Ethereum is one of the most important blockchains in crypto. It’s home to a thriving ecosystem of decentralized financial (DeFi) products that provide users with opportunities to earn and transfer value. Central to all these is the Ethereum Virtual Machine (EVM) and EVM wallets.
The EVM is code built into the Ethereum blockchain that allows other programs to run on it. Similarly, an EVM wallet allows users to interact with the various dApps on the Ethereum network. Of course, there are pluses and minuses to using them. So, as always, it is imperative that you take the time to learn about them before you use them.
In this article, we’ll cover the basics of the EVM and EVM wallets. Then we’ll talk about how the wallets work and what to consider before using them.
What is an EVM Wallet?
An EVM wallet is an application that lets you store and transact crypto assets on the Ethereum blockchain. Examples include Metamask, Brave Wallet, Trustwallet, and the Coinbase dApp. These are able to function because their software programs are compatible with a crucial part of the protocol – the Ethereum Virtual Machine (EVM).
What is it?
The Ethereum Virtual Machine
The EVM is the part of Ethereum that executes smart contracts. By doing so, it provides a platform for decentralized applications (dApps) to run. Such apps include the crypto wallets mentioned above, decentralized exchanges (DEXs), video games, lending platforms, and aggregators.
Note that the EVM isn’t a physical machine in a room somewhere. It is a virtual machine that is maintained by a global network of nodes (computers) on Ethereum. However, it behaves like a real computer, which is why it’s able to execute programs and run code. One example of this is smart contracts, which are lines of code on a blockchain.
Another function of the EVM includes enforcing the rules of Ethereum and defining the state of the protocol at any given time. This makes it crucial to the functioning of the blockchain. Without it, Ethereum would be a radically different blockchain from what it is today.
How Do EVM Wallets Work?
Since they run on a blockchain, EVM wallets are dApps. A dApp is an application whose control and ownership belong to no one. It is decentralized.
This means that EVM wallets are non-custodial. While using one, you won’t be entrusting the custody of your cryptocurrencies to someone else. The app gives you your private keys in the form of a mnemonic phrase – a series of 12-24 randomly generated words that are cryptographically linked to your private keys.
Having these keys gives you full ownership and control of your crypto funds. This is a key distinction from wallets that you find in centralized exchanges like Binance. Such wallets are custodial, i.e., the private keys stay with the exchange.
This gives the exchange the power to freeze your funds if they deem it necessary. There are also some potential risks. For instance, you may lose your funds if the platform is hacked. You’ll also lose the ability to withdraw your crypto if the exchange collapses or goes bankrupt.
Using an EVM Wallet
Most EVM wallets are open-source projects. This means that they are actively developed and maintained by their respective communities. Thus, they are free to download as web apps and/or mobile applications.
Once you’ve downloaded your EVM wallet, setting it up is easy. There’s no signup process that collects your personal data. The application will prompt you to create a wallet, which you can do by simply clicking a button.
It will then generate your mnemonic phrase and request you to write it down. This is a crucial step as this phrase is only generated once and if you lose it, there’s no way to recover it. You’ll then be asked to create a password. The password acts as a security measure to prevent unauthorized access to your crypto wallet.
Pros and Cons of Using an EVM Wallet
The benefits of using an EVM Wallet include the following:
- Easy to Use
EVM wallets are some of the easiest to use among self-custody wallets. As demonstrated above, creating one is relatively straightforward. There is no signup process or KYC procedure. And as an added benefit, they cost nothing.
- True Ownership
EVM wallets allow you true ownership of your funds by giving you your private keys. You are solely responsible for your funds. As long as you have these keys, you can send, receive, and withdraw crypto from your wallet as you wish.
This is not the case with wallets that keep your keys for you. Over the years, we’ve seen people lose access to their funds when an exchange starts struggling due to hacks, poor management, or market downturns.
- Smart Contract Interactions
EVM wallets can interact with smart contracts. This makes it easy to use other dApps in the DeFi ecosystem. For instance, you can interact with exchanges and perform swaps directly from your wallet.
Since Ethereum launched, EVM has been adopted by many other blockchains. Such blockchains are known as EVM-compatible protocols. They include the Binance Smart Chain (BSC), Avalanche, Cardano, Fantom, and Polygon.
Because they are EVM compatible, you can add all these chains to your EVM wallet. Therefore, instead of having a wallet for each cryptocurrency, you have one for all.
However, there are downsides to EVM wallets. Most of these center around security. For example, being hot wallets, the private keys of EVM wallets are stored directly on your device which is connected to the internet. This makes EVM wallets more vulnerable to hacking than hardware wallets.
EVM wallets are also a popular target for phishing attacks. Therefore, you must be careful of the kinds of websites you visit and sign with your wallet.
Lastly, given how easy it is to interact with smart contracts, EVM wallets are exposed to smart contract risks. You can lose your funds by interacting with a buggy smart contract. Hackers can also exploit smart contract vulnerabilities.
EVM Wallets Example
There are many EVM wallets in the Ethereum ecosystem. Popular examples include:
- MetaMask: Created in 2016, Metamask has gone on to become the most widely used EVM wallet.
- Trust wallet: Trust wallet is a popular Ethereum wallet application. It’s easy to use and supports hundreds of ERC-20 tokens.
- MyEtherWallet (MEW): MEW is an open-source wallet developed for use on the Ethereum blockchain.
Potential Issues with EVM wallets
Here are some issues you may face when using an EVM wallet:
- Forgotten password: EVM wallets require a password every time they’re opened. If you forget your wallet’s password, you’ll be unable to open it and access your funds. Solving this will require you to use your seed phrase to recover your wallet.
- Forgotten or lost seed phrase: Losing/forgetting your seed phrase means you no longer have a way to recover your wallet. This makes it a more serious problem than forgetting your password.
- Stolen seed phrase: Someone else may get their hands on your seed phrase. If this happens, your funds are at risk of getting stolen. Therefore, you should move them to a new uncompromised wallet immediately.
- Adding chains: You can add different chains to your EVM wallet. However, it’s not always a straightforward process. Adding some chains requires more work than others, which can be hard for beginners. You’ll also have to do some research to know which chains are compatible and which are not.
EVM wallets are the most readily available and widely used wallets in crypto. Their biggest advantages are that they’re easy to use, free to download, and support a wide variety of tokens and chains.
However, issues do arise every once in a while. The most common is a lost password and a forgotten seed phrase. Nothing can really be done about the latter. However, recovering a forgotten password is possible with the help of password recovery experts, like Professional Crypto Recovery.