According to some on social media, cryptocurrency has gone completely mainstream. But there’s no denying that these days, the best part of the process is that anyone can start investing and devising the perfect investment strategy.
However, what crypto newbies and savvy investors have in common is that they both need to use digital wallets. However, with one quick internet search, you’ll realize there are many options available and it might be challenging to choose the right one.
The first step is to choose between software wallets or hardware wallets. How do you know which one is better or suitable for you? To help, we’ll cover the benefits and drawbacks of both.
Crypto Wallets Explained
Before going further into comparing software and hardware wallets, we should explain what a crypto wallet is. In many ways, a crypto wallet is a lot like a physical wallet in that it holds your monetary goods.
A crypto wallet is a type of program or a physical device that holds encryption material that gives access to crypto funds. When you create a digital wallet, you receive a private key which that opens it. With a crypto wallet, users can send and receive payments and safely store their tokens.
Some crypto exchanges offer custodial wallets, which provide some benefits. However, at the same time, they have access to the private key, which means users have less control. That’s why we’ll focus on non-custodial types of software and hardware wallets.
Benefits of Using Software Wallets
In general, all software wallets are precisely that – software. However, they are separated into three categories:
- Online wallets
- Mobile wallets
- Desktop wallets
Online or web-based wallets are very popular and super easy to use. There are countless options to choose from, and some of them even use open-source technology. These wallets are free, may require private information to use, and usually offer fast payments.
Mobile wallets are designed for those who prefer to pay with Bitcoin or trade while on the go. Many companies cater to mobile crypto users and offer a mobile-friendly interface. Some mobile wallets even use cloud-based technology to minimize the use of phone storage.
Finally, desktop wallets function the same way as any software you can download to your computer. They’re suitable for investors and traders that primarily use their PCs or laptops and might want an alternative solution to web-based wallets.
Benefits of Hardware Wallets
A hardware wallet is a physical device that comes in many forms. Usually, it resembles a USB flash drive but has a display. Some hardware wallets look like credit cards or mini-tablets, and some resemble digital car keys.
Unlike software wallets, these storage units are not free. While some might cost around $40-$50, others can have a price tag close to $200. So, why are hardware wallets expensive, and what makes them an excellent choice for crypto users?
This type of crypto wallet is considered the safest, especially for long-term crypto investments. The private key is entirely unexposed as you never have to type it online. Furthermore, a hardware wallet has PIN encryption that the user creates and holds.
Also, the most popular hardware wallets can store several types of cryptocurrencies. Software wallets usually focus on one or two major tokens such as Bitcoin and Ethereum or Bitcoin and Litecoin.
A hardware wallet also has an interface – usually an accompanying software or web-based. It’s typically not geared towards beginner users and might be challenging to navigate.
The only significant downside of hardware wallets, other than their price, is that you need to keep them safe. If you lose a hardware wallet, getting back to your crypto assets can be complicated and often impossible.
Those interested in crypto hardware wallets can explore reliable and well-established brands such as Trezor, Ledger, Safepal S1, or Coolwallet Pro. But there are many other solutions available on the market.
Choosing the Winner
In reality, software and hardware wallets are not in direct competition. They cater to different types of crypto investors. Furthermore, many software wallet users choose to invest in a hardware wallet at some point.
Storing more considerable sums of digital tokens is safer with a hardware wallet, especially if you’re not going to cash in for a while. On the other hand, for everyday smaller transactions, software wallets offer convenience, ease of use, and are free of service charges. Ultimately, there is no right or wrong answer, just personal preference and strategy.