Web1, which mostly consisted of static web page designs with no advertisements. It’s the internet in its infancy, mostly filled with personal web pages.

The vast majority of internet as we know it is what’s called Web2. All social media sites, websites with logins, podcasts, or any content-focused sites are all Web2. It hosts advertising as well, setting it apart from the previous generation. Web2 relies heavily on data of all types, including user data, traffic data, and advertising data. This data helps specialize the services for the user, but it also helps monetize them. It enables services to keep an eye on what’s popular and personal for all their users, and they often sell that information to third parties.

Web3 is the future of web interaction, where the user is the focus. It’s decentralized, so personal data remains personal. For example, most banks as they exist now hold all of your personal information and finances. They know everything about your spending habits, debt, where you live, how old you are, what you had for breakfast, the list goes on and on. If something doesn’t seem right, they’ll be quick to shut down your ability to use your own money. In a Web3 financial structure, you’re the only one who has access to your finances. No one can throw last minute fines at you or lock you out of your account, you’re the only one in control.

Web3 was largely just a fantasy until blockchain technologies arrived on the scene, making way for true privacy and power over one’s identity when it comes to web interactions. The Ethereum blockchain powers Web3 development, and browlets act as your vehicle to navigate the waters of decentralized finance.  

The last part of our wallet series will look at different types of wallets built on smart contract technology, bringing a new approach to wallet recovery and security.

Ethereum smart contracts are coded contracts written in Solidity, or other compatible languages, that exist in a solely digital form. Their purpose is to perform a specific task without the need of a middleman through the use of the immutable code of the Ethereum blockchain. To read more about what smart contracts are capable of, check out this article here.

Every token that exists on the Ethereum Blockchain is tied to a smart contract, each with their own set of functions they use to perform tasks.

ERC20, which stands for ‘Ethereum Request for Comment’, is just one type of smart contract standard that exists within the Ethereum ecosystem, but it is by far the most recognizable. Understanding the framework of an ERC20 smart contract can help shed light on exactly what’s going on when you send transactions, participate in token sales, or even check your balance.

This is not a guide to learn how to write smart contracts, but instead is an outline for those interested in learning more about what’s going on behind-the-scenes when they interact with their crypto.

ERC20 Smart Contracts

ERC20 Smart Contracts are composed of six mandatory functions and three optional (but more familiar) ones.

These first six functions are:

• balanceOf( )
• totalSupply( )
• transfer( )
• transferFrom( )
• approve( )
• allowance( )

The optional ones determine factors such as the token’s name, symbol, and the number of decimal places it measures.

totalSupply( )

The ‘totalSupply( )’ function pulls the entire circulating supply of the token that contract is tied to. Even though there may be a predetermined maximum set limit for the total supply, this function shows the current total supply in circulation, which may be less than its future total.

Example:
function totalSupply( ) constant returns (uint theTotalSupply);

balanceOf( )

The balance of your token is stored and retrieved through the ‘balanceOf( )’ function. This function requires a public Ethereum address to work properly, or else there is nowhere to pull a balance from.

Example:
function balanceOf(address _owner) constant returns (uint balance);

approve( )

This function is easier to think of as an authentication step for the owner of the contract. It approves the withdrawal of tokens from the owner’s address to the address that is attempting to retrieve tokens, up to a specified amount. This function works hand-in-hand with ‘allowance( )’.

Example:
function approve(address _spender, uint _value) returns (bool success);

transfer( )

This function is one many users are familiar with, as it allows the transfer of tokens from the contract owner’s address to another address.

Example:
function transfer(address _to, uint _value) returns (bool success);

transferFrom( )

If we already have a ‘transfer( )’ function, why do we need a ‘transferFrom( )’?

Well, think of it as an automatic transfer function. ‘transferFrom( )’ allows the smart contract to automatically send tokens from the owner’s address to another address, assuming the person has been approved to withdraw. It’s generally used by the contract itself, not by an actual person.

Example:
function transferFrom(address _from, address _to, uint _value) returns (bool success);

allowance( )

This function checks the amount of tokens that the owner is allowing to be transferred by the smart contract from the owner’s address to another address. This function generally works hand-in-hand with the function ‘approve( )’, as it checks the amount of tokens that have been approved for transfer. Think of the value seen here as a limit cap on token withdrawals, so the supply can be properly managed.

Example:
function allowance(address _owner, address _spender) constant returns (uint remaining);

ERC20 (Optional)

These additional fields are more familiar to those who have added a custom token on MEW before. These details can generally be found pretty easily on an Ethereum blockchain explorer, like Etherscan. They delegate the name, symbol, and amount of decimal places that tokens are read to.

Token Name

This sets the name for the token.

Example:
string public constant name = “My Token Name”;

Token Symbol

This sets the 3 - 4 letter abbreviation for the token.

Example:
string public constant symbol = “MTN”;

Number of Decimals

This sets the decimal place for reading the amount of the token. You can’t write decimal places in Solidity, so the only way to specify how many decimal places you want to go out to is through whole numbers and this decimal function. Decimals are usually set to ‘18’.

Example:
Uint8 public constant decimals = 18;

ERC223 Smart Contracts

After enough time, problems with the ERC20 standard began to pop up. One problem in particular has caused a lot of heartaches and lost funds. If the ‘transfer( )’ function is used to send tokens directly to the main address of a smart contract, they are locked forever within the contract and can never be retrieved.

ERC223 is one out of many proposals to fix this issue, and it’s arguably the most popular. It is built with a newly defined ‘transfer( )’ function that allows tokens to be sent to either a personal address or a smart contract. It also includes a ‘tokenFallback( )’ function that checks the receiving contract for the same function. If the receiving contract does not have a ‘tokenFallback( )’ function, then the transaction will fail and all funds are returned to the address that sent them initially.

This new definition of ‘transfer( )’ eliminates the issue of lost tokens locked in contracts until the end of time, but sadly has no effect on all the previous ERC20 contracts that have already been written. It’s also worth mentioning that sending ERC223 tokens to a contract is a one-step process (rather than the two step approve-transfer process for ERC20 tokens). As such, it requires less gas costs to execute, making it very energy efficient!

ERC721 Smart Contracts

The second most recognizable smart contract on Ethereum is the ERC721 contract, which we’ll go over briefly. ERC721 is famous for allowing the creation of unique tokens called Non-Fungible Tokens (NFTs) that cannot be duplicated. With a unique token, an address can have indisputable ownership of whatever that token represents, such as a house deed, a rare piece of art, or a crypto-collectible.

ERC721 contracts have eight functions and two optional functions, some of which are similar to the ERC20 standard.

They are defined as:

• name( )
• symbol( )
• totalSupply( )
• balanceOf( )
• ownerOf( )
• approve( )
• takeOwnership( )
• transfer( )
• tokenOfOwnerByIndex( ) - optional
• tokenMetadata( ) - optional
  

name( ), symbol( ), totalSupply( ), approve( ), transfer( ), balanceOf( )

These functions are pretty much the same as they are defined in the ERC20 standard above.

For review:

‘name( )’ gets the name of the token

‘symbol( )’ gets the 3 - 4 letter abbreviation

‘totalSupply( )’ pulls the total circulating supply of the token

‘approve( )’ sets permission to transfer a token

‘transfer( )’ sends the token from the owner’s address to another

‘balanceOf( )’ pulls the balance for a specified address

ownerOf( )

This is where ERC721 starts to get different. ‘ownerOf( )’ retrieves the address that owns whichever NFT ID number is searched. Ownership is defined by simply having the token, as each NFT is completely unique and can only exist on one address at a time.

takeOwnership( )

This function is easier to think of as ‘withdraw’, since that’s what it does. If approved in advance with the ‘approve( )’ function, an address holder can use this function to transfer the token from another address that currently holds it.

ERC721 (Optional)

tokenOfOwnerByIndex( )

This function is necessary for anyone who plans to have more than one NFT. It allows NFT IDs to be searched through a list of tokens owned by the user. Since each NFT is unique, they are each listed individually.

tokenMetadata( )

When this function is called, it retrieves any metadata about the NFT that may be included in its code, such as links showing what it’s meant to represent or any other details that may be helpful for identifying its purpose.

As ERC standards evolve over time, it’s important to stay up-to-date with the newest protocols. Make sure you follow us on Twitter, Instagram, and YouTube to stay informed with the latest happenings in the crypto-sphere.

In the oral narrative tradition of many cultures, horror stories (or even fairy tales, in their Grimm, un-Disneyfied form) have always been told to teach lessons, to warn about dangers, and to build tolerance against the brutal, unfair world. The bloodcurdling tales of protagonists who were too foolish or too self-confident to hedge against certain risks served a vital educational purpose in a time when the written word didn’t exist, or was not widely disseminated.

In the West, we associate Halloween with gruesome accounts of wrong turns, dark basements, and the cruel loss of happy innocence. The holiday’s roots, however, are in early Christian and pagan festivals that were less about gory scares, and more about remembering and communicating with the dead. After all, ‘Hallows’ means Saints, rather than vindictive ghosts.

For this year’s Halloween, we decided to combine the two traditional narratives of the holiday, and bring you chilling crypto tales from the beyond that double as valuable lessons for the future. With the help of crypto’s best spiritists, known in wider circles as MEW’s support team, we present to you: communications from funds that are no longer with us…

Death by... Sending to random address

Where are they now?

Depending on the luck of the draw, either appropriated by the surprised recipient for their individual needs, or languishing in a wallet that no one owns or accesses. Of course, you may get lucky, hit a wallet with an exceptionally conscientious owner, and have the funds sent back to you – but the chances of that are vanishingly slim.

Message from the dearly departed:

It takes just one wrong letter or number to send your precious coins into the abyss! Admittedly, it’s hard to keep 42 alpha-numeric characters straight – that’s why you should consider getting an ENS domain name for yourself and advise your friends to do the same. It’s like having an email address for your wallet! Besides, now you can apply these names to non-Ethereum wallets too and make all your crypto transactions safer.

Death by... Sending to a smart contract

Where are they now?

Locked forever in the smart contract, unmoveable, wasting away with no purpose. Even the smart contract owners are not able to access those funds.

