Open blockchains like Ethereum are secure because they are decentralized. That means that each user of Ethereum should control their own keys which control access to their funds and contracts. Some users choose to give up control over their keys by using a third party custodian, such as an exchange wallet. In this book, we will teach you how to take control and manage your own keys.
With that control comes a big responsibility. If you lose your keys, you lose access to funds and contracts. No one can help you regain access - your funds will be locked forever. Here are a few tips to help you manage this responsibility:
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When you are prompted to choose a password: make it strong, back it up and don’t share it. If you don’t have a password manager, write it down and store it in a locked drawer or safe.
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When you are prompted to back up a key or mnemonic words, use pen and paper to make a physical backup. Do not leave that task for "later", you will forget
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Do not store key material (encrypted or not) in digital documents, digital photos, online drives, encrypted PDFs, etc. Don’t improvise security. Use a password manager or pen and paper.
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Before transferring any large amounts, first do a small test transaction (eg. $1 value). Once you receive the test transaction, try sending it from that wallet. This is a good time to find out you forgot the password.
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Do not send money to any of the addresses shown in this book. The private keys are listed in the book and someone will immediately take that money.
Ethereum’s currency unit is called ether, identified also as ETH or with the symbols Ξ (from the Greek letter "Xi" that looks like a stylized capital E) or (more rarely) ♦, for example 1 ether, or 1 ETH, or Ξ1, or ♦1
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Tip
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Use the HTML code & Xi; and & diams; for the symbols Ξ and ♦ respectively (without a space after the &) |
Ether is subdivided into smaller units, down to the smallest unit possible which is named wei. One ether is 1 quintilion wei (1 x 1018 or 1,000,000,000,000,000,000). You may hear people refer to the currency "Ethereum" too but this is a common beginner mistake.
The value of ether is always represented internally in Ethereum as integer multiples of wei. When you transact 1 ether, the transaction encodes 1018 wei as the value.
Ether’s various denominations have a both a scientific name using the International System of units (SI), and a colloquial name that pays homage to many of the great minds of cryptography and computer science.
Table Ether Denominations and Unit Names shows the various units, their colloquial (common) name and their SI name. In keeping with the internal representation of value, the table shows all denominations in wei (first row), with ether shown as 1018 wei in the 7th row:
| Value (in wei) | Exponent | Common Name | SI Name |
|---|---|---|---|
1 |
1 |
wei |
wei |
1,000 |
103 |
babbage |
kilowei or femtoether |
1,000,000 |
106 |
lovelace |
megawei or picoether |
1,000,000,000 |
109 |
shannon |
gigawei or nanoether |
1,000,000,000,000 |
1012 |
szabo |
microether or micro |
1,000,000,000,000,000 |
1015 |
finney |
milliether or milli |
1,000,000,000,000,000,000 |
1018 |
ether |
ether |
1,000,000,000,000,000,000,000 |
1021 |
grand |
kiloether |
1,000,000,000,000,000,000,000,000 |
1024 |
megaether |
An Ethereum wallet is your gateway to the Ethereum system. It holds your keys and can create and broadcast transactions on your behalf. Choosing an Ethereum wallet is difficult. There are many different options, with different features and designs. Some are more suitable for beginners and some are more suitable for experts. Even if you choose well now, you might decide to change your choice a year from now. Ethereum itself is constantly changing and the "best" wallets change as some manage to keep up and others don’t.
Don’t worry! If you choose a wallet and don’t like how it works, you can change wallets quite easily. All you have to do is make a transaction that sends your funds from the old wallet to the new wallet. In Ethereum (as in all open blockchains), a transaction between your own wallets is indistinguishable from and just as easy as any other transaction.
To get us started, we will choose three different wallets that we will be using throughout in many of the examples: one mobile wallet, one desktop wallet and one web-based wallet. These three wallets are good choices for the readers of this book, as they represent a broad range of complexity and features. The choice of these wallets is not an endorsement of their quality or security. They are good enough for demonstration and testing and we have to start somewhere.
Starter wallets:
- MetaMask
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MetaMask is a Chrome browser extension wallet that runs in your Chrome browser. It is easy to use and convenient for testing, as it is able to connect to a variety of Ethereum nodes and test blockchains (see [testnets]).
- Jaxx
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Jaxx is a multi-platform and multi-currency wallet that runs on a variety of operating systems including Android, iOS, Windows, Mac and Linux. It is often a good choice for new users as it is designed for simplicity and ease of use.
