Our team is very familiar with the way wallets like MetaMask work and how they actually function. In the article we will break down exactly how the wallet works, everything you need to know about setting it up, and explain other important information like gas fees.
MetaMask is a wallet which enables decentralized services and allows you to access the Ethereum node on the web or through an app. The wallet functions through the use of a private key which stores information on a ledger; the private key gives you ownership to the digital item and/or tokens.
Our team has put together a more in depth explanation as to the way wallets function. Continue reading to find out how the wallet actually works. We also explain how you can set up an account and everything you need to know about MetaMask.
The wallet enables dapps or decentralized applications such as DeFi (decentralized financial services) which provides many of the functions as brick and mortar banks. An additional example of dapps that can be accessed through wallets like MetaMask is the storing of collectables like non-fungible tokens (NFTs). NFTs can be stored in a wallet and can be exchanged or sold for tokens like Ethereum. If you want to become an NFT expert, we have an article with an in depth explanation breaking down what they are.
MetaMask is available as a web browser extension; it can be download here (Also linked later in the article). This extension includes an Ethereum web3 API which is automatically downloaded; this enables access to the Ethereum blockchain from a browser or web application. The wallet connects to an Ethereum node and enables the web application to analyze blockchain data and therefore allows transactions to occur.
One important aspect of the wallet to note is that the wallet doesn’t actually hold the items like a physical wallet does. MetaMask only stores the information that gives you access to the token; the access is stored in something known as a private key.
The wallet uses a public and private key. The public key is used for identification and is widely distributed for all users in the blockchain to see. The private key is used for encryption and gives ownership to the user with it. The wallet has a secure and easy to use interface that allows you to preview a transaction before it is made.
Crypto currencies are kept on a large database known as a ledger; a ledger documents all transactions that occur. The most commonly used ledger within cryptocurrencies is known as the blockchain.
Continue reading to find out about the safety of MetaMask, how wallets are most commonly breached, why fees exist in cryptocurrencies, what gas fees are, why fees can be high on MetaMask, and our complete guide on using MetaMask.
Is MetaMask Wallet Safe?
One critical matter when evaluating wallets is security – nobody wants to lose valuable assets.
As a general rule, MetaMask is a very safe wallet; MetaMask is even more safe when a hardware wallet is connected. The only way information gets released is through phishing attacks however, the risks are so slim our team doesn’t consider it a concern.
Hardware walles work by storing your private key – which is the master key to your digital assets – offline. If a centralized exchange like FTX goes bankrupt, all users who hold their crypto on the exchange will lose their assets; by using a hardware wallet – you actually are the owner and would not lose any assets due to bankruptcy. More on hardware wallets and the importance of them can be found here.
To find out exactly what a phishing attack is and what makes the wallet secure, continue reading.
The security system is among the best and the MetaMask team frequently works on updates to ensure no breaches occur. Using Infura, the wallet is able to connect to the Ethereum network. It stores wallet keys on the browser which gives users more control, which we consider an advantage.
What is a phishing attack?
Phishing is the attempt of fraudulent attackers to obtain personal information like passwords and other private information; most commonly, phishing attacks are done via email by impersonating the a person of great importance like a government official or even an employee of MetaMask.
Phishing attacks can be avoided by checking the legitimacy and authority of the site; this will help prevent this event from happening. Our team advises you to be cautious especially when sites ask for personal information. Only download MetaMask from the official site (which we have linked to later in the article).
Why Do Fees Exist in Cryptocurrencies & What Are Gas Fees?
The exchange and trade of cryptocurrencies and NFTs are further complicated by high fees. Unfortunately, other wallets (MetaMask competitors) also have high fees. These high fees are driven because of the increasingly high number of users on the Ethereum network.
The blockchain network which Ethereum uses doesn’t have the transaction speed of instant transfers the way a credit card does. The proprietary credit card networks have been optimized for speed and in time our team thinks the blockchain will be similarly optimized (without the use of proprietary technology).
Fees exist because processing and verifying transactions on the blockchain requires energy and someone needs to do this work; this person is called a ‘minor’. Minors are paid fees which are called ‘gas’. The total cost reflects the energy required to complete a transaction on the blockchain.
Gas prices are often quite volatile depending on the amount of users attempting to complete transactions. The price depends on what minors are willing to work for; if the price is too low, they may decline to process the transaction.
Most commonly, gas fees are measured in “Gwei” which can be defined as the amount of ETH spent per unit of gas.
Why Are Gas Fees So High On MetaMask?
Gas fees are important to understand as they have the potential to detrimentally affect the amount of money you make. If you are not careful gas fees can be quite problematic.
When a token is purchased or exchanged, numerous fees are paid. MetaMask has a 0.875% service charge. Additionally, charges for other services like uniswap (a decentralized currency exchange that communicates with MetaMask) typically have a 0.3% fee depending on the amount of traffic at that specific time.
Our team understands why fees are high and can help you transact at a price that is more comfortable for a user.
Here is an illustrated example of a real world situation in which our team is exchanging roughly 1 fiat US dollar (at the time the screenshot was taken) of the token Ethereum for another token known as AAVE. In this illustration, which you can see below, it shows that swapping 0.0005 ETH for AAVE causes the gas fee comes out to around $230. This $1 cryptocurrency transaction incurs $230 in fees!