Message from the dearly departed:

Double- and triple- check all addresses before sending! Transactions to the blockchain are final and irreversible. If you’re dealing with exchanges or smart contracts, and if you’re unsure about where you should actually send your funds, do extensive research before going through with the transaction.

Death by... Giving away keys to scammers voluntarily

Where are they now?

Depending on the scammer, being HODLed or used to purchase a Lambo. To be fair, your funds could go on to be used for any imaginable purpose, but given how they were obtained, it’s not likely that they are financing access to clean water in an African village.

Message from the dearly departed:

How can we make this clear? NEVER NEVER NEVER give your private key or seed phrase to anyone! Not to your best friend. Not to your boo. Not to ‘support’. Not on Reddit, not on Telegram, or Facebook, or WhatsApp, or anywhere. They don’t need your keys to give you money (like THAT will ever happen anyway). They don’t need your keys to manage your account. They don’t need your keys to help you figure out how to use your wallet. The only reason ANYONE EVER will ask for your keys is to STEAL YOUR CRYPTO.

Death by... Phishing via fake websites and unsafe key storage

Where are they now?

These hackers are inventive and professional. In fact, chances are that you were phished by a bot. Your access information was lifted off your drive or cloud storage, or you gave it yourself on a fake website… Often, phishers set up a series of transactions so that it’s more difficult to follow the money. No one knows where they are now, but you are certainly never getting them back. No, we can’t investigate the phisher. Even the FBI may have a difficult time, and they certainly won’t try for the sake of 1 or even 100 ETH.

Message from the dearly departed:

Here’s the hard truth: in the crypto space, when it comes to the security of funds, a great deal still depends on the user. So, read this and then this. And then read them both over again. Oh, and also this, if you’re STILL using private key, mnemonic phrase, or keystore file for direct online access (DON’T. STOP NOW.)

Death by... Forgotten or lost keys

Where are they now?

Still where you left them, but forever separated by the invisible veil of lost wallet access. Unless someone happens on your wallet by chance (which is nearly impossible given the mathematical realities of the blockchain), they’ll be in your locked wallet for the rest of blockchain existence.

Message from the dearly departed:

Financial freedom, like any freedom, comes at the cost of responsibility. With client-side wallets, ONLY YOU can decide when and where to move your funds, and no one can tell you that you can’t. But also, ONLY YOU have the access to that wallet, and no one can restore or reset your access information. When you created a wallet, you took responsibility for your funds and it was a beautiful thing. Don’t let your coins down again :(

Death by... Investment and market volatility

Where are they now?

Crypto that leaves you under the circumstances of bad investment or a downturn in the market is not technically gone, of course. It’s like the Earth’s water cycle: the funds evaporate from your accounts to rain money into someone else’s when the market is back up.

Message from the dearly departed:

Wherever you get your investment advice, you shouldn’t expect anyone else to take responsibility for your choices. The wisdom is old, but it’s true: never invest more than you can afford to lose, and always, ALWAYS do your research. Whether it’s the team behind an ICO, or the tech behind a particular blockchain, do the searching and the reading. If you do, who knows – you may see your departed funds coming around again (in a good way, not in the Walking Dead way…)

Although on the blockchain, as in life, time can’t be reversed and the dead can’t be brought back, lessons can be learned and passed on to newbies just starting out on their crypto journey. To avoid unnecessary bloodshed, consider reviewing the five most common preventable causes of crypto death.

Our beloved lost funds will never be forgotten, but we can listen to their messages from beyond the grave and assure them that their sacrifice was not in vain!

Here’s to scary stories with happy endings!

Happy Halloween from MEWteam!

Dear MEW,

Is there a difference between using the MEW website and the MEW Chrome Extension, in terms of security? What would be the advantages to using one over the other?

Divided and Undecided

Dear Divided and Undecided,

Here at MEW, we recognize that different users will have different needs, different resources, and different approaches to crypto management. For this reason, we aim to provide various ways of accessing your funds and interacting with the blockchain.

All of MEW’s products, including the Chrome extension (MEW CX) and the smartphone app (MEWconnect), reflect our dedication to give you multiple options for best security practices with a simple, intuitive interface.

That being said, when interacting with a crypto wallet, the safety of funds still depends a great deal on the user and the method of access.

For example, using the MEW website in combination with either a hardware wallet or MEWconnect is one of the most secure methods of wallet access available in the space.

On the other hand, typing in a private key or mnemonic phrase directly in an online environment (in any wallet interface) is the worst choice of access method, as it dramatically increases the chances of phishing and loss of funds.

That’s why software methods like keystore file, mnemonic phrase, and private key are designated as ‘not recommended’ on MEW: using them directly can expose the access information to phishers.

However, if you are using one of the software methods, there may be an advantage to using the MEW CX browser extension. For one, you will not be typing in your access information online every single time you need to use the wallet. In addition, you will not be navigating to a web page every time, so there is less risk of landing on a malicious site.

The CX also has a slightly different utility than the web interface. It's the more convenient choice if you want to interact with Dapps like CryptoKitties in the browser. As more Dapps and Decentralized Finance instruments become available on the web, there will be more and more use cases for the browser wallet, and our updates to the CX will reflect those developments.

To conclude – different MEW products will be best for different uses. For holding larger amounts of funds for longer periods of time, a hardware wallet or the MEWconnect app, used together with the MEW website, is the better option. For daily interaction with Dapps and for sending small transactions, MEW CX could be a convenient alternative.

In all cases, the most important thing to remember is never give your private key or recovery phrase to anyone, never type it directly on a website or in a messenger, and never store it on a cloud service!

Supporting you from all sides,

MEW

Being able to access your finances on the go has revolutionized how we communicate. Some people make their entire living from working online, and their mobile phones are a big part of that system. To move crypto adoption forward, the developer community is tapping into the potential of crypto wallets that are designed specifically for the smartphone. (If you are concerned that mobile apps are not compatible with financial security, take a look at this article – you might be surprised!)

There are so many mobile crypto apps to choose from out there, that it may be difficult to understand how they differ and what specific benefits they offer. Mainly, mobile crypto apps fall into three categories:

1. custodial wallets (centralized)

2. non-custodial wallets (decentralized)

3. other, unique mobile solutions for interacting with the blockchain and Web3

Which app will be right for you depends completely on what your goals are.

Custodial

The most important distinction to understand with all crypto wallets, including mobile ones, is whether they are custodial or non-custodial, centralized or decentralized.

In a custodial (centralized) wallet, servers run by the app hold all your information for you. In these wallets you are more likely to have the same options that are available in a regular banking app, such as resetting your password, getting special deals on your birthday, signing up for an email list, and sometimes recovering stolen funds. These wallets can also be tied to online exchanges, so it’s important to be aware how and where your information is being shared.

A good example of a custodial wallet is the original Coinbase app, which basically serves as the exchange built into your phone. Accounts are synced across their servers, so you can access the same wallet from either web or mobile by simply logging in with your email. This is very convenient, but it’s also a clear sign your information is being collected and stored by a third party. In these cases, there’s barely any difference from having a regular banking app. You are not in control of your funds and information.

By the way, exchanges can also be centralized or decentralized. When custodial wallets are tied to an exchange, it’s most likely a centralized exchange that holds your keys and your funds. Decentralized exchanges don’t hold your funds or manage your keys, so using them in combination with non-custodial wallets allows you to retain full control over your crypto.

Non-custodial

In a non-custodial (decentralized) wallet app, you are in charge of everything. None of your information is stored, so no one can manage your funds but you. This can sound frightening initially, but it’s also liberating in the long run. You will never have to pay surprise fees, deal with support for your password problems, or worry about your information getting leaked through back-end servers... because it doesn’t exist there. Your entire financial identity is yours alone.

This is what is meant by ‘being your own bank’ and ‘not your keys, not your crypto’. From a certain perspective, decentralization is the reason for blockchain’s existence in the first place, and with non-custodial wallets, you are taking advantage of the benefits of decentralized finance. In the big picture, non-custodial wallets are a more secure option because no one else has any control over your money. By putting the power entirely into your hands, though, non-custodial wallets can be challenging to manage. Losing your access information or sharing it with anyone can, and does, lead to the permanent loss of funds.

Unique solutions and the future of Web3

Some mobile crypto apps don’t fall neatly into either of the two wallet categories described above. For sites that support them, Progressive Web Apps (PWAs) can be installed on the smartphone as well as on the desktop (described in Part 1 of the wallet series). These are basically just web wallets accessed from the phone, but their mobile environment may not be the best if it’s not curated for mobile use. Accessing your wallet offline through a PWA can be useful in certain circumstances, but sending a transaction will always require a connection. Whether a PWA is custodial or non-custodial depends on the nature of the web service from which it originates.

Another type of mobile wallet is the hardware-like wallet. For example, take MEWconnect. This is MEW’s smartphone app, but it mainly acts as a secure access point for MEW’s web interface, rather than being a full interface in itself. Like a hardware wallet, it cannot send transactions from the device itself, but provides greater key security than any software solution. It even gives you a 24-word mnemonic phrase for recovery!

To use MEWconnect, you access the wallet on your phone, and then scan a QR code to secure the connection between mobile and browser. This technology is at the forefront of Web3 interactions and facilitates connectivity with real security to back it up. In the future, connections to multiple decentralized applications and even between mobile devices may be mediated via secure QR scans.

Hardware-like wallets are non-custodial by their nature, as they keep your keys secure within the device and give you a phrase for wallet recovery in case the device is lost or broken. When in doubt, remember this: if you’re receiving a 12 or 24 word phrase that you are asked to keep very safe and never give to anyone – you are using a non-custodial solution. If all you get is a password to the app, but no private key or phrase – then it’s a custodial one.

In Part 4, we’ll be returning to browser-based wallets with the ‘browlet’, a wallet that is hosted within a browser extension to allow interactions with Dapps and other actors in the Ethereum marketplace. We’ll also discuss what Web3 is, while reviewing the best security practices to keep you safe while exploring the cryptosphere. Keep an eye out!

All DearMEW articles are based on real user questions, edited for privacy, clarity, and flow.

