I wanted to get ethereum wallet, I wanted to become a part of blockchain and cryptocurrencies. I learned that I need to get a wallet, a place to store cryptocurrencies. Which is of course true. I read how cold storage, such as paper wallets are the best way of having a wallet because they can’t be hacked since it’s written/printed on paper.
I visited https://www.myetherwallet.com/ and created my paper wallet. Went to a shop and printed it. I was so happy. I created CoinBase account to deposit some ETH and I sent some very small amount to my paper wallet to test it. It worked fine. But I started wondering what is paper wallet, why people use Ledger Nano S and what’s the best way.
I found out that paper wallet is one time usage only! You can receive as much money as you want but when it comes to sending there’s a trick you might not know and that’s why you could lose your money.
Let’s say you have 3ETH and you want to send 1ETH to your friend. That’s easy, you send it to his address and that’s it. What happens with remaining 2ETH? Does it stay on your account? NO! Those 2ETH are called “change”. It’s kinda like when you buy a candy bar for 3$ and you pay with a $1 dollar bill. You get $2 change back.
The problem is that the change goes to a different address! You have to specify that address or you lose that 2ETH.
When you need to spend ETH from your paper wallet, the full amount of ETH should first be swept into an online wallet. Don’t do any transaction from a paper wallet, it seems secure but you might lose your ethers if you don’t know what you’re doing.
Paper wallets scare me, so I decided to buy Ledger Nano S. I bought one few days ago. Let see when it gets here. Ledger Nano S is hardware wallet, it’s more secure, easy to use and you don’t have to think ofa “change”. A hardware wallet is a special type of wallet which stores the user’s private keys in a secure hardware device. Yes you have to pay for it, Ledger Nano S is one of the best and cheapest out there.
Once I get it and test it I’ll write an article about Ledger Nano S.
Here is more information about paper wallets and the “change”: https://www.reddit.com/r/Bitcoin/comments/1c9xr7/psa_using_paper_wallets_understanding_change/
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