The most valuable crypto coin out there today is Bitcoin. But, before you can consider buying, mining, or asking your clients to pay with Bitcoin, the one must-have component is a cryptocurrency wallet. One such option is the Electrum Bitcoin wallet.
Because of rising concerns about the cryptocurrency industry’s security, and revelations that attackers can even hack wallets, you might be having some questions such as “Is Electrum safe?” or “Is Electrum reliable?” This post seeks to answer these questions that you might have about Electrum’s cryptocurrency wallet.
To demonstrate how to use Electrum, this review starts by exploring the different types of wallets, and then, extends to the main pros and cons.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet is a digital location for storing digital coins. However, the wallets do not store the actual coins. Instead, they generate random pairs of cryptographic keys that are used to link your coins and facilitate sending tokens to other wallets.
The wallet acts as a link with the blockchain to ensure that all tokens are secured from easy access by third-parties. It is, therefore, crucial that you keep the private keys safe. Before looking at the Electrum wallet, let’s take a glance at the different types of wallets available today.
These are considered the most secure wallets because the tokens are kept offline. One type of cold wallet is the paper wallet that involves printing the private keys and storing them offline. Cold wallets require users to keep the printed codes secure because they are the only way to access their coins. Note that people are discouraged from using private wallets because of the difficulty in setting it up.
The other cold storage option is the hardware wallet. These are hardware devices, such as Trezor, that resemble a standard flash drive, and are recommended for long-term cryptocurrency storage. The hardware wallet provides an additional layer of security, and convenience, because of its portability.
Hot wallets are storage facilities for digital coins designed to only operate when connected to the internet. They are ideal for day to day spending because users can access them from any computing device, no matter their location. However, they are less secure compared to the cold storage.
If you must use a hot wallet, it is advisable to only store a small number of digital coins, while keeping the rest in secured cold storage. You should also look for hot wallets with good security features to guarantee optimal security.
This is where the Electrum wallet comes in. Like hardware wallets, desktop software wallets are designed to run on your desktop or phone, to deliver optimal security and convenience. Though not as secure as hardware wallets, they are very convenient to use, especially for daily crypto transactions.
What is Electrum?
Electrum wallet is an easy to use Bitcoin wallet released in November 2011. This implies that it is one of the oldest Bitcoin wallets available on the market.
Unlike other wallets, such as Trezor, that have multi-support for other cryptocurrencies, the Electrum wallet only stores Bitcoin. But, this includes other Bitcoin forks that use the same Bitcoin core code, such as Bitcoin Cash.
Though the Electrum wallet is free to download and install on your device, it attracts a small fee when sending Bitcoin. The default fee for sending Bitcoin from Electrum is 0.2 mBTC. Note that the transaction charges are included in the amount that you want to send, which makes calculations easy.
Is Electrum Bitcoin Wallet Secure?
The greatest concern for people using Electrum is security. Electrum is considered among the most secure wallets out there because of its advanced encryption, which makes it very hard for hackers to find users’ keys.
When the wallet generates private keys, they only remain in the computer. However, you should be careful because the loss of the keys, either through formatting the computer drive or damage by fire, could mean that the stored Bitcoins are also lost.
The development team also made the wallet secure by ensuring that the seed phrases are generated randomly.
Like other wallets such as Jaxx or Ledger Nano S, it is advisable to store the private keys, as well as the seed phrase away from the main computer. The seed phrase will be required for generating the private keys in the case of a loss.
How to Set Up Electrum Wallet
The process of setting up an Electrum wallet is easy and fast. Here are the main steps:
- Download and install the wallet on your computer: Visit the Electrum website to download the application and install it.
- Select the wallet type and seed type: The good thing with the Electrum wallet is that it supports different types of wallets. You can select either a standard wallet, multi-signature wallet, or a wallet with 2-factor authentication. Then, generate the seed (12-word phrase) that can be used to regenerate the private keys in the event of a computer crash.
- Generate the seed and encrypt the wallet: The wallet will ask you to re-enter the seed generated in step two, before allowing you to set the wallet password. Note that you have the option to encrypt the wallet file for an additional layer of security.
- Once the wallet is set, and you can start generating public addresses to receive Bitcoin from other wallets.
One more thing, if you check the balance section of the Electrum wallet, you will realize that they are given in mBTC (Millibitcoin). This can be confusing. Reset it, so that it reads BTC. You could even select for the wallet to always show the BTC balance in fiat currency.
The Main Advantages and Disadvantages of the Electrum Wallet
How good is the Electrum wallet? As explained above, the Electrum wallet is desktop software. This implies that the keys are always on the desktop. While it is not as secure as hardware wallets, it is very reliable for storing small to average quantities of Bitcoin.
Here is a summary of the wallet’s pros and cons.
The Main Advantages of Using Electrum
- It is an ideal option for people who want to use Bitcoin regularly to make and receive payments
- The wallet uses multiple layers of security, such as advanced encryption and passwords, to make it harder for attackers to break in.
- Unlike the people who use Bitcoin’s client wallet, which requires downloading the entire Blockchain, Electrum only requires the user to download the app.
- The private keys generated by the wallet only remain on the desktop. This means that they are not shared with other devices including servers.
- The wallet is entirely free to download and install on users’ computer.
- The design of the wallet helps users calculate the fee when sending BTC using Electrum.
- The user interface of the wallet is intuitive so that even new users can navigate with ease.
The Main Disadvantages of Using Electrum
Before deciding to download and use the Electrum wallet, it is important to also consider its main disadvantages.
- Although Electrum’s wallet is a software wallet, it still requires a connection to the internet to run regular transactions. This implies that it is still vulnerable to hackers.
- The wallet only supports Bitcoin. This is a major disadvantage because many people want to invest in multiple cryptocurrencies without having to use different wallets. Because of this inconvenience, some are opting for more flexible wallets like Trezor, which support more than five coins.
- The programming language of Electrum is only written in Python. This makes it very difficult for developers to make improvements using other languages, such as C++.
- The recent security breach reported in 2017 took a very long time to be corrected. The community feels that it was not right for a security breach to go for two years before being fixed.
The Final Take
Is Electrum a good wallet to use? This review found the Electrum wallet to be a reliable software wallet, designed to provide users with optimal convenience and security when making regular BTC transactions.
From how to use Electrum to its unique architecture, it has all the traits of a great wallet. But you should compare it to other options depending on your needs. For example, if you plan to handle very large quantities of BTC, or combine multiple different coins, it is advisable to select a different wallet, such as Ledger Nano S.
However, people who need to receive and send BTC regularly should strongly consider using Electrum. Remember that the security of your wallet, and the assets stored there, will largely depend on your ability to employ the best practices. These include keeping your wallet and your computer updated, storing a copy of the seed phrase away from the main computer, and not visiting risky websites.