Dear MEW,

I sent a transaction hours ago, and it still hasn't gone through. How long does it take? Should I wait? Can I cancel it? Can I still use my wallet for other transactions?

What's Taking This Blockchain So Long

Dear WTTBSL,

What a great question! Although such delays don't happen very often, they are very frustrating when they do. What if it's an urgent funds transfer? Can you use your wallet for other transactions while one is pending? Is the internet down? Is MEW broken? Is the blockchain broken?

Usually, transactions sent via MEW will indicate 'Success' in Notifications within minutes, if not seconds, of confirming. Initially you will see that the transaction is 'Processing', and if that status isn't changing for a long time, you may wonder what has gone wrong.

The first thing to do is check transaction status with an Ethereum block explorer like Etherscan, where it is likely to show as 'Pending'. This means the transaction has not been picked up by miners yet. Your transaction will go through, and show 'Success' status on the block explorer, only when miners pick it from the pool of all signed transactions, put it into a new block, and add it to the blockchain.

How quickly the transaction will be picked up depends mostly on two factors – network congestion and the transaction fee, which in turn is determined by gas limit and gas price. Because miners receive the gas fees for the trouble of maintaining and growing the blockchain, it's in their interest to pick up transactions with the highest fees first.

With increased network congestion, gas fees go up throughout the Ethereum blockchain, and it takes a little more ETH to get to the front of the line. (For a more detailed look at the transaction journey and the calculation of the fee, see this article.)

So, what can you do to make sure a transaction doesn't get stuck, and what action can you take if it does?

Many wallets, including MEW, set the transaction fee for you automatically, but the automatic calculation does depend on your choice of Transaction Speed. You can adjust this by clicking 'Edit' across from 'Transaction Fee' on the Send Transaction page, which will open the Settings window. You can also find Settings under the identicon in the upper right corner of the screen.

Most of the time, the Economy setting works just fine. Network conditions can change quickly though, and gas prices that were great a few hours ago may become insufficient at a later moment (again, these are rare cases we are talking about). That's why, to prevent transactions from suddenly getting stuck during high network congestion, it's best to keep your Transaction Speed set to Regular or Fast.

How do you know whether the network is congested and what transaction fees are good right now? A blockchain explorer is, again, the answer. (In fact, block explorers are the answer to a lot of good crypto questions – see this story for some examples).

On Etherscan, this chart shows Daily Network Utilization. The higher the percentage, the busier the network, the higher the gas prices. To see what kind of gas prices are leading to successful transactions at the moment, this Ethereum Gas Tracker may help. It's always being updated, though you may have to keep refreshing the page.

If the transaction gets stuck in pending limbo despite all preventative measures, you may need to just wait it out. When the entire Ethereum network is clogged and delays are experienced across the board, there might be nothing you can do to push the transaction through – that is, until blockchains scale to greater capacities and speeds, which is something all of us are looking forward to!

Otherwise, there are a few things you can try, but keep in mind that none of these are guaranteed to work and none of this means that you can cancel a blockchain transaction whenever you wish. All transactions to the blockchain are still final and, at the risk of repeating ourselves, cases when they get stuck pending indefinitely are very rare...

Sometimes, just trying to send the transaction again will get it to go through. If network congestion has gone down since the last time you tried, the same gas price might now work successfully. The best bet, though, is to try a transaction with a much higher gas price (again, by going to Settings and either choosing a higher Transaction Speed or putting in a custom value).

Since the previous transaction is still pending and has not been added to the blockchain yet, the new transaction with higher gas will be mined earlier and will effectively cancel and replace the pending one. At that point, the status of the previously stuck transaction will say 'Dropped and replaced' on Etherscan.

You can read more about checking transaction status and canceling transactions here and here, but remember – these are techniques best tried by experienced users and not guaranteed to work as expected. Nevertheless, we hope that these tips will help you avoid transaction delays in the future, as well as reduce some of the frustrations when these things do happen!

Speedily yours,

MEW

All DearMEW articles are based on real user questions, edited for privacy, clarity, and flow.

Dear MEW,

I am thinking about using the MEWconnect app, but I am concerned about the security of a mobile wallet. What if someone keylogs my phone, gets my password and copies the encrypted key file? Could they decrypt my private key?

And if MEWconnect has to access the website to make transactions, could hackers use malware to clone my phone, keylog my password, and use the MEWconnect app on the cloned phone to access my wallet?

Imagining Super Hackers in Black Hoodies Targeting My Crypto

Dear ISHBHTMC,

First of all, let us say that your comprehensive exploration of possible mobile wallet vulnerabilities is quite impressive. Staying skeptical and detail oriented is a great advantage in the crypto space. Besides, understanding the way technologies and security features actually work goes a long way towards ensuring the safety of your funds.

Overall, it seems that your concern about MEWconnect begins with your concern about mobile apps generally. As it turns out, the security measures implemented by mobile applications are much more solid than many people believe.

When smartphones were a new product, the security frameworks of mobile operating systems and apps were underdeveloped compared to those of the personal computer. Today, mobile apps have not only advanced substantially in terms of security, but they may actually be safer to use because there are less attack scenarios in mobile compared to the PC. (Read in more detail about the security of mobile apps in general, and crypto wallets in particular, in this article).

Now, to address the specific scenarios that you describe: someone keylogging your phone, getting the password and decrypting the private key, or using a ‘cloned’ MEWconnect to access your wallet via the website.

To be honest, you are assuming that a lot of resources are available to the hacker! While it’s good to be cautious, consider the layers of security an attacker would need to get through before being able to access your funds directly:

1. The PIN, password or biometric recognition of the smartphone.
2. The PIN, password or biometric recognition of the app.
3. iOS Keychain or Android KeyStore encryption.
4. The encryption and management of the private key itself.

Let’s talk about each of these layers in more detail.

Smartphone access

Modern mobile devices are protected by multiple security measures, precisely to prevent the kind of access that would allow a hacker to install malware that can introduce keylogging and collect your information. So, how is a hacker going to keylog the phone in the first place?

Unless you are suspecting that someone in your circle of relatives, friends, and colleagues might choose to compromise your phone’s security (which is a different issue altogether), you can take measures to prevent random attacks.

Don’t download apps when you are not sure of their source, don’t click on suspicious links, and don’t ‘jailbreak’ or ‘root’ your mobile OS. If you are using a password or pin, make sure you are making them as strong as possible (for reference, take a look at this guide by MEW’s hardware wallet partner Trezor for making a strong passphrase). In addition, consider turning on biometric access.

What about SIM swapping? For services that implement 2FA (two-factor authentication), explore the possibility of using authenticator apps like Google Authenticator and Authy instead of a text message. Avoid tying a lot of services to a single email address, and find a useful guide (something like this one) about responding quickly to a SIM hijacking situation.

App access

Most mobile applications that are related to finance, banking, or crypto use an additional password and/or biometric check for app access. In addition, many of such apps require more than just password entry when re-installed on a different mobile device. With banking apps, it might be a two-factor check (see above about using an authenticator app for this), and with MEWconnect, you would need to restore wallet access with the mnemonic recovery phrase.

This means that even if an attacker knew your app password through keylogging, that wouldn’t be enough to access your wallet once they installed the app on their phone. Even if they got access to your full phone backup in the cloud, the app would require the recovery phrase after installation – and that recovery phrase, if used correctly, should never be entered manually online or stored with internet services (like email, Dropbox, GoogleDrive, cloud-based notes apps, etc.)

iOS Keychain/Android KeyStore encryption

This layer of security is one of the features that differentiate mobile apps from web interfaces. The memory of mobile devices is more difficult to ‘hack’ than that of personal computers, and decrypting passwords from mobile OS encryption mechanisms is a formidable task in itself. So, if you don’t store your access information in a Google Doc on a Google Drive, your phone will take good care of the sensitive information entrusted to it.

It’s worth keeping in mind that Apple’s Secure Enclave chip can’t be used for crypto wallet keys at the moment, for various reasons having to do with the private key algorithm and Secure Enclave design. (See a detailed explanation of this on MEW’s subreddit here.) So when wallets say they use Apple’s Secure Enclave, they actually mean iOS Keychain encryption (which still keeps your info safely encrypted).

Private key management

On top of security measures applicable to mobile devices and mobile apps in general, crypto wallets implement specialized technology to safeguard the users’ private keys. In terms of key management, MEWconnect is actually more like a hardware wallet than the standard mobile wallet app.

For most mobile crypto wallets, the keys are stored in the same ‘location’ where transactions occur, allowing the keys to come in contact with the internet, though with encryption protections in place. MEWconnect, on the other hand, acts like a hardware wallet by never exposing the private keys. The signing of the transaction takes place in a secure environment, keeping keys safe even in the context of a mobile device that is continuously connected to the internet.

At the current state of digital technology, it turns out a PC is not inherently safer than a smartphone. Rather, it’s all about best security practices (which are pretty much the same across devices, when it comes to crypto) and making sure your apps come from trusted creators. As many desktop applications move to the browser, PWAs (progressive web apps) become more widely used, and browsers introduce updates to accommodate decentralized applications, the lines between PC and mobile become more and more blurred.

Globally, internet use has long been shifting towards mobile devices, and that trend will only gain momentum, especially since new users of internet services tend to come from geographic regions where ownership of a smartphone is much more accessible than ownership of a PC. Given this reality of mobile domination, developers must (and do) use the best available security features when building mobile apps.

Having said all this, if you intend to store large amounts of crypto for long periods of time, cold storage methods like hardware and paper wallets are still the highest standard of security. Mobile wallets are probably best suited for keeping smaller amounts of funds for payments, daily transactions, swaps, and dapp interaction.

Hopefully, this exploration into the workings behind mobile app security can help soothe some of the worries about using a mobile device to access your crypto!

Keeping you safe from hackers, whether they are wearing black hoodies or not,

MEW

All DearMEW articles are based on real user questions, edited for privacy, clarity, and flow.

Dear MEW,

I had read on some Telegram channels that the MEW website generates keys server-side, and that only by downloading the paper wallet generator and running it offline will I be able to generate keys client-side. Is this true?

Incredulous but Concerned

Dear Incredulous but Concerned,

You are right to question what you see on social media and Telegram channels, because too often, the authoritative advice proffered there is not backed by technological expertise or sufficient knowledge about the subject (that is, if it’s not an outright scam).

That being said, the crypto space is still rather young, and even experts can disagree on topics related to technological protocols, best practices, and terminology. Irresponsibly spread misinformation can only add to the uncertainty already experienced by many crypto users on a daily basis. Whenever possible, it’s best to get the facts from the official source – so kudos to you for doing just that!

We can assure you that MEW wallet generation is absolutely always client-side.

The codebase for our online and offline builds is the same. Whether you are using the online web interface or running MEW offline, the same process is used to generate your keys. Specifically, we are using https://github.com/ethereumjs/ethereumjs-wallet library, which uses ‘window.crypto’ built into the browser to generate cryptographically secure random bytes. No servers are involved in this generation process.

That brings us to our unwavering endeavor to inform users that, unlike a bank, we don’t collect or store any user information. The keys are generated within your browser, the mnemonic phrase, keystore file, and/or password is only ever seen by you, and we never, ever have access to your wallet.

This means that we can’t mess with your funds, but it also means that we can’t change any settings or restore access information. (We feel so strongly about this, we wrote a whole article about all the ways we are not like a bank. You can read it here.)

Hopefully this answers your question, and you can carry the flame of true knowledge back to the Telegram group where your confidence was unduly shaken in the first place!

Always client-sidedly yours,

MEW

No one can deny that the evolution of the crypto ecosystem is, in many ways, fueled and shaped by hype. The pervasive ‘get-rich-quick’ scheming, speculation, scaremongering, and scamming often leave crypto beginners in a fog of war that prevents seeing a balanced approach to the space.

One frequent question that comes up in support, social media threads, and searches is ‘how do I cash out’? Most new users are unfamiliar with the crypto market and the state of crypto regulation. (To be fair, given the lack of clarity with regulation agencies, even experts can have difficulty defining the current state of things.) Having received some tokens in an Ethereum wallet, it’s quite natural to think: “Well, this is nice! Free cryptographic money – now how do I get it in hand?” In reality, it can be somewhat complicated and not always worth the effort, but it’s a reasonable question that deserves a reasonably clear answer, so here we go.

Is the token worth anything?

First things first – not all tokens are worth anything at all, for now. They may rise in value in the future as the project develops, or the project may never get off the ground. Most tokens that are airdropped into wallets (when they appear there without your knowledge) don’t have any value yet.

You can check current token price on Coinmarketcap. Ethereum block explorers like Etherscan also show prices, but that information is not always up to date. If the token price is extremely low, or the coin is not even listed, trying to swap it may not be worth the time or gas fee for the transaction.

That’s right, you need to pay gas for any transaction on the Ethereum blockchain, so before you can move any tokens, you need some ETH in your wallet. Just a little (0.01 ETH) should be plenty to cover a few transactions, but it’s your call whether those tokens are worth the investment.

Get ETH for tokens

Probably the simplest way to convert ERC20 tokens to a currency of more enduring value is to swap them for ETH.

If using MEW, go to the Swap page in the wallet dashboard, select the token on the left and ETH on the right. (If you can’t see the token balance in the wallet, you need to add it as a custom token first.)

If any of the MEW partner exchanges support the swap, you’ll be able to select one on the bottom of the screen and proceed with the transaction, putting the same Ethereum wallet address in the ‘To’ field to send it to yourself.

If the swap is not available in the wallet, you will need to research which exchange supports your token. Then you can make an account on that exchange, send the tokens to the appropriate token address (you should be able to obtain this information in your exchange account dashboard), and, if you choose, send the received ETH back to your preferred Ethereum wallet.

If using wallets other than MEW, look at the relevant support documentation, but the process will be similar: either you’ll be able to swap in wallet, or you’ll need to send out to another exchange for the swap, and then send the ETH back to your wallet.

Get BTC for tokens

The procedure for getting Bitcoin for your tokens is quite similar to the one with ETH, but you need to keep in mind that you need to have a Bitcoin wallet ready before swapping.

Bitcoin is a different blockchain than Ethereum, and you need different wallets to hold these currencies. Whether it’s an address in a multi-currency wallet like Coinbase, or a wallet created with a client-side solution like MEW or Blockchain.com, make sure you are sending BTC to a Bitcoin address and ETH to an Ethereum address.

Once you have a Bitcoin wallet, you can follow the same steps as with ETH on the MEW Swap page, but put the Bitcoin address in the ‘To’ field. If the swap is not supported in MEW, then send out to an exchange, swap, and send the BTC back to your Bitcoin wallet. With select tokens, you will be able to swap directly to BTC. In other cases, you may need to swap the token to ETH first, and then ETH to BTC.

Get cash in hand

Compared to swapping for other cryptocurrencies, cashing out to fiat involves an extra step and, possibly, a KYC procedure. If your goal is to get from a token (or any cryptocurrency, for that matter) to actual cash in your hands, you’ll have to deal with a traditional bank. Most of the time, this means providing information to verify your identity.

For cashing out to Euro or Swiss Francs, you can take advantage of Bity’s exit-to-fiat gateway. If using MEW, you can do this right inside the wallet dashboard. This tool is KYC-less, in that you won’t need to upload your ID and wait to be approved, but you will need to provide your banking details and your phone number (to receive a verification code). Only BTC or ETH can be exchanged for fiat with Bity, so you will need to swap your tokens for one of these cryptocurrencies first.

To get US dollars, first you would need to set up an account with a crypto exchange, like Coinbase, which supports linking your bank account. This approach will require full KYC, with uploading your ID and providing your contact details. After getting approved (which may take a few days or longer), you’ll be able to swap out your Ether or Bitcoin for USD and deposit that money into your bank account.

For other national currencies, you’ll have to do the research to see if any crypto exchanges support them. Surely, Coinbase and Bity are not the only platforms that provide exit-to-fiat services. Wherever you are, you should consult your financial adviser for information about any taxes that may apply when selling crypto for fiat. Although, as mentioned before, regulations are far from clear at the moment.

Alternatives to cashing out

No matter how you got your tokens in the first place – through an ICO, a deliberate purchase, a gift, or an airdrop – now that you’re here, it’s worth looking into the project behind the token. If you think it has value in the space and a chance of succeeding, you may want to hold the coins and see if their value will rise.

The crypto market is still young, which is why many influencers and industry experts advise to ‘HODL’ – Hold On for Dear Life to your crypto in the expectation that value will increase considerably in the next few years. Hodling, as opposed to speculating, also helps stabilize the market for everyone.

If you are unhappy with just having your crypto sit there, consider exploring DeFi instruments, like the MakerDAO CDP protocol integrated in the MEW wallet. That way, you get value out of your cryptocurrency without selling it for fiat.

A final note to keep in mind: If you started out in crypto with a client-side, noncustodial wallet like MEW, you are using a decentralized solution and retaining full control of your funds. Exchanges that implement KYC procedures and traditional banks where the fiat will be deposited are centralized entities. That means they can share your information with third parties and take some of the control over your assets away from you. Only you can judge how important decentralization is to you, and what role it will play in your financial future.

All wallets have differing levels of security. With so many ways to access a wallet, it can be difficult to figure out what makes some of them more secure. There are things you absolutely shouldn’t do, regardless of the type of wallet used – like enter your private information directly online. Some wallet creation methods leave the user vulnerable to phishing. Other access methods, like hardware wallets, are more difficult to mess up. Which brings us to...

The Private Tree

(You can read the full Private Tree article here.)

While it’s ultimately up to the user to keep themselves safe, wallets can build security measures into their design to help users along. As we see in the diagram, direct access with software methods is the least secure option. Encrypting the user’s private key adds an additional level of security. Another measure is using a mnemonic phrase or private key for recovery purposes only, rather than the main method of access, avoiding unnecessary exposure.

Hardware wallets are seen as the pinnacle of wallet security, offering cold storage in a physical device that keeps your keys encrypted in the device itself, off the internet, and in your own hands. Most hardware wallets still need to be used with another form of wallet service, such as a web-based interface or desktop app (covered in the first part of this series!) to offer full functionality.

HD Paths

These wallets are Hierarchical Deterministic (HD) wallets, meaning they offer multiple public addresses to choose from when deciding where to store your funds. Each wallet has a root private key and public address pairing, but these split off into thousands of other pairings that are unique to the wallet. The benefit of this lies in creating options, giving some wiggle room for temporary investments or organizing assets. However, this can also get confusing if actions aren’t taken to map it all out from the start.

Each of the hardware wallet addresses comes from a 'derivation path', which is a fancy way of saying the addresses branch off in different ways. If you use one path for your address, you’ll need to continue using that path for all future access. For example, the derivation path for Ethereum is m’/44’/60’/0’/0, but the path for Ethereum Classic is m’/44’/61’/0’/0. Both of these paths result in a different list of public Ethereum addresses, so it’s important to keep track of which path you’re using. Most wallets will tell you when you connect, but if they don’t, they’re likely defaulting to the Ethereum path above.

Hardware Wallets

Hardware wallets are considered cold storage, because they keep your sensitive information separate from online servers. In this way, it’s impossible for your wallet access keys to get phished or stolen. Each hardware wallet uses a different approach to this, but cold storage is the standard for this category of wallets.

Ledger hardware wallets are a little different than the rest, as they have their own desktop wallet called Ledger Live, and they use a different default derivation path than most other Ethereum wallets (m’/44’/60’/0’, taking a ‘0’ off the end). The Ledger comes in multiple models, the newest being the Ledger Nano X, which can connect through USB or Bluetooth.

Trezor is another popular hardware wallet and the biggest contender with Ledger. They also sport multiple models to choose from, with the most popular arguably being the Trezor One. Trezor and all the other hardware wallets follow the standard derivation path for Ethereum. Among the other hardware wallets are Secalot, KeepKey, Digital BitBox, and more. It’s worth doing your own research to discover which one is right for you.

Hardware-like Mobile Wallets

There are many mobile wallets out there, and we will cover them in depth in another part of this series, but only a few phone applications can work as a hardware wallet substitute. One such example is MEWconnect, a MEW companion app meant to allow secure wallet access comparable to that of hardware wallets. Although this is not a separate piece of physical hardware, it still offers an encrypted access method that keeps your keys away from online servers and stored in a secure, local location on the phone itself.

In MEWconnect’s specific example, the wallet is secured with a mnemonic phrase for recovery purposes should the phone become lost, stolen, or broken. Just like other hardware wallets, MEWconnect also functions as a HD wallet with multiple addresses. However, it defaults to the first address of the list and keeps the rest hidden. If you restore this wallet in a different provider, you’ll likely see multiple addresses along with your familiar one at the top.

Other examples of smartphone wallets with hardware-like functionality include the Finney, supported by the MEW web interface, and Samsung’s Galaxy S10 blockchain phone. Most of these hardware-like wallets are not full-fledged wallet interfaces, as they cannot send transactions or interact with smart contracts on their own. They’re used mainly as a secure access method, much like a hardware wallet, to allow users safer interactions with web-based or desktop wallets.

In Part 3, we’ll take a look at mobile wallets and the differences between custodial and noncustodial wallets. We’ll also explore the benefits and detriments of centralization, and how it can have an effect on user experience.

If you’ve ever created a wallet with a client-side interface like MEW and read through the warning cards, or contacted wallet support with questions about your account, you are likely to have come across the phrase “We are not a bank.”

What exactly is meant by that? After all, you are well aware that you are not interacting with Citibank, Chase, or any other private bank of your choice.

Why do some crypto services make a point of reiterating this statement?

Why is it that other crypto services don’t mention this at all?

Why does it even matter in this context?

Banking expectations

In the modern Western world, many new crypto users come with a history of using online banking platforms on a daily basis and, understandably, have similar expectations with regard to crypto wallets.

Some of these expectations may include: 24-hour customer service, help with account management, password resets, fraud alerts, the possibility of freezing or reversing transactions in response to fraudulent activity, and the understanding that the bank will take responsibility for an unexplained loss of funds.

Even unbanked users, who don’t have the online banking experience as a reference, sometimes seem to expect an ultimate authority on the other end of the customer service line – someone who can modify their wallet settings, adjust balances, and reset access information remotely.

BYOB: Be your own bank

Overall, very few beginners are aware of their personal role in crypto management. One of the greatest advantages of crypto is being your own bank, which means no one has control over your funds except you. On the flip side, this also means that you are taking on a lot of the responsibility for the security of your funds.

It would be perfunctory, not to mention obnoxious, to say: “it’s not a bug, it’s a feature.” Without a doubt, most crypto services have a long way to go before they can be considered truly user friendly. However, some aspects of blockchain technology and cryptocurrency are intentional, unavoidable, and will always be different from the banking model.

It’s important to keep in mind that being your own bank is only truly possible with decentralized, non-custodial services. Centralized wallets and exchanges, like Coinbase, retain control over users’ funds and, for that reason, can provide a more custodial, bank-like experience. Client-side wallets like MEW give the user full control over their keys and funds, giving full independence, but also requiring more agency from the users themselves.

We are not a bank because…

There is no account management

Client-side services don’t collect any user information (no name, no phone, no email, no IP address or physical address). There is no ‘file’ on the user and no account to manage. Customer support can’t look into wallets or adjust settings, reset passwords, or ‘fix’ balances. Since there is no information on users, non-custodial wallets can’t investigate scams or figure out the identity of the phishing address owner.

However, the fact that no one is managing your account also means that no one can block or freeze the funds, and you don’t need to wait for anyone’s approval on transactions, no matter the amount or the location of the recipient. There are no banking holidays or service interruptions, and no one can prevent you from using or withdrawing your funds – no matter what is happening with the stock market or the political environment.

There are no servers or ‘vaults’

Your cryptocurrency is always on the blockchain, while various services and interfaces help you interact with and reassign ownership of it. Crypto is never ‘moved’ from one storage place to another.

It’s not ‘in’ your hardware wallet, it’s not ‘on’ your browser interface wallet, there are no servers or digital ‘vaults’ where stores of currency are kept. All wallet apps and interfaces are just various ways of accessing those cryptocurrencies on the blockchain whose ownership is assigned to your wallet.

What does that mean in practical terms? A client-side wallet does not have your funds, can’t use your funds, can’t take your funds and lend to others and then run out when you need to withdraw them.

Hackers don’t hack client-side wallet companies, because there is nothing to hack: no store of data, no store of currency. When hacks happen, it’s by compromising the internet itself (as in a DNS hack), or by getting individual wallet access information right from the user (through unintentional user error).

There is no single point of failure. Even if customer service stops responding, the site disappears, and the wallet company goes out of business – as long as you have your access information, you can use it on another interface and your funds are still there, on the blockchain.

Blockchain rules apply

There are a couple of reasons why blockchain technology is the big deal that it is, and they are directly related to the un-bank-ness of it.

Blockchain is a decentralized ledger of information that can’t be changed after the fact – for better or worse. Nobody can go back and fake something that didn’t happen, or erase something that did happen. For the same reason, transactions to the blockchain are irreversible.

Nobody can freeze or cancel transactions that have gone through, even if it was in error or as a result of a scam. Custodial services can insure themselves against such cases and ‘recover’ user funds by paying them from the insurance fund, but even they are not able to reverse transactions.

On the upside, the blockchain doesn’t care where you are sending your funds, why, or how much. The speed of transaction depends only on the congestion of the network and can take minutes, without requiring any permissions or checks. Transactions costs will vary depending on the blockchain, but they usually end up being significantly lower than bank wire fees.

You are the only one who has access

In the traditional banking model, the custody of your funds is shared between you and the bank, where the bank, arguably, has more power. Your funds can be frozen, your transfers can be restricted, your credit score can substantially affect your life, and in the worst case scenario, the bank can default.

With client-side crypto wallets, you are the only one who makes the decisions and no one can restrict your access to financial services and products. At the risk of dragging out a tired cliché, with that freedom comes responsibility – both for your security and for the consequences of those decisions.

Custodial crypto services don’t need to emphasize that they are ‘not a bank’ because in fact, they are a bit like a bank: centralized, retaining custody of your keys and funds, but also helping you manage them.

Perhaps in the future, traditional banks and crypto services will be able to give users the best of both worlds, combining customer freedom and customer support in unprecedented ways. Until then, you have a choice whether to use client-side, non-custodial wallets, or centralized, custodial services. Both options are useful for specific needs and scenarios.

Just keep in mind what it means when wallets say ‘we are not a bank’, and understand that they really do mean it!

In the crypto world, your wallet is essentially your identity. If you’re looking to interact with blockchain technology in one way or another, a wallet is your key to that world. However, there are many different wallets available, with more innovations introduced daily. This series will explore different types of wallets, organized into four main groups. But first, let’s take a look at what a wallet is.

In Ethereum, a wallet provides you with two main pieces of information: a public address (or multiple) for receiving funds and some sort of private information used for access. Public addresses take the form of a 42 character string, beginning with ‘0x’. The private information that comes with this address can be a private key (another string of 64 hexadecimal characters), a mnemonic phrase, or a keystore file. In addition, some wallets add a password or pin for daily wallet access. With the public address and your wallet’s access information, you can explore almost every corner of the Ethereum world.  

The first group of wallets outlined in this article comprises those that look like a website or desktop application: specifically, web-based, PWA (Progressive Web App), and desktop wallets. This group represents one of the most popular wallet formats, and most wallets out there offer some sort of web or desktop setup.

Web-Based Wallets

Web-based wallets are interfaces that are found by typing in a website - or, by clicking a bookmark, like a secure and smart user should do. A good example of this type of wallet is MyEtherWallet (MEW). All interactions can be made right within the web interface, and data (for saving wallets or adding custom tokens) is stored locally and temporarily within the browser itself.

This is the easiest type of wallet to set up because it requires no installation or downloads. However, there is some concern about the vulnerability of web wallets to hacks and phishing attacks. In fact, many web wallets (including MEW) store absolutely no user information, so the wallet itself can’t be hacked to access user data. Most phishing attacks are executed via fake URLs or spying malware, and loss of funds is preventable with education and best security practices.

Another thing to keep in mind is that a web-based wallet functions best as a comprehensive interface that is accessed through integrations with hardware wallets, ‘browlet’ extension wallets, and phone apps. Direct software access via private key, mnemonic phrase and keystore file is still available on many web and desktop wallets, but the industry is stepping away from those methods because they are not sufficiently secure for online use. Instead, web-based solutions like MEW are evolving into platforms that offer myriad ways of interacting with the blockchain, while wallet access should be handled with secure devices.

One concept that originates with web-based wallets is the term “paper wallet”. This is when you print a piece of paper that carries your public address and private key on it. In this method, your keys are kept off of a computer where it could get phished or stolen. Instead, it’s kept in the physical world and only used when needed. If you choose to access the funds held in the paper wallet, it’s best to use an offline method. That way your private information is never transmitted through the web for all to see, but instead is encrypted and transmitted through safer methodology. Keeping your keys off the internet in a paper or hardware wallet is referred to as ‘cold storage’.

Education is the best resource for knowing how to navigate these crypto waters, so it’s suggested to DYOR (do your own research). MEW offers a wealth of educational material in the MEW Knowledge Base, as well as a dedicated support team found at support@myetherwallet.com. MEW is open-source as well, so if you’d like to build or suggest, you can make your own contributions straight to GitHub.

Progressive Web App (PWA) Wallets

PWAs are web-based wallets that can be downloaded as a desktop or smartphone application. This option has its advantages over website-only wallets, as PWAs offer offline capabilities, smoother interactions, and more reliability. They can also sport completely different UI/UX than their web counterparts, designed for mobile viewing, more speed, and stream-lined interactions.

The Chrome browser has updated its interface to include PWA download buttons right in the URL for all websites that offer this option, making it easier than ever to download desktop or smartphone app versions of your favorite websites. It also eliminates the need for submitting products to App stores, waiting for approvals, and remaining at the whims of a third party. PWAs are accessible immediately, straight from the browser.

