Cryptocurrency wallets are used to secure your digital assets including cryptocurrencies, NFTs, digital identities, etc. Digital wallets also act as an interface that allows you to use your cryptocurrencies in a variety of ways, such as exchanging them for other assets, staking them for profit, or deploying them in decentralized finance (DeFi) protocols to earn investment income. Let’s differentiate between software wallets vs hardware wallets.
Hardware Wallets
Hardware wallets allow users to store their cryptocurrencies on the device. The private key is saved on the device and always offline. To transfer cryptocurrency to another wallet, users must enter a PIN on the hardware device. This provides an extremely secure way to store large amounts of cryptocurrency. Likewise, hardware wallets are no longer practical for active cryptocurrency traders. Indeed, making last-minute transactions is tedious because access to hardware devices is required. The best cryptocurrency wallet providers are Trezor and Ledger Nano. Both are decentralized because neither vendor has access to the device's private key. However, keep in mind that users will need to provide certain personal and financial information when purchasing a hardware wallet online.
Usually a physical device that resembles a bank card or USB stick, hardware wallets are a subset of cold wallets. Because someone would need to physically steal a hardware wallet from you in order to access your cryptocurrency holdings, hardware wallets are thought to be more secure than software wallets. The primary characteristic of hardware wallets is the storage of digital assets on a physical, offline device that has been configured with software. This implies that since your hardware wallet isn't linked to the internet unless you need to make a transaction, online hackers cannot access it.
For this reason, hardware wallets are particularly helpful when holding big volumes of bitcoin.
Furthermore, a lot of hardware wallets have the capacity to hold numerous cryptocurrencies, which makes them ideal for safely keeping whole cryptocurrency portfolios. Ledger and Trezor hardware wallets are two examples of well-known models.
Despite their popularity in the crypto market, hardware wallets have some drawbacks.
- Value: Unlike software wallets, hardware wallets are not free. They can range from $50 to $200, depending on the brand and features and functionality. This can be a barrier for those who do not hold large amounts of money.
- Limited number of supporting assets: Not all cryptocurrencies are supported by all hardware wallets. It might not be able to keep a digital asset using a hardware wallet if it is less widespread.
- Limited accessibility: Since a hardware wallet must be physically connected to a device (usually via USB) to transact, it can be less convenient, unlike mobile wallets like the Our Wallet app, that you can access from everywhere.
- Risk of loss or damage: If you lose your hardware wallet or the wallet is damaged, you risk losing access to your digital assets. Most wallets have a recovery process, but you need to back up your recovery secret. However, if you forget or lose your passphrase, your crypto assets will be gone.
- User Experience: Especially for a novice, using a hardware wallet can be challenging. These usually involve setting up a PIN, a recovery seed, and manually using the small buttons on the device. This complexity can frustrate some users.
Software Wallets
Software wallets serve as an interface to the blockchain, which houses all of the transactions and cryptocurrencies connected to your wallet address, rather than actually storing your digital money.
These so-called "hot Wallets" are designed to be utilized using an application that is installed on your desktop computer or mobile device, or through a web browser extension. They are often simpler to use than hardware wallets and are available from any location with an internet connection. However, they are less secure than hardware or cold wallets since they require an internet connection in order to access your private keys, making them susceptible to hackers.
Installing and configuring a software wallet on your desktop computer or smartphone is required in order to utilize it. You may use the wallet program to store and manage your cryptocurrency assets as soon as you've downloaded it and made a new wallet. Our Wallet is an excellent illustration of a software wallet that is available as a browser extension or as an app for your mobile device. With Our Wallet, you can manage and store more than a million digital assets from up to 70 blockchains—including NFTs—under one roof.
With more than million users of Our Wallet, you have complete control over your private keys and digital assets.
Decentralized apps (dApps) can also be accessed via software wallets. For example, Our Wallet comes with a built-in dApp browser that lets you access dApps across many blockchains. Software wallets, such as Our Wallet, also have the noteworthy benefit of being simple to use and access on a daily basis. This is because you don't need to carry about a physical device that can be lost and is difficult to retrieve. Finally, software wallets can instantly enable near-field communication (NFC) or QR code scanning to process payments at real stores.
Software wallets provide a number of advantages, but they can have disadvantages.
- Security risks:
Software wallets are more vulnerable to phishing, malware, keylogging, hacking, and other cyberattacks than hardware wallets, which store your private keys offline and are typically virus- and malware-free.
- Network connection:
Software wallets need an internet connection in order to conduct transactions, which might be a problem in places with inadequate connectivity.
Best Decentralized Crypto Software Wallet
Trust wallet
An open source multi-currency crypto wallet that supports multiple cryptocurrencies. Available for both mobile devices and as a browser extension. It allows you to bet a certain amount of cryptocurrencies and buy some of them with a bank card. The wallet has a built-in Web3 browser for users to access dApps. Considered one of the safest wallets.
MyEtherWallet (MEW)
Client-side interface for interacting with the Ethereum blockchain that is open source. Supports all ERC-20 tokens, allowing users to interact with popular hardware wallets and work with dApps. Additionally, it offers cross-chain swaps and allows users to withdraw Ethereum for Euros or Swiss Francs. Available for browsers and mobile devices.
Our Wallet
This best crypto wallet features an intuitive and user-friendly interface. Available as a mobile app. The wallet supports Ethereum and all major digital assets.It is the most secure, private and user-friendly app.
Exodus
One of the most adaptable and flexible multi-chain wallets is Exodus. Exodus is the platform of choice for exchanging, staking, buying, and NFT storage because it supports more than 260 coins. Exodus wallet provides users with unmatched levels of ease and usefulness across a range of channels, including desktop, mobile, browser extension, and physical wallet.
Which type of wallet (software or hardware) is more secure?
There are several aspects that might influence a decision when selecting a cryptocurrency wallet. Software wallets can provide you with a terrific user experience and even an amazing user-friendly interface, to name a few benefits. However, because they require an internet connection to function, hackers can more easily compromise their security and permanently destroy your cryptocurrency.
Thankfully, if we store our private keys in a hardware wallet or, at the very least, store the majority of them there, the several protection levels offered by hardware wallets reduce this risk to a minimum. Put otherwise, you should store the majority of your cryptocurrency in your hardware wallet and utilize a software wallet to store whatever you wish to use for transactions or trades in the near future.
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