Hardware vs. Software Wallets
More and more people are joining the crypto world each day, usually through online exchange platforms. As such, each coin is stored through one of either two ways: hardware or software wallets. While there are several pros and cons of using each one, both wallets give you the ability to securely store and use your coins. Whether you’re looking for better security or accessibility, understanding the key differences between the two will help you decide which kind of wallet is best for you.
Hardware Wallets & Cold Storage
One way in which you can store your digital currency is with a hardware wallet; A.K.A. cold storage. Hardware wallets are physical devices resembling an external drive that are separate from online exchange platforms. Cold storage requires you to plug into a computer or online device to access your digital currency. Once accessed, your digital currency can be stored onto the hardware wallet device and it will no longer be stored on online servers. The private keys remain on the device which only you have access to.
At the end of the day, hardware wallets provide the most secure way to store your cryptocurrency. Although it may not be conveniently accessible, especially when compared to software or exchange wallets, cold storage eliminates the level of trust between yourself and the exchange, ensuring that you’ll never have to worry about your tokens being hacked or stolen. Even if your computer gets hacked or your wallet is stolen, the thief will be unable to transfer your coins without knowing your passphrase. Additionally, if you do happen to lose your hardware wallet, you can always restore your coins to a new wallet. If you are looking to store cryptocurrency for a long time and want to ensure the highest form of security, then hardware wallets are the way to go. For security, it is recommended that coins are not stored in an exchange wallet for extended time periods.
Maintain vigilance regarding scams, though. If you purchase from anyone other than a reputable vendor, the wallet’s seed phrase may have been compromised and the potential to lose your entire offline portfolio exists.
If you consider yourself to be a long term investor then hardware wallets should be your preferred platform for storing crypto. Don’t forget that once you place an order for a hardware wallet it could take months to arrive depending on where you purchase it from, so you might want to order it as soon as possible. When it comes to choosing the best hardware wallet to store your coins, there are dozens of wallets on the market to pick from. One wallet, the Ledger Nano S, is a battery-less device that uses an OLED interface to interact with the user, giving straightforward navigation and a sleek look.
Just like any long term investment, you must be ready and willing to spend money to make money, so be prepared to drop some cash for hardware wallets which sell for more than $90 depending on where you buy it. In terms of getting the most bang for your buck, users agree: the Ledger Nano S will give you an affordable experience and has continually been accepted as the best Bitcoin wallet to have. Other hardware wallets like TREZOR and KeepKey are also viable options for hardware wallets, both of which provide full security and accessibility just like any other hardware wallet.
Recently, the Mandala Exchange announced their hardware wallet that will allow its users to keep and secure keys, passwords, and coins offline. As the world of crypto evolves, we’ll continue to see innovation in the area of coin storage such as that implemented by the Mandala Exchange, making it easier for crypto owners to store and manage all of their coins and information.
The other type of crypto-wallet which you can use to store your digital currency is a software wallet. Software wallets are non-physical programs that you download onto your computer. This wallet is encrypted and requires a password to access the coins you have stored in it. As with hardware wallets, you have the ability to restore and recover your coins by utilizing the recovery phrase in the event that you forget your password or your computer is damaged or hacked.
The biggest issue with these wallets is that they’re still connected to the internet, remaining susceptible to any malware or virus which may be lurking in the background. Any recovery phrase or passcode that may be visible on your screen could be seen and recorded by a hacker. Although highly unlikely, it still presents a small amount of risk which you must be content with having. However, software wallets are indeed much more accessible and convenient for users to exchange and send currencies. All you need is the password for the software and the user interface will make sending and exchanging cryptocurrencies extremely simple.
With desktop, mobile and online software wallets existing, there are even more options to choose from when deciding which software wallet is best for you. Security remains the highest priority for many users, discouraging them from using desktop or online software wallets which remain highly susceptible to hacking when connected to the internet. Another factor to consider when considering software wallets is which coins it is able to store. There are some wallets which store all coins while some are specifically designed for certain coins.
One such wallet is Copay, a free Bitcoin software wallet available to download on the app store, while Exodus is a free wallet that you can store most coins on. Worried about security and accessibility? Say no more, as Electrum is compatible with Ledger and Trezor hardware wallets to add extra security to your coins. Most software wallets are free and relatively straightforward to set up and use. These wallets are suited best for beginners who may not have all the knowledge and expertise needed to effectively store or manage coins.
Which Wallet To Use?
Irrespective of which coin(s) you are investing in, each wallet has its own advantages that can better suit what you are looking for. Are you someone who won’t be exchanging your coins any time soon or investing a large amount of money? Then hardware wallets are best for you. What about someone who wants quick access to easily monitor and exchange digital assets? Software wallets might be your best way to store cryptocurrency.
Remember to keep all your passwords written on paper and secure. As always, happy investing!
Which type of cryptocurrency wallet do you prefer? Why?
Let us know in the comments.