The key difference between hardware wallets and software wallets is that hardware wallets are real physical devices that are used to store private keys, whereas software wallets are stored locally within a computer’s desktop or hard drive.
Cryptocurrencies are now a major sector of an individual’s investment portfolio, but how can investors keep their cryptocurrencies safe? That’s why there are different types of Crypto wallets on the market for investors to safely store their crypto assets. The two main different types of wallets are hardware wallets and software wallets.
CONTENTS
1. Overview and Key Difference
2. What is a Hardware Wallet
3. What is a Software Wallet
4. Hardware Wallets vs Software Wallets in Tabular Form
5. Summary – Hardware Wallets vs Software Wallets
What is a Hardware Wallet?
A hardware wallet is a tangible physical wallet that is used to store private keys. A private key is a string of numbers or letters that are stored in a file. A private key is essentially an investor’s password. A hardware wallet is the safest and most secure type of wallet since it is held on a physical device that is not connected to the internet, making it totally resistant to internet hackers. On a hard wallet, an investor can rest assured that their assets are secure. A hardware wallet, however, could be mistakenly misplaced by the owner, in which case the owner would lose all of their assets.
Figure 01: Ledger Nano Hardware Wallet
A hardware wallet, although safe from online hackers, is less accessible when compared to software wallets, as they have to be plugged into a computer to access your assets. The Ledger Nano is believed to be the best hardware wallet on the market, and it is only the size of a standard USB. It has support for over 700 different types of cryptocurrencies, although the device is pretty expensive, costing anywhere between $100 to $300.
What is a Software Wallet?
A software wallet is a type of crypto wallet that is stored locally within your computer’s desktop or hard drive. A software wallet is a programme that can be downloaded for the internet to store your keys. These wallets are usually very cheap than hardware wallets, and in some instances, they can be free. Although they are very cheap, they are susceptible to online hackers as these wallets are remotely connected to the internet.
Figure 02: Different Types of Software Wallets
In addition, a software wallet is very easy to use and is easily accessible as it is already located within your computer. The most common software wallet is Exodus. It has support for many of the major types of cryptocurrencies and several other altcoins. The exodus interface is well crafted, ensuring that the user can easily manage their private keys without feeling confused. On top of all of that, Exodus is free to download, making it the best option for smaller investors.
What is the Difference Between Hardware Wallets and Software Wallets?
Both hardware and software wallets have the same aim: to store an investor’s private keys safely and effectively to enhance the safety of an investor’s crypto assets. However, they are very different as a Hardware wallet is stored offline and on a physical medium while a software wallet is stored locally on a computer. Due to this, Hardware Wallets are safer as they are immune to online hackers. Thus, this is the key difference between hardware wallets and software wallets. However, hardware wallets are very expensive, while software wallets are cheap and often free.
The below infographic presents the differences between hardware wallets and software wallets in tabular form for side by side comparison.
Summary – Hardware Wallets vs Software Wallets
Both hardware wallets and software wallets store private keys and hence protect the loss of an investor’s crypto assets. The key difference between hardware wallets and software wallets is that a hardware wallet is stored offline on a physical device while a software wallet is stored locally on a computer.
Image Courtesy:
1. “Bitcoin senden mithilfe des Ledger Nano S” By Marco Verch Professional Photographer (CC BY 2.0)
2. “Wallet Apps” By Shahnazi2002 – Own work (CC BY-SA 4.0) via Commons Wikimedia