Desktop Wallets

Desktop wallets are similar to PWAs, except that they are built specifically to be downloaded and used separately from a browser. They can also be accessed offline and provide smoother interactions for their users, but the main difference is the necessity for a download or installation. Desktop wallets run right from your desktop (big surprise!), but they still store your keys directly on your computer. A couple examples include the Exodus Wallet and Atomic Wallet.

These types of wallets are touted as being safer, as they don’t fall prey to URL schemes or transmit personal data directly in a web browser. It’s important to stay vigilant, however, because phishers are innovative and tricky. A desktop wallet won’t stop spyware from seeing your personal information, and it won’t protect you from sending your own funds to bad actors.

Web-based wallets, PWAs, and Desktop wallets are not considered cold storage. Although you can interact with them offline, you still need an internet connection to send a transaction. With a few exceptions (like using MEW’s offline tool), all wallets described thus far are hot wallets. This means they run the risk of the user’s private access information being intercepted during transmission, rather than keeping the keys completely separate.

In Part 2, we’ll be looking at hardware and hardware-like wallets, delving into the benefits and challenges of using cold storage and HD wallets. We’ll also go deeper into the security of various access methods. Stay tuned!

One of the most useful features of Ethereum technology is its ability to host sub-currencies,  known as ‘tokens’, directly on its blockchain. These tokens are each ruled by a smart contract, which self-executes commands based on a unique, immutable code.

There are several different types of tokens on the Ethereum blockchain, and multiple sub-categories exist within those types. We’ll take a quick look at the interesting variations of tokens, and address some aspects of their uses.

ERC20

The most common type of token launched on the Ethereum blockchain follows the ERC20 standard. ERC stands for ‘Ethereum Request for Comment’, which is basically a development proposal for the framework of the Ethereum blockchain. Ethereum is decentralized, so developers suggest new requests that are either abandoned or accepted by the community – the latter leading to widespread adoption of the protocol.

ERC20 tokens are the kind you see the most frequently. They can be seen as a sub-currency of Ether, each having a pre-specified supply and purpose while still relying on ETH for the gas (transaction fees) they use to deploy the contract. These tokens hold their own value separate from the ETH, and they are generally used for more nuanced purposes. Anyone can build a token on the Ethereum blockchain, and there are many different reasons to do so. For example, there is a token called Maker (MKR) specifically used to manage another token called the DAI stablecoin.

Wait, stablecoin? What’s that?

For an in-depth look at stablecoins, check out our stablecoin explainer article. But the very concise summary is that stablecoins are a sub-genre of ERC20 tokens that maintain the same value, generally tied to a fiat currency like the US dollar. It creates a safe space for investors and those looking to decentralize their financial lives to explore crypto in a less volatile, more familiar way.

Some stablecoins are backed directly by real fiat currencies, some are backed by physical assets like gold, and some are managed by smart contracts to keep the value stable at a predetermined price. DAI, for example, is managed by smart contracts that keep its value at $1 USD. This process allows DAI to remain fully decentralized, while other types of stablecoins have been criticized for using a centralized foundation to maintain their stability.

It’s important to make the distinction that not all stablecoins are ERC20 tokens. Some are full fledged coins on their own blockchains, separate from Ethereum (one well-known example is Tether), and they can’t be stored in an ERC20/ETH wallet.

Tokens Moving to Mainnet

Occasionally a project with an ERC20 token can get too large or ambitious to stay on the Ethereum blockchain. They may want to change the framework of the technology that their currency runs on, or they may just simply want more control over what they can and can’t do. When this happens, the team can decide to transition to mainnet.

This means the team is building their own separate blockchain for the token, attempting to graduate it to a full-fledged coin. It is no longer bound to Ethereum in this case, but instead becomes a currency on a different blockchain. These currencies can not be kept in Ethereum wallets, so generally the token’s team will hold a swap on an exchange like Binance. The exchange takes the ERC20 tokens and swaps them for the new coins which are placed into a different wallet on the new blockchain. It’s important to follow updates on all your token investments to see if they plan to transition to mainnet in the near or far future, since getting left behind could have negative consequences to your assets.

ERC721

Non-Fungible Tokens, or NFTs, are one of the most brilliant and understated uses of Ethereum technology. Each token represents a single, unique thing. No two NFTs are alike, so holding one proves without doubt that you are the true owner of whatever it represents. Whether that’s a digital collectible character (like CryptoKitties) or the deed to your house, NFTs are ground-breaking for their individualized properties that can be applied to an infinite amount of tangible objects.

The (Possible) Future: ERC223, et al.

In all aspects of life, things change. The Ethereum blockchain is no exception, and it benefits from an active community of ambitious developers always working on improvements to the ecosystem as a whole. One such improvement in the works is the ERC223 token standard.

ERC20 tokens have many functions, but one thing you should never do is send them directly to a smart contract. Remember, each token is tied to a smart contract that governs its actions through code. One shortcoming of ERC20 smart contracts is that if they receive tokens directly to the contract address, they cannot send them back out again.

ERC223 seeks to fix this issue with a fallback ‘return to sender’ function, where these misplaced tokens can be refunded or returned, instead of stuck permanently in a smart contract. Since the Ethereum blockchain is immutable, this only applies to contracts that will be created after the widespread adoption of this new code. All tokens that are currently stuck in smart contracts will remain there indefinitely.

New token standards are constantly being innovated by the Ethereum community – ERC777, ERC1155, and others. If this is something that interests you, a good place to explore new Ethereum proposals is the Fellowship of Ethereum Magicians, an active discussion board for Ethereum developers. For now, ERC20 and ERC721 are the most widely used and accepted token standards for Ethereum, but as other proposals become fully implemented, MEW is committed to integrating the latest Ethereum technology with the platform.

That’s all folks!

Now you’ve been acquainted with the basic categories of tokens that exist on the Ethereum blockchain at this time. Take this information with you when searching for cryptocurrencies to invest in, because the choices can get overwhelming. New tokens are being launched daily, but it’s up to the investor to determine if their vision and goals align with the token’s purpose.

If you feel strongly about these subjects, join the discussion on Reddit or Twitter. Make yourself heard! The Ethereum community is very accepting of new ideas. While you’re at it, don’t forget to follow us on Twitter and Reddit for updates and more educational articles, like this one.

Besides Bitcoin, Ether is the most well known and widely used cryptocurrency in the world. If you want to get into crypto, these two blockchains are the ones to start with, but they are also quite different from each other.

Bitcoin is mostly a store of value: You buy it like you would buy gold, and stash it away to see the value grow. Bitcoin is the oldest and most established cryptocurrency in the crypto market.

Things you can do with Bitcoin right now: buy, sell, hold, and speculate.

Just like Bitcoin, Ether can be used as a cryptocurrency, but it also powers a platform for smart contracts, which are essentially programs written in a special Ethereum blockchain language called Solidity.

Things you can do with Ethereum right now:
- buy, sell, hold, speculate
- play games
- create and buy unique collectibles
- write contracts that automatically execute predetermined actions
- obtain verifiable documents like licenses, diplomas and proofs of ownership
- get loans and earn interest
- vote and exercise governance
- track provenance and shipment of goods

The freedom to accomplish these things without the control or interference of third parties like governments, lawyers, and bankers is the ‘why’ of getting into cryptocurrency for many people. Now, let’s move on to the ‘how’!

Welcome to Ethereum

Because the Ethereum blockchain use cases are so varied, the Ethereum community of developers is the largest among blockchains, and the community of users is among the most active. This article explains how to become a participant in this community, and by extension the entire crypto space, from zero knowledge to full awareness.

It does say ‘Absolute Beginner’ right on top, so if you’ve made and lost thousands of dollars in crypto, rode the wave, HODLed*, FOMOed**, FUDed***, DYORed****, invested in dozens of ICOs*****, and wrote a bunch of smart contracts – it’s probably not for you.

However, if you really are new to the space, this article can help you feel (almost) instantly comfortable with crypto and save you the considerable hassle of learning from your own mistakes.

Yes, it’s long and there’s no TL;DR, but you are allowed to read it in more than one sitting. It’ll be here tomorrow. Use a bookmark and come back to it – like actual books used to work, remember?

And honestly, if you TL;DR crypto, you’ll get robbed and no one will be able to get that money back. This is not a ‘how to get rich in crypto in 3 steps’ article. It’s a ‘what is it’ and ‘why should I’ and ‘how do I go about it’ article. However, you will be directed to excellent step-by-step guides on the way, and there are a couple of excellent cheat sheets at the end, so - onwards!

*HODL: hold on for dear life
**FOMO: fear of missing out
***FUD: fear, uncertainty, and doubt
****DYOR: do your own research
*****ICO: initial coin offering, the regulation-free IPO of crypto, now mostly replaced by more regulated STOs (security token offering) and IEOs (initial exchange offering)

Introducing the Marketplace

It’s helpful to think of the Ethereum ecosystem as a big marketplace, where many kinds of goods and services are available, and all transactions are carried out on a power grid, fueled by the ETH currency.

This means that any action on the Ethereum blockchain requires a small fee called gas (usually, a couple of US cents at the current prices). Whether you are sending ETH or tokens, or interacting with any contract, game, or service – you will need a little bit of ETH in your wallet. You do not need ETH to receive transfers, though.

The Ethereum marketplace is separate from, let’s say, Bitcoin, Ripple, Litecoin, EOS or Tether – those are all different and separate blockchains. The Ethereum environment does cover many of things you may have heard about in relation to crypto:
- smart contracts
- tokens
- ICOs and STOs
- CryptoKitties
- digital scarcity
- rewards for watching advertisements
- micro-tipping online content creators
- decentralized finance,
and much more.

In fact, Ethereum might be the perfect ‘starter’ blockchain for a crypto beginner. Why? Because it allows you to try many different blockchain applications on one platform, setting up just one type of wallet and having an easily accessible, active community of users that you can turn to for answers.

Where can this community be reached? Twitter and Reddit tend to be the platforms where most crypto news and discussion takes place. If you use MEW, it’s highly recommended that you follow the Twitter account for updates, tips, and alerts. Decentralized crypto services like MEW will never email users first and will not send out newsletters to avoid creating vectors for phishing attacks, so it’s important to stay tuned to social channel announcements.

