A hardware wallet is a physical device that stores your private keys offline. Since this device stores your wallet’s data offline, it remains isolated most of the time. That’s why these wallets are often referred to as “cold-storage” devices. The result is an extremely secure wallet that is difficult to hack.
Even if someone were to physically get a hold of your hardware wallet, popular brands like Ledger utilize robust technology to enhance security and protect against physical attacks such as power glitching, side-channel attacks, and software attacks.
In fact, reputable hardware wallets use a secure element that’s also found in our bank cards and passports to provide ultimate protection against hackers.
Also, most hardware wallets are compatible with numerous blockchain networks. This means you can use one hardware wallet to store multiple blockchain-based assets like crypto and NFTs regardless of which blockchain they live on.
Although hardware wallets are known as the most secure type of crypto wallet available, users may still be hesitant to try them as they’re expensive and there’s a slight learning curve to use them.
Moreover, only certain brands of hardware wallets should be entrusted with storing your digital goods securely.
- The most secure type of crypto wallet available
- Protects users and their assets from both software and physical attacks
- Utilizes robust technology for enhanced security
- Compatible with numerous blockchains
- Enables you to store multiple types of digital assets
- Hardware wallets can be expensive
- There’s a learning curve to set one up and use it properly
- Not all hardware wallets are created equally
Examples of Hardware Wallets
When it comