Electrum Wallet

Electrum is a free, open-source wallet for Bitcoin, first released in November 2011 by the developer Thomas Voegtlin. It is a lightweight wallet: instead of downloading and checking the whole of the Bitcoin blockchain, it connects to a network of independent Electrum servers that supply the transaction data it needs. It runs on Windows, macOS and Linux, with an Android version, and is one of the oldest Bitcoin wallets still in active development.

Electrum is a non-custodial desktop wallet: the user's private keys are generated and stored on their own device, and Electrum's developers never hold users' funds. It is popular with experienced users because of its speed and its advanced features, including multisignature wallets, hardware-wallet support, coin control and Lightning payments. It supports only bitcoin, unlike multi-coin wallets, although other projects have created modified versions for other coins.

Running a complete Bitcoin node is like keeping a full copy of every bank statement ever issued, which takes a lot of disk space and time. Electrum takes a shortcut. It keeps only the keys to the user's own money and asks helper computers, called servers, for the parts of the record that concern the user's addresses. It then checks the answers with cryptographic proofs, so a server cannot simply invent payments.

The result is a wallet that opens in seconds and works on an ordinary laptop. The trade-off is that the user leans on outside servers for information, which can reveal which addresses belong to them, unless they run their own server.

Electrum appeared in 2011, when the only widely used Bitcoin software was the original client, which required users to download the entire blockchain before they could spend anything. Voegtlin's goal was a wallet that started instantly and could be restored from a short seed, at a time when many early users lost coins through corrupted or forgotten wallet files. The project grew into a small team of volunteer and paid developers, and the server software was reimplemented several times by independent contributors, most widely as ElectrumX. Over the following decade Electrum added support for new Bitcoin features shortly after they were adopted, including SegWit addresses and later Lightning, and it became the basis or inspiration for several other wallets. It remains free to use; an optional two-factor service run by a third party charges a fee.

When a wallet is created, Electrum generates a seed phrase from which all keys are derived, making it a deterministic wallet. Electrum was among the first wallets to adopt this approach. It uses its own seed format by default rather than the more common BIP-39 word lists, though it can import BIP-39 seeds; users moving between wallets need to be aware of the difference. To check balances, the wallet asks Electrum servers about its addresses and verifies the answers against block headers using simplified payment verification, a technique described in the original Bitcoin whitepaper. Users who want full independence can point Electrum at a server connected to their own full node.

• Hardware wallet support. Electrum can act as the interface for a hardware wallet, keeping keys on the device while handling transactions on the computer.
• Multisignature wallets. Users can create a multi-sig wallet requiring several keys to approve a payment, useful for businesses and shared custody.
• Cold storage. Electrum can run on an offline computer that signs transactions while an online "watching-only" copy builds and broadcasts them, a form of cold storage.
• Fee control. Users can set fees, raise them on stuck transactions and choose which coins to spend.
• Lightning. Since version 4, released in 2020, Electrum has supported payments over the Lightning Network.
• Address types. It supports Segregated Witness addresses, which lower fees.

Electrum's biggest security incident came from its reliance on public servers. From December 2018, attackers set up malicious Electrum servers that sent users of older versions a fake error message urging them to download an "update". The download was malware that stole funds, and reported losses ran to millions of dollars over the following months. The attackers later added large numbers of servers to crowd out honest ones, alongside denial-of-service attacks on legitimate servers. The developers changed the software so that servers could no longer display such messages and urged users to download Electrum only from its official website. The episode is a classic case of phishing aimed at crypto users.

Electrum's strengths are its long track record, speed, low resource use, open-source code and flexibility for advanced setups. Its limitations are a technical interface that can confuse beginners, support for bitcoin only, a privacy cost when using public servers and the general risks of any software running on an internet-connected computer, which makes it a hot wallet unless paired with offline signing. As with any self-custody wallet, losing the seed phrase means losing the funds, and nobody can restore access.

• Electrum Bitcoin Wallet