Electrum Wallet Review: Is Electrum a Good Wallet?

Description

What is Electrum wallet? Electrum is a noncustodial, open-source bitcoin-only wallet. It is a lightweight wallet that can be used on a desktop, mobile, or with the command line interface. Electrum is compatible with the hardware and multisig wallets. It supports Lightning Network for fast and cheap transactions and is intended to store, send, and receive bitcoin.

How Does Electrum Wallet Work

Electrum runs on such operating systems as Windows, Linux, macOS, Android, and Tails. You can download the desktop wallet from the official website or the Electrum mobile wallet from Google Play Store.

I recently downloaded Electrum desktop version to try it out myself. Here’s a breakdown of the installation wizard to help you get started. Download the latest version of Electrum from the official Electrum website. Once the installation is complete, open the program. The Install Wizard will appear. Click on “Create Default Wallet” and proceed by clicking “Next.” Choose the type of wallet you wish to create. There are four options for you to create Electrum wallet:

• Standard Wallet
• Wallet with 2FA (Two-Factor Authentication)
• Multi-signature Wallet
• Import Bitcoin Addresses/Private Keys

Electrum Standard Wallet

With a standard wallet, you have the option to create a new seed or restore from an existing one. Supported addresses include SegWit and Legacy. The standard wallet allows you to use the master key to create a watching-only wallet by entering your master public key (xpub/ypub/zpub). For a spending wallet, enter a master private key (xprv/yprv/zprv).

Electrum 2FA Wallet

This type of wallet uses multi-signature technology, where you possess 2 of 3 keys, with the third key stored on a remote server. You’ll need Google Authenticator installed on your smartphone to use this wallet. A small transaction fee is applied for transactions using the remote server. However, your funds are not locked in this service, and you can withdraw your funds at any time and at no cost by using the ‘restore wallet’ option with your wallet seed.

Electrum Multi-signature Wallet

If creating a multi-signature wallet, choose the number of signatures required to unlock funds, as well as the number of cosigners and signatures using a sliding bar.

Importing Bitcoin Addresses

For this type of Electrum wallet, you need to enter a list of addresses to create a watching-only wallet. To import private keys, enter a list of private keys using QR codes, by opening a file, or by writing them directly.

Once you’ve completed these steps, your Electrum wallet should be set up and ready to use according to your chosen configuration. Remember to keep your seed and private keys secure. If lost, there’s no way to access your funds.

Does Electrum Support Lightning?

Yes, Electrum supports the Lightning Network. To use Lightning in Electrum, you need the latest version of the software, as Lightning Network support was introduced in Electrum 4.0 and later. When creating a new wallet, you can enable Lightning Network support, and existing wallets can be converted to support it via the wallet information settings.

To get started, you first need to create a Lightning channel, which involves an on-chain BTC transaction, so you must already have on-chain BTC. While it’s possible to have someone else create the channel for you, it’s generally done by the user. After creating the Lightning channel, you can only send money via Lightning, not receive it. To receive payments, you either need to spend some Lightning BTC (LN-BTC) or perform a submarine swap.

Once the channel is open, you can send payments almost instantly and with minimal fees. To send a payment, use the Lightning tab to open a channel, choose an amount to commit, and select a node to connect to. Payments are made by entering the Lightning invoice details in the Send tab. To receive payments, generate a Lightning invoice in the Receive tab and share it with the sender.

Channel management is accessible through the Channels tab, where you can view the status of your channels, close them, or adjust their capacity. The amount you can send or receive is limited to the channel’s capacity. Regular backups of your wallet are crucial when using the Lightning Network, as losing your wallet data can result in losing access to your funds.

A Watchtower service is a feature in the Electrum Lightning wallet that allows for monitoring and auto-updating of your lightning nodes . It periodically checks for new software versions or updates, ensuring your node remains up-to-date and secure from potential vulnerabilities . With this feature, you can automatically update your node to the latest version without needing to manually initiate the process . This is particularly useful when running a public node, as it ensures uninterrupted service for users routing through your node .

Electrum Android App

To use the Electrum wallet on your Android device, start by downloading the app from the Google Play Store. After installing the app, open it and proceed to create a new wallet with a name of your choice. Electrum offers three types of wallets to choose from: Standard, Wallet with Two-Factor Authentication, and Multi-signature wallet.

The Standard wallet is the simplest option, requiring no additional authentication measures. If you opt for the wallet with Two-Factor Authentication, you will need a separate device with Google Authenticator installed. In this case, you will possess two out of the three keys required for transaction signing. The third key is held on a remote server, which charges a small fee for signing transactions. However, if you prefer not to rely on the remote server, you have the option to withdraw your funds using the ‘restore wallet’ feature.

If you are seeking enhanced security and involvement of multiple participants, the Multi-signature wallet is available. When setting up a Multi-signature wallet, you will be prompted to specify the number of participants and the number of signatures required to access your funds. The minimum number of cosigners and signatures is two, while the maximum allowed is 15.