- MyEtherWallet (MEW)
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MyEtherWallet is a web-page based wallet that runs in any browser. It has many sophisticated features that we will explore in many of our examples.
We’ll start by installing MetaMask on our desktop and Jaxx on our mobile (smartphone).
Open the Google Chrome browser and navigate to:
Search for "MetaMask" and click on the result showing the logo of a fox. You should see the extension’s detail page like this:
It’s important that you download the real MetaMask extension, as sometimes people are able to sneak malicious extensions past Google’s filters. The real one:
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Shows the ID nkbihfbeogaeaoehlefnkodbefgpgknn in the address bar
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Is offered by https://metamask.io
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Has more than 500 reviews
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Has more than 800,000 users
Once you confirm you are looking at the correct extension, click "Add to Chrome", to install it.
Once MetaMask is installed you should see a new icon (the head of a fox) in your browser’s toolbar. Click on it to get started. You will be asked to accept the terms and conditions and then you will be asked to create your new Ethereum wallet by entering a password:
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Tip
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The password controls access to MetaMask so that it can’t be used by anyone with access to your browser. |
Once you’ve set a password, MetaMask will generate a wallet for you and show you a mnemonic backup, consisting of 12 English words. This backup can be used in any compatible wallet to recover access to your funds should something happen to MetaMask or your computer. You do not need the password for this recovery, the 12 words are sufficient.
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Tip
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Backup your mnemonic (12 words) on paper, twice. Store the two paper backups in two distant secure locations, such as a fire resistant safe, a locked drawer or a safe deposit box. Treat the paper backups like cash of equivalent value as what you store in your Ethereum wallet. Anyone with access to these words gets your money. |
Once you have confirmed that you have stored the mnemonic securely, MetaMask shows you your Ethereum account details:
Your account page shows the name of your account ("Account 1" by default), an Ethereum address (0x9E713… in the example) and a colorful icon to help you visually distinguish this account from other accounts. At the top of the account page you can see which Ethereum network you are currently working on ("Main Network" in the example).
Congratulations! You have set up your first Ethereum wallet!
As you can see on the MetaMask account page, you can choose between multiple Ethereum networks. By default, MetaMask starts on the "Main Network". The other choices are public testnets, any Ethereum node of your choice, or nodes running private blockchains on your own computer (localhost):
- Main Test Network
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The main, public, Ethereum blockchains. Real ETH, real value, real consequences.
- Ropsten Test Network
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Ethereum public test blockchain and network, using Proof-of-Work consensus (mining). ETH on this network has no value.
- Kovan Test Network
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Ethereum public test blockchain and network, using Proof-of-Authority consensus (federated signing). ETH on this network has no value.
- Rinkeby Test Network
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Ethereum public test blockchain and network, using Proof-of-Authority consensus (federated signing). ETH on this network has no value.
- Localhost 8545
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Connect to a node running on the same computer as the browser. The node can be part of any public blockchain (main or testnet), or a private testnet (see [ganache]).
- Custom RPC
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Allows you to connect MetaMask to any node with a geth-compatible Remote Procedure Call (RPC) interface. The node can be part of any public or private blockchain.
For more information about the various Ethereum testnets and how to choose between them, see [testnets].
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Tip
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Your MetaMask wallet uses the same private key and Ethereum address on all the networks it can connect to. Your Ethereum address balance on each Ethereum network will be different. Your keys may control ether and contracts on Ropsten, for example, but not on the Main Network. |
Our first task is to get our wallet funded. We won’t be doing that on the Main Network, because real ether costs money and handling it requires a bit more experience. For now, we will load our wallet with some testnet ether.
Switch MetaMask to the Ropsten Test Network. The click "Buy", and click "Ropsten Test Faucet". MetaMask will open a new web page:
You may notice that the web page already contains your MetaMask wallet’s Ethereum address. MetaMask integrates Ethereum enabled web pages (see [dapps]) with your MetaMask wallet. MetaMask can "see" Ethereum addresses in the web page, allowing you for example to send a payment to an online shop displaying an Ethereum address. Metamask can also populate the web page with your own wallet’s address as a recipient address if the web page requests an address. In this page, the faucet application is asking MetaMask for a wallet address to sent test-ether.