As the ecosystem for NFTs and crypto assets mature, we here at NFTexplained.info are optimistic that the overhead of high fees will decrease. Changes and improvement are constantly being made and new crypto projects are always coming out with faster transaction speeds and less expensive fees. At this time, it is not possible to eliminate the gas expense however, our team has prepared a tip to help you reduce gas fees. This can be done by trading during off hours or times when less users are trading on the network. This can be done by looking at the Ethereum Gas Prices. Our team has linked to the source here.
As you can see from the screenshot, gas prices are measured in gwei and the chart measures prices at the time you visit the site and gives previous data of prices from the previous 7 days. Prices vary hugely over time. Our team has noticed that prices tend to peak in the morning at roughly 8AM-11AM EST and tend to have lower prices early in the morning and late at night; this is just a general trend we have identified. Variance in price frequently changes at different times and depending on the amount of transacting users at that specific point in time.
How Can I Get MetaMask on Desktop?
Downloading and accessing MetaMask can seem like a daunting task however our team has broken down the steps to help you understand how to access the wallet and how to use all the functions the wallet offers.
If you are on desktop, MetaMask can be downloaded at MetaMask.io. The browser extension can be downloaded on the supported browsers which include: Chrome, Firefox, Brave, and Edge. The browser extension download only takes a few seconds when connected to high speed internet.
If you are not on desktop, MetaMask can be downloaded on the app store for Android and IOS.
Since you will be storing valuable digital assets, the site will make you create a strong password (our team advises you create a complex password – use best practices) and give you a secret backup phrase. It is important to write down the backup phrase in the case of account recovery. The site will then have you confirm the phrase by forcing you to choose the words in the correct order.
How do I Connect my MetaMask Browser Extension to my MetaMask Mobile Wallet?
If you wish to be able to see your cryptocurrencies and NFTs regardless of where you are; you need to connect the desktop extension to a mobile wallet.
- Select your account logo on the top right of the webpage 2. hit settings 3. advanced 4. sync with mobile 5.enter password 6. scan QR code on your phone.
How to Complete a Direct Deposit on MetaMask (USD > ETH)
MetaMask gives you a few ways to purchase cryptocurrencies like Ethereum. The first was is by Wyre and the second is by direct deposit using a debit/credit card on MetaMask. The last way is by sending ETH to your MetaMask account from a different crypto exchange (which we have explained later in the article).
We are going to explain how to complete a direct deposit into your MetaMask account.
Go to the main MetaMask wallet page and hit buy, select direct deposit, select USD and ETH and enter the amount you want to deposit. This will show you the transaction and network fee for the purchase. Hit next and enter information like your name and card number.
The other way to deposit funds into your MetaMask account is by transferring over from Coinbase or Binance which we have explained in the next section of our article.
How to Swap Cryptocurrencies on MetaMask
In the example below, our team is using the mobile MetaMask Application. The desktop version is extremely similar.
Go to the main wallet screen, hit the ‘swap’ button, select the cryptocurrency in which you would like to swap, enter the amount, hit the ‘get quote’ button – the application will show you quotes with the gas fees. If you have enough of the cryptocurrency, the ‘get quotes’ button will become blue and available.
You will be able to view numerous quotes, however, the best quote will be automatically selected for you.
At this point you have to make another decision about the variance in price in quotes provided to you. This variance is known as slippage. Slippage is the rate change from when you hit get quotes to when the order is confirmed. You are able to adjust the slippage from 1%-5%. Fees can be extremely high so be cautious. To help you understand slippage, perhaps a reference to an equity trade is useful. An equity order will change multiple times a second (this is slippage) whereas in a limit order, the purchase price is defined by the buyer. An order will not be fulfilled if the market demand is not there (the transaction will not happen).
How to Add Custom Tokens on MetaMask
Simply hit assets (on desktop) or tokens (on mobile) and click ‘Add Tokens’. Search for the token by entering in the ticker symbol and if the token you are looking for doesn’t show up, hit the custom token button. Enter the Token Address.
Entering the tokens address – this can be completed in two ways. The first way is by viewing transaction history and then by clicking on etherscan.io. Hit the contract for the token which you want to be visible in your wallet. Copy the contract and paste it into the token address; this should cause the token symbol and token of precision should automatically pop up.
The second way to find a tokens contact address is by opening up etherscan.io and then simply searching for the token you are trying to find.
Receiving Tokens From Coinbase & Other Crypto Exchanges
Open the cryptocurrency exchange you are using and hit the ‘send/receive’ button. Copy the account address from whatever wallet you are using like MetaMask and paste the address into the platform you are using for cryptocurrency exchanges.
If you have $50 USD of Ethereum and you want to transfer the Ethereum into a wallet like MetaMask, you will have to send a lower amount like $45 in order to pay for gas fees or the transaction won’t go through.
How to Send Coins on MetaMask
Go to the main wallet screen, hit send, select your account in which you would like to send funds from, enter the recipients public address or scan the recipients QR code, enter the amount you would like to send, hit next to confirm the transaction.
How MetaMask is Used for NFTs
The vast majority of NFTs are stored on the Ethereum blockchain however a small number of NFTs live on other blockchains. Wallets store information like TokenURI which point to a hash file where the NFT is stored or directs you to the metadata that contains the actual location of the NFT.
Wallets like MetaMask don’t actually store the digital token but rather the location of where the NFT is stored on the blockchain. As our team stated previously, wallets don’t work like the ones we keep in our pockets as the actual item is not stored there but rather the bunch of zeros and ones which point to where the NFT lives.
We hope you are just as excited as we are about NFTs and continue to stay informed at NFTexplained.info. To get the latest news in this rapidly evolving space, follow our team on Instagram & Twitter!