Additionally, if you have existing Bitcoin addresses or private keys, Electrum provides the functionality to import them into the wallet. Importing Bitcoin addresses enables you to create a watch-only wallet, allowing you to monitor the funds without the ability to spend them.

Advantages of Electrum

• Simple Payment Verification (SPV) method. The SPV method allows verifying transactions without downloading the entire blockchain. It makes Electrum lightweight, thus enabling it to send and receive bitcoin quickly.
• Two-factor authentification. Electrum has two-factor authentication functionality, adding a new security level. 2FA uses a third-party service, TrustedCoin: it stores another key in addition to the one stored in the wallet file on your computer. Bitcoin cannot be sent without a transaction signature on the TrustedCoin side.
• Multisig wallet. This type of wallet requires two persons to sign off on a transaction before it can be completed. Multsig feature adds an extra layer of security and helps to prevent unauthorized access to funds.
• Anonymity. Electrum does not require registering with an email address or providing other personal information. The wallet does not reveal any personal information (no-KYC wallet). There is no Tor support functionality implemented into the application, but there is an instruction from the developers on how to use the wallet in the Tor network. You can use this possibility to get more anonymity.
• Watch-only wallet. This means you can view your wallet balance and create transactions without storing the private key.
• Cold storage support. To hold your sats and sign transactions, Electrum offers cold storage technology. It can be implemented in an offline software wallet (Electrum offers to install it on a device disconnected from the internet) or in third-party hardware wallets such as Trezor, Ledger, and Keepkey.
• Replace-by-fee (RBF). Electrum RBF feature allows you to replace an unconfirmed bitcoin transaction with a higher fee to speed up the process.
• Hold invoice: Hold invoices is a temporary pause button on payments that are flagged for issues like missing information, discrepancies, pending approvals, or disputes. This prevents automatic payments and ensures any concerns are addressed before processing.
• Portable: You can export your private keys for use with other Bitcoin wallets.

Disadvantages of Electrum

• No customer support. You can not use live chat or write an email to get answers to your questions. Instead, you can read documentation on the official website, visit the official Electrum forum or read the information on Twitter or Reddit.
• Some wallet versions are susceptible to phishing attacks. Electrum versions older than 3.3.4 are susceptible to phishing attacks, as well as other security vulnerabilities.
• No iOS mobile wallet. Electrum mobile wallets are designed for Android devices.
• It is a hot wallet. Like all the hot wallets, Electrum can be vulnerable to attack from hackers. To reduce the risk of hacking, developers provide an array of security measures to keep your funds safe.

Electrum Wallet Fee

While Electrum itself is free to use and receive bitcoin, sending bitcoin transactions incurs fees that incentivize miners and maintain network stability. The Electrum’s Replace-by-fee feature allow you to increase the miner fee of an unconfirmed transaction to speeding up its confirmation. In addition, the wallet allows you to set custom fees manually, offering greater control over transaction cost. The Electrum wallet Lightning feature also offers cheaper off-chain transactions.

Is Electrum a Good Wallet?

Electrum is a trustworthy and a good wallet, particularly well-suited for advanced users. It is a robust Bitcoin wallet option favored for its advanced features and security measures. It boasts features like 2FA, Watch-only wallet, RBF, and multsig capabilities. Additionally, integration with hardware wallets enhances its security further.

One of the notable advantages of Electrum is its ability to export private keys to other wallets, offering you flexibility and control over your funds. Moreover, Electrum uses servers that index the Bitcoin blockchain for faster searches and efficient handling of the growing blockchain.

The combination of these features makes Electrum a compelling choice if you are seeking a secure and self-custody Bitcoin wallet. Its offline signing capabilities (watch-only) and decentralized nature contribute to its reputation for enhanced security and user control. Furthermore, Electrum’s support for Lightning Network transactions facilitates faster and cheaper transactions. Being a Bitcoin-only wallet, Electrum aligns well with the principles of bitcoin maximalists.

While Electrum offers numerous advantages, it’s important to acknowledge its weaknesses as well. Based on my analysis, I would not recommend the Electrum wallet for beginners due to its advanced features, interface, and lack of customer support options. The wallet can be a little confusing because of its many options. There are no live chat or email to seek assistance or resolve queries, which may pose challenges, especially for less experienced users encountering issues.

For inexperienced users, using Electrum Lightning features can be challenging due to its more manual approach. Unlike Lighning wallets like Phoenix, Wallet of Satoshi, Breez, and Exodus which automate channel opening and offer inbound liquidity for you, Electrum requires users to individually establish channels and supply inbound liquidity.

Moreover, Electrum, being a software wallet, may be more vulnerable to attacks from hackers compared to hardware wallets. Although Electrum implements various security measures, such as encryption and seed phrases, the inherent risks associated with online software wallets remain. You must exercise caution and adhere to best security practices to mitigate these risks effectively. Finally, it’s important to note that there’s no Electrum wallet available for iOS users. If you are an iPhone user, you can explore these top mobile wallets for iOS.

More Information

• Electrum documentation
• Official announcements on Twitter
• Bitcointalk Forum to ask questions

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