Subreddits like Ethereum and CryptoCurrency can be very helpful, but can also be daunting, because members’ level of expertise varies widely. You can always receive targeted support in the MEW Reddit community and look for groups that are specifically address beginner concerns. Truly, there are a lot of people out there willing to help Ethereum newbies.

If the Ethereum ecosystem sounds like something you’d like to explore, getting a wallet is the essential first step.

The Wallet: Your Key to the Blockchain

What's a wallet

Before you can do anything in the crypto market, on any blockchain, you need a wallet.

Every participant of the ecosystem must have at least one, but it’s common for people to have a few, just as one can have a few different bank accounts and different financial instruments.

When you enter the Ethereum market, whether you are there to buy, sell, or use services – you need money and some form of ID. In the crypto space, your wallet is both (but does NOT necessarily reveal your actual ID beyond the crypto market – more on this later). It’s like an online account, but with the important difference that you are the only person accessing and managing it.

For any interaction with the blockchain – sending or receiving money, playing a game, casting a vote or exchanging information – there are no email sign-ups or profile setups, much less logins with Facebook… Your point of entry, connection, and reconnection is always your wallet. Different blockchains will require different blockchain-specific wallets. We will focus on Ethereum wallets here.

Choosing a wallet

There are many varieties of wallets out there, and they fall into 5 general categories:

Choice of wallet depends a lot on individual needs and goals, but for your first wallet, try to avoid being impetuous or lazy. If someone dropped a chunk of gold in your lap and asked “How would you like to store this?”, you would probably say “I’d like your best, state-of-the-art, long-term security solution, please.” You wouldn’t say, “That shed over there seems ok, although I may have given my neighbor Joe a key at some point…”

Crypto may not be a chunk of gold yet, but you are putting in your own money into it, so choose the best security for your hard earned cash right from the start. Get a hardware wallet (reputable ones start at around $50) or use the MEWconnect app.

The principle of Do Your Own Research applies here, as it does – very strongly – in the rest of the crypto space. You can read more about how different types of Ethereum wallets work here, and why using a secure wallet solution is important here.

Creating and Accessing Different Wallets

The procedure for creating a wallet will vary depending on the method and service provider you are going to use, but in all cases you will be required to copy some information and then keep it very safe. Usually, the information will consist of two items:

1. a phrase of 12 or 24 words, called ‘mnemonic’, ‘recovery’ or ‘seed’ phrase, which is used to restore wallet access under emergency circumstances
2. an additional password or pin used for logging into your wallet on a regular basis.

Let’s view specific examples.

Hardware wallet with web interface

The hardware wallet manufacturer will provide specific instructions, but generally you will make a pin or password to access the device on a daily basis, and write down a 24-word recovery phrase to use if the device breaks, an update goes wrong, or you lose it.

The recovery phrase will always lead back to the same addresses, as long as you use the same HD derivation path (What path, now? Read about it here). The HD path looks something like this: m’/44’/60’/0’/0 – that’s the default one for Ethereum, by the way. Just take note of which path you are using at the very beginning. It’s usually the default one, but you might choose a different path by accident or the hardware wallet settings may vary. In an emergency, you want to have all the information about how you created the wallet.

Once you have the hardware wallet set up, you will need to use it in combination with a web interface like MEW. Some devices have native application interfaces, but they usually offer fewer functions. You’ll connect the device to a computer via a cable or Bluetooth, go through the interface prompts, and confirm transactions first on the hardware device, and then on the computer screen.

MEWconnect app with MEW web interface

The MEWconnect app is a hardware wallet-like solution for your smartphone, so setup and use is very similar to an actual hardware wallet. You will make an app password for daily wallet access, and you will write down a 24-word phrase to restore wallet access in case you lose or break your phone and have to reinstall the app on a different device.

MEWconnect is the next best thing to a hardware wallet. It’s quick to use, you don’t need a separate device, and it’s much more secure than software access because it keeps your private information away from the internet. If you really don’t have the time or the resources to purchase a hardware wallet, this is the best alternative.

Detailed instructions for setting up MEWconnect and using it with MEW’s web interface can be found here and here. The concept is similar to the hardware wallet – you will connect the phone app to the web interface and confirm transactions on the phone first. Also like a hardware wallet, you will always need to use MEWconnect in combination with the MEW website.

Direct software access (private key, keystore file, mnemonic phrase)

When blockchains and cryptocurrencies were first introduced, there were no hardware wallets or wallet interface apps to help people interact with the blockchain. It was accessible only to developers familiar with the command line, and wallet generation was not adapted for regular users and good security practices.

At that point, most users created wallets via private key or encrypted keystore file, and more rarely via mnemonic phrase. In such cases, all the user receives is the ‘naked’ wallet information of a private key, phrase, or encrypted file, and they enter it directly when accessing the wallet. If this ‘naked’ information is transmitted via the internet (as it is when you use it online), it allows anyone who intercepts it to immediately access your wallet just like you are doing.

These software wallet creation methods are still available, but using them online means greatly increasing the chances of being phished. In fact, some wallet interfaces and services are planning to discontinue access via these methods altogether. So, don’t do it. If you need more convincing, read this.

P.S.: There is an option of accessing a wallet via software methods offline. It’s a bit complicated, and for best results you will need a second ‘air gapped’ computer that is always offline. You can read about the offline procedure (as used in MEW) here. The general purpose of offline access is to keep your private keys away from the internet. Hardware wallets will do this for you without the complex setup.

Browser wallet solutions

Increasingly, as more applications are built on Ethereum, web browsers and browser extensions are providing integrated wallet and Web3 services. What does this mean? By downloading a specific browser (like Opera or Brave) or installing a browser extension (like MEW CX or MetaMask), you will be continuously connected to your wallet while using the browser so you can interact with blockchain services and decentralized applications seamlessly.

When creating an account using these services, you will usually make an app password for regular access and receive a recovery phrase of 12 or 24 words, just like with hardware wallets. Still, the hardware wallet is the most secure solution for holding large amounts of currency for long periods. Browser wallets are more suitable for holding small amounts for the purpose of daily interaction with applications.

Mobile wallets

As previously mentioned, mobile wallet applications come in many different ‘flavors’ – depending on whether they are associated with an exchange or not, whether anyone is taking custody of your funds while you are using the wallet, and how your private keys are stored and handled.

For example, the MEW web interface and the MEWconnect app are non-custodial wallet solutions. That means MEW does not handle your funds or manage your blockchain account. MEW provides a way to interact with your crypto, but it’s your job to keep your wallet information secure and to follow news updates in the space. On the other hand, this also means that MEW can’t ‘default’ and lose your money, or ‘freeze’ your account, or in any other way interfere with what you do with your coins.

Here, the expression “Not your keys, not your crypto” is very relevant. Most of the time, a non-custodial wallet will give you your private key or seed phrase and will not require KYC. A custodial wallet, like Coinbase, will let you create a password only, will not give you the private key or seed phrase, and will require you to submit identification for KYC. Before using a mobile wallet app, figure out what kind of custodianship is involved, and make your decision according to the setup which works best for your needs.

On paper wallets and cold storage

It seems that a fair number of crypto beginners have heard of paper wallets as a safe method for cold storage, as well as a good way to gift crypto to someone.

We’d like to point out here that putting wallet information on a piece of paper or a plastic card does not in itself make the wallet secure by some mysterious alchemy. What makes it safe is that after creation, the wallet is never accessed online. The public address can be used to deposit more funds to the wallet and to view the wallet balance on a blockchain explorer.

However, using that private key or seed phrase even once to access the wallet online and send a transaction will null its cold storage status and leave it vulnerable to being phished. Especially when gifting a paper wallet, it’s essential to make the new owners understand this: If they choose to use the funds actively, they must create a different, safer wallet and transfer the crypto from the original paper wallet to the new one.

Things To Do When in Ethereum

Now that you have a wallet set up, what are some things you can try doing?

Receive funds

Once you have an Ethereum address, you can start receiving ETH and tokens. Copy your public address only (it starts with 0x and has 40 more alpha-numeric characters, like this: 0x29cAbc05c5F105ca8d8c9460Dd56bce697Fd826a) and give to people so they can send you crypto.

There is no harm in receiving free token airdrops, although most of them are obscure and will not have any real market value for a long time, if ever. An incoming token can’t give your wallet a ‘virus’, but if someone says ‘send me 2 ETH, and I’ll send you back 20 ETH’ – it’s a scam. No one ever gives away valuable currency.

Get ETH

For anything besides receiving funds, you will need some ETH in your wallet to pay for gas. You don’t need a lot – 0.01 ETH is usually enough to cover at least 2-3 transactions, probably more. One way to get ETH is to buy it with a credit card through an exchange. You can do this from your MEW wallet via the Simplex exchange, or on other exchanges like Coinbase.

Take note that when you do this, you will have to go through the KYC (Know Your Customer) procedure which will essentially connect your Ethereum wallet to your real identity. That doesn’t mean that your wallet service or anyone on the blockchain will know your name when they see your Ethereum address – they won’t. But it does mean that your government and bank can know your cryptocurrency history, if they choose to take interest and investigate. More on this later…

There is an alternative way of getting ETH: receiving it from another user (a friend, a client, an employer paying for services, or even a stranger on Reddit who sends you a few cents to pay for gas and help you move your funds).

Believe it or not, there are even ETH ATMs which will take cash and deposit ETH into a provided address. For now, these are not widely available, and their reliability is not well-established. It’s something to consider though, if you don’t want to provide your personal information for the purchase.

Of course, ETH can also be mined, but that requires sophisticated blockchain knowledge and equipment. It is not a very practical way of obtaining the currency for a beginner, but you are more than welcome to do the research and see if it’s something that you are willing to try!

Use blockchain explorers

Regardless of which wallet interface you are using, if you are ever in doubt about your balance or unsure about the status of a transaction, there is one source of blockchain truth you can always turn to – the blockchain explorer. Wallet interfaces may have errors that prevent seeing correct balances, or they may fail to show the most recent transaction details. The block explorer will always have that information up to date.

At the moment, the most popular explorer for Ethereum is Etherscan. Put simply, it’s an application that shows all activity on the blockchain. If you put your public address in the search field, you can view your ETH and token balances, as well as the full transaction history. You can also explore token prices, average gas fees, latest block information, transaction volume, miner rewards, and lots of other data. Learning to use the block explorer is very helpful for navigating the crypto space with confidence.

Buy or swap tokens

Frequently, people come into crypto after being inspired by a particular blockchain project and deciding to invest in it. Good news! Most of the time, the tokens of such projects are in the ERC-20 format, based on Ethereum.

Sometimes projects distribute tokens for free (airdrop them), in which case all you need to do is provide your public address. If the tokens have market value, you can use an exchange to swap ETH for the token of your choice.

If you are using a custodial wallet like Coinbase, your funds are probably already on the exchange, so you just have to check which tokens are supported. Even though MEW is a non-custodial wallet, it is partnered with the exchanges Simplex, Kyber, Bity, and Changelly, which can be used within the interface. When you use non-custodial wallets that do not integrate any exchanges, you will have to move your funds to a wallet on the exchange first, conduct the swap there, and then move the swapped coins back to your non-custodial wallet.

Swaps are not limited to ETH for tokens. You can even swap ETH for Bitcoin, or vice versa, but keep in mind that Bitcoin can’t be sent to your Ethereum wallet – they are different blockchains, and you’ll have a different wallet for Bitcoin.

Giving Decentralization a Try

It’s time to talk about decentralization as the structuring principle of blockchain and cryptocurrency.

Why Decentralize?

The main idea is that with decentralized networks, there is no third party that validates network transactions – which means there is no gatekeeper that can dictate rules that might prevent you from using the service, and there is no central point of failure which can be used to ‘take out’ the entire network.

In practical terms, decentralization removes barriers to entry and puts control into the hands of the network participants rather than a single governing body. A government can restrict citizen movements and rights, a bank can deny a loan or freeze funds, and a centralized service like Google or Facebook can change terms and impose any set of rules on the users. Decentralized tools aim to provide the same functions and services, but without the limitations and threats of centralized organizations.

DApps

Decentralized applications (DApps) are just what they sound like – computer programs and online services that are built on a decentralized blockchain like Ethereum. Quite a few DApps are in the works, but most of them are admittedly in their infancy. Nevertheless, some are certainly worth a try. You can browse lists of currently active DApps on websites like DApp.com, State of the DApps, and DappRadar. There are games, gambling, social networks and collectibles like CryptoKitties. And if you’re not really interested in whimsical blockchain uses, there is decentralized finance.

Decentralized Finance

DeFi is one of the most promising recent developments on Ethereum. Adding a decentralized structure to financial instruments makes them available for those who don’t have access to traditional banking –a significant part of the world’s population outside of North America, Western Europe and Australia.

Stablecoins – cryptocurrencies tied to the value of a fiat currency like the US Dollar – are an essential component of the DeFi environment. They offer many of the benefits of cryptocurrencies while counteracting the crypto market’s considerable volatility. You can read more about stablecoins here.

To get a better idea of the specific benefits of decentralized finance, read about the MakerDAO CDP Protocol, a DeFi application integrated in the MEW wallet interface. The CDP allows anyone who owns ETH to take out a loan or earn interest without the necessity of applications, credit checks, excessive fees, or commitments. It’s a good place to start to get a feel for what decentralization can practically do for you, in your life.

Security and Compliance

Just like a busy marketplace, Ethereum has its share of pickpockets, con artists, and authorities attempting to keep things under control. Whether the players vying for power in the space are genuinely concerned about the safety of the public, or they are more interested in hijacking the entire operation, is a matter of opinion and nuance.

Be that as it may, as a participant of the cryptocurrency marketplace, you must be mindful of people trying to steal your money, people promising to take care of your money and people attempting to supervise your money. Let’s see what we’re dealing with.

Phishing and scams

Even a very casual foray into the world of cryptocurrency will immediately bring you into contact with all kinds and formats of security warnings and, for lack of a better word, disclaimers. As a prime example, MEW’s vintage interface still has a very substantial and rather intimidating set of warning cards for the user to read through before creating a wallet.

While no service in the space wants to scare users off, there is still a lot of phishing in crypto, and reports of crypto security concerns are not that exaggerated. In fact, while crypto UX designers work on bringing you soothing colors and 2-click onboarding procedures, it’s still your job to protect yourself from scams. As it always has been in this life, by the way.

Non-custodial crypto solutions like client-side wallets are not like banks.
They do not: manage accounts, collect your data, monitor your IP addresses, or store histories on servers.
They can not: reset your password, cancel transactions, or investigate scammers.
They will never see your password, private key or seed phrase (so they can’t help you bring those back if you lose them).

Blockchain technology is a one way street without red lights – the chain is growing continuously and can not be rolled back. A transaction is knit into the fabric of the ledger, and once it’s sent, it’s gone. Whether they happen as a result of a phishing scam, a misunderstanding about the way blockchains work, or a wrong address entered by accident, ‘wrong’ transactions can’t be frozen or reversed, by anyone.

So, crypto security is heavy on prevention. This collection of tips on avoiding phishing is a good start, and there is a handy Security Memo at the end of this article. This piece provides a nice visual explanation about why some wallet access methods are safer than others. Really, there is plenty of information out there about best crypto safety practices, the trick is to actually read it before jumping in…

Custodians

If non-custodial, decentralized solutions are so scary and labor-intensive, with no one to help you fix mistakes, perhaps a traditional centralized approach is best? It’s really a matter of personal choice.

Are you passionate about being free from the restrictions of third parties and being in full control of your funds? Are you concerned about the possibility of bank defaults, policy changes, and authoritarian governments? Then perhaps staying in charge of your own security would not be such a burden.

On the other hand, are your reasons for exploring crypto less ideological? Are you just exploring a new investment opportunity and would rather have someone taking care of your funds, like a bank does, even at the price of full independence and agency? Then custodial, centralized services may be a better choice.

Whether or not centralization in finance and governance is a bad thing is the subject of an extensive political, social, and philosophic discussion actively ongoing in the Ethereum community (and beyond it). As in any good discussion, there are great arguments on all sides. Still, there is no getting away from one fact – either you are the sole custodian of your funds, or you are dependent on someone else, fully or partially. The choice is entirely yours – make sure that you are comfortable with it.

Regulators and Taxmen

Where there is money, there will always be regulators and taxes.

You may have heard about the ‘ICO craze’ of 2017. What happened is this: a large number of blockchain projects decided to pursue the Initial Coin Offering model of financing, which is like a traditional IPO crossed with crowdfunding.

The companies created their tokens on the blockchain (which is not difficult to do and does not require any permissions from anyone) and sold them like stocks to interested investors, despite the tokens having no real value at the time of the ICO.

Neither the companies nor the investors had to undergo any regulatory checks. Some of the projects used the money for developing their product, raising the value of the token.  Most, however, never created anything and/or ran away with the funds, leaving investors without any recourse for recovering their money.

The opportunity for speculation and the possibility of anonymous payments are two reasons why regulators are beginning to look closely at cryptocurrencies. Whether they are justified in doing so is arguable, given that plain old cash is still the currency of choice for evil deeds, and investment scams existed long before cryptocurrencies, or even calculators, were invented.

The very qualities that are making blockchain useful for people who don’t have access to centralized finance and governance are also the qualities that threaten the power of those financial institutions and governments. It’s unlikely that cryptocurrencies will just be ‘left alone’ by regulators and tax agencies. It’s also impossible for cryptocurrencies to be ‘shut down’, due to their decentralized structure. At this time, there are no clear regulations or taxation procedures for most cryptocurrencies, in most countries.

Regulatory compliance, both for companies and retail investors, requires a very individual approach, taking into account various factors like:

• whether decentralized or centralized services are used
• whether KYC is/has been part of the process
• specific types of tokens or currencies involved
• national and international laws affecting relevant jurisdictions

Once again, Do Your Own Research. Official reports on regulation of cryptocurrency, like this one, and taxation guides, like this one, may help.

Venturing Into Other Marketplaces

It’s important to keep in mind that the crypto space comprises many different blockchains, and they will often have different rules and functionality.

We mentioned Bitcoin in the beginning of the article. It’s the most established and highly-valued cryptocurrency at the moment, so it is seen by many as the best store of value in crypto.

What are some other well-known blockchains, and what do they do?

EOS and Tron provide alternative platforms for decentralized applications. Ripple, BitcoinCash, Litecoin, and Stellar aim to facilitate transactions and establish fast global payment networks. Zcash and Monero emphasize strong privacy features. There are permissioned and permissionless blockchains, as well as public and private blockchains. There are also a number of distinct consensus algorithms including proof of work and proof of stake.

Don’t worry, for most purposes, you don’t need to know all the details of blockchain differences. Just be aware that

• specific conditions may apply (like gas fees on Ethereum, for example), so do your research before diving in
• you may need to create blockchain-specific wallets for corresponding coins
• you can’t send funds between blockchains, but you can use exchanges to swap one kind of crypto with another

Be adventurous and have fun, but remember to keep track of all your various wallets’ information and follow the news about all your investments. A lot of services and projects will not contact users directly because of security concerns, and some may simply lack the resources for consistent community support. At this point, it’s mostly your job to keep track of their developments.

ERC-20 tokens that were originally launched on the Ethereum blockchain may transition to their own mainnet – that’s a big change, it often requires some action on the part of the investor, and you can read about that here.

Blockchains can fork, which means splitting off to form two distinct chains with possibly different rules and histories. Sometimes the new chain becomes the default chain, sometimes it becomes a whole different project. It’s another big change to pay attention to, and you can read more here.

Finally, stay mindful of the crypto market’s volatility and immaturity. Don’t invest more than you are prepared to lose, and check back often on projects you invested in.

Bonus: Take These With You When You Go

We are impressed and excited that you made it through the article! Cheat sheets can’t replace real understanding and awareness in crypto (which is why we wrote this massive piece in the first place), but they can be handy as a reminder of the most important concepts.

These are things that many long-time users wish they knew and/or bothered to do from the start. Reading and copying them for reference is your chance to be ahead of the curve from day one.