Author:
Kelley Daniels
Date:
24/02/2023
Experiences:
Kelley is your go-to for all things NFT!
Experiences:
Kelley is your go-to for all things NFT!
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Table of Content
What is a cryptocurrency wallet?
When you purchase Bitcoin, or any other digital currency, thereâs nothing tangible that you can actually touch. You keep your flat currency in bank and savings accounts, and although you can transfer these funds electronically, itâs possible to withdraw real cash that you can hold in your hand, and store in a physical wallet.
When you buy cryptocurrencies, there are no actual coins or notes that you can see. And even when you make a purchase, the digital currency itself is securely locked away within a blockchain ledger. So what you actually purchase is two keys â a public and a private key â which give you control over that asset. And itâs these keys which you need to store safely, as without them, your crypto becomes completely inaccessible.
How private and public keys work
The public key for your crypto asset operates in much the same way as your bank account number. It gives the exact location of the currency so that it can be identified in transactions. This is the information youâll need to provide when moving or trading that asset.
Your private key, on the other hand, is much like your PIN, in that itâs restricted information that gives access to your funds. So if someone has both your public key and your private key, they effectively have control over your cryptocurrency. And since these markets are unregulated, thereâs no way of recovering your money. So keeping those keys safe is absolutely essential!
Introducing the crypto wallet
If youâre only just embarking on your cryptocurrency journey, weâve got everything you need right here at BitStacker.com to get started. Our comparison guides make it easy to narrow down your crypto-buying options, checking out our Trezor review, and discovering which are the best crypto exchanges for your needs. But the keys to your new crypto assets need to be safely stored somewhere â but where?
When youâre out of your comfort zone and everything seems unfamiliar, deciding whether youâd be better off with a hardware or software crypto wallet certainly isnât going to be on your radar. And since most crypto exchanges offer the facility to store your crypto assets on their site, you might not be aware of the risks.
Every crypto investor needs a digital wallet
A crypto wallet is an absolute essential for anyone buying, investing or trading in Bitcoin and other cryptocurrencies. Hackers are extremely interested in crypto brokers and exchanges, simply because they tend to have access to huge stores of digital assets. So keeping your cryto on the site is leaving it exposed and vulnerable to attack.
Regardless of whether you choose a hardware or software crypto wallet, itâs absolutely essential to have one. Safe and secure storage for your public and private keys will ensure that only you can access your precious crypto portfolio.
Exploring hardware vs software crypto wallets
Digital wallets come in two main types â either hardware or software. The option youâll choose will be dictated by a number of factors, including:
- Cost: some wallets are completely free to use, whilst you could end up paying hundreds for some of the more technically advanced hardware options
- Security: everyone needs to be security conscious in unregulated cryptocurrency markets, but investors with larger portfolios will be keen to track down the options offering top-level security features
- Ease of use: a basic wallet is likely to be more suitable for first-time crypto investors and those who are just testing the waters
- Functionality: the ability to store multiple crypto assets and even buy more crypto directly from the wallet is something that more experienced investors are likely to be interested in.
There are advantages and disadvantages to both types of crypto wallet, so itâs not possible to state that one option is categorically better than the other. Youâll need to take a look at how each type of wallet operates, so that you can make up your own mind which crypto wallet might be best suited to your requirements.
Software wallets
Weâll begin our hardware vs software crypto wallet exploration with a close-up look at software wallets. These can be broken down into three variants:
Software wallet advantages
- A great range of options available, to suit all types of investors
- Fast and convenient transactions
- Some software wallets support multiple currencies
- Extensive support usually available
- Good option for small or frequent transactions
- Free to download, or minimal cost for paid options
Software wallet disadvantages
- Wallet is susceptible to hacking attempts, including viruses and malware
- Security may not be at the highest level
- Online wallets donât give you control of your private keys
- Transaction charges may apply
Our favorite crypto wallets
Hardware wallets
In this section of our hardware vs software crypto wallet article, weâll be concentrating on hardware wallets. These are physical devices that you can hold in your hand. And crucially, a hardware wallet isnât connected to the internet, or held in the cloud, making it the safest way to store any digital assets.
Hardware wallets are available for every type of crypto investor, from the absolute beginner to the experienced trader. They tend to be expensive, although some budget models are available, but if youâre holding valuable crypto assets, paying extra to secure them is an extremely sensible route to go down.
The internet is teeming with viruses that have been created specifically to seek out private crypto keys and send them to hackers. That means software wallets are extremely vulnerable, with the need for regular updates in an attempt to stay one step ahead of the criminals. Thatâs not something you need to worry about when you use a hardware wallet, as your device isnât connected to the internet.
Hardware wallets offer an extra level of security
In the crypto wallet hardware vs software debate, thereâs no question that hardware wallets canât be beaten on security. Once you understand how crypto hardware wallets work, itâs obvious that software wallets pose much more of a risk, due to the fact that they can so easily be accessed. But your hardware wallet is a completely separate device, thatâs only connected very briefly to verify transactions.
Some of the best crypto hardware wallets donât even need to connect to the internet at all. Digital displays on the device allow you to verify signatures and authorise transactions offline, using a QR code to transmit the data to the other party.
Hardware wallets put you in control of your crypto
A software wallet might seem exceptionally convenient, as you can carry it around safely locked away in your laptop or handheld device. But if you should happen to lose your device, thereâs the potential to lose your Bitcoin or altcoins too.
Hardware wallets can be as small as a USB drive, and even the biggest models could easily slip into a pocket or bag. So you can carry your crypto around with you, using it to complete transactions as needed. The important thing is that you have complete control over your private keys, and without those, your crypto canât be accessed by anyone else.
Hardware wallet advantages
- The safest and most secure option for storing cryptocurrency
- Suitable for large amounts of crypto, across multiple currencies
- Extra functionality, including the ability to buy crypto with some models
Hardware wallet disadvantages
- The most expensive option for storing crypto
- Most models arenât aimed at crypto beginners
- Not as convenient or quick as software wallets
Crypto wallets: Hardware vs software â which is better for your purposes?
So which option would be better for you â a hardware or software crypto wallet? Thatâs a decision only you can make, but here at BitStacker.com, we aim to make that process as easy and intuitive as possible. If youâre still on the fence, try answering the following questions, which should help to point you in the right direction:
How much money will you be investing in crypto?
If youâre only considering dipping your toes into the cryptocurrency waters to test the temperature, a high level of security wonât be your primary concern. An online wallet from your preferred exchange is fine for temporary storage of smaller amounts, but a downloadable wallet will give you a higher level of protection.
Larger crypto investments deserve a higher level of security. Although many software wallets use sophisticated technology to keep cryptocurrencies protected, theyâre not foolproof. Hardware wallets offer a level of security and safety that simply canât be achieved by software alone. A hardware wallet should be your go-to option if you hold, or intend to acquire, a large portfolio of crypto investments.
Which cryptocurrencies are you interested in?
Bitcoin is the primary cryptocurrency that people think of when considering digital assets. It was the first crypto to be developed, so itâs had plenty of time to establish itself in peopleâs minds. But Bitcoin certainly isnât the only option, with new cryptocurrencies constantly in development, while existing ones are being refined.
When deciding whether to go with a hardware or software crypto wallet, youâll need to check which options are available for your preferred crypto. Try checking out the official website for the coin youâre interested in, as thereâs often a wallet available directly from there. It wonât offer as much security as a hardware wallet though, so if youâre intending to purchase large amounts of any crypto, a hardware wallet is always the best option.
How much are you prepared to spend on security features?
Casual investors will only be investing money they can afford to lose, so paying extra for security could be a step too far â at least during the early stages of crypto purchasing. A free software wallet is always going to sound like the better option in these situations, so be sure to look for the one thatâs most suitable.
High-stakes investors and traders will have much larger sums of money invested in cryptocurrency., and keeping those assets safe will be of paramount importance. In this situation, a hardware wallet with top-level security features is absolutely essential. An option that never connects to the internet offers the absolute highest levels of protection, although this will add to the overall price.
How tech-savvy are you?
Whether you decide on a hardware or software crypto wallet, make sure you select an option suitable for your level of experience. Paying a little extra for a high-security hardware wallet wonât be of much use if itâs too complicated to use! There are cryptocurrency wallets available for every level of experience, so whether youâve been trading crypto for years, or youâre just about to start, thereâs a wallet thatâs perfect for your needs.
Conclusion: Will you choose a hardware or software crypto wallet?
Now that weâve come to the end of our crypto wallet hardware vs software comparison, you should have a better idea of which type is best for your purposes. We suggest considering your potential crypto needs over the coming months, so you can pick an option that allows your assets to grow, along with your knowledge.
Remember, here at BitStacker.com, weâre always on hand to answer your cryptocurrency questions. Whether youâre wondering âIs crypto mining profitable?â, or you want to learn about crypto leverage trading, our site is packed with useful information. So come and check out our Ledger review, discover which online casinos let you play with Bitcoin,, and see whether crypto mining could be for you. Call back regularly, as weâve always got something new for you to discover!
Crypto wallet hardware vs software FAQ
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