Press the green "request 1 ether from faucet" button. You will see a transaction ID appear in the lower part of the page. The faucet app has created transaction - a payment to you. The transaction ID looks like this:
0x7c7ad5aaea6474adccf6f5c5d6abed11b70a350fbc6f9590109e099568090c57
In a few seconds the new transaction will be mined by the Ropsten miners and your MetaMask wallet will show a balance of 1 ETH. Click on the transaction ID and your browser will take you to a block explorer, which is a web site that allows you to visualize and explore blocks, addresses and transactions. MetaMask uses the etherscan.io block explorer, one of the more popular Ethereum block explorers. The transaction containing our payment from the Ropsten Test Faucet is shown in Etherscan Ropsten Block Explorer
The transaction has been recorded on the Ropsten blockchain and can be viewed at anytime by anyone, simply by searching for the transaction ID, or visiting the link:
Try visiting that link, or entering the transaction hash into the ropsten.etherscan.io website, to see it for yourself.
Once we’ve received our first test ETH from the Ropsten Test Faucet, we will experiment with sending ether, by trying to send some back to the faucet. As you can see on the Ropsten Test Faucet page, there is an option to "donate" 1 ETH to the faucet. This option is available so that once you’re done testing, you can return the remainder of your test ether, so that somemone else can use it next. Even though test ether has no value, some people hoard it, making it difficult for everyone else to use the test networks. Hoarding test ether is frowned upon!
Fortunately, we are not test ether hoarders and we want practice sending ether anyway.
Click on the orange "1 ether" button to tell MetaMask to create a transaction paying the faucet 1 ether. MetaMask will prepare a transaction and pop-up a window for you to confirm:
Oops! You probably noticed you can’t complete the transaction. MetaMask says "Insufficient balance for transaction". At first this will seem confusing: we have 1 ETH, we want to send 1 ETH, why is MetaMask saying we have insufficient funds?
The answer is because of the cost of gas. Every Ethereum transaction requires payment of a fee, which is collected by the miners to validate the transaction. The fees in Ethereum are charged in a virtual currency called gas. You pay the gas with ether, as part of the transaction.
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Tip
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Fees are required on the test networks too. Without fees, a test network would behave differently from the main network, making it an inadequate testing platform. |
MetaMask calculates that this transaction will consume 3 GWEI, which stands for 3 gigawei. Wei is the smallest subdivision of the ether currency, as we will discuss in Ether currency units.
All this to say: to make a 1 ETH transaction costs 1.000063 ETH. MetaMask confusingly rounds that down to 1 ETH when showing the total, but the actual amount you need is 1.000063 ETH and you only have 1 ETH. Click "Reject" to cancel this transaction.
Let’s get some more test ether! Click on the green "request 1 ether from the faucet" button again and wait a few seconds. Don’t worry, the faucet should have plenty of ether and will give you more if you ask.
Once you have a balance of 2 ETH, you can again try sending some back. This time, when you click on the orange "1 ether" donation button, you have sufficient balance to complete the transaction. Click "Submit" when MetaMask pops-up the payment window. After all this, you should see a balance of 0.999947 ETH, accounting for the 1 ETH you sent to the faucet and the 0.000063 in gas costs.
By now you have become an expert in using MetaMask to send and receive test ether. Your wallet has received at least two payments and sent at least one. Let’s see all these transactions, using the ropsten.etherscan.io block explorer. You can either copy your wallet address and paste it into the block explorer’s search box, or you can have MetaMask open the page for you. Next to your account icon in MetaMask, you will see a button showing three dots. Click on it to show a menu of account-related options:
Select "View Account on Etherscan", to open a web page in the block explorer, showing your account’s transaction history:
Here you can see all the transaction history of your Ethereum address. It shows all transactions recorded on the Ropsten blockchain, where your address is the sender or recipient in the transaction. Click on a few of these transactions to look at the details.
You can explore the transaction history of any address. See if you can explore the transaction history of the Ropsten Test Faucet address (Hint, it is the "sender" address listed in the oldest payment to your address). You can see all the test ether sent from the faucet to you and to other addresses. Every transaction you see can lead you to more addresses and more transactions. Before long you will be lost in the maze of interconnected data. Public blockchains contain an enormous wealth of information, all of which can be explored programmaticaly, as we will see in subsequent examples.
Compare to bitcoin: single input, single output.
Source /Destination ………. EOA ……… contract
EOA …….. X ………. Y
Contract….. Z ……….. Q
Four types?
One type, four combinations
Source, dest, signature, amount, gas limit, gas price, nonce, data
Tx is simpler than bitcoin, complexity is at a higher level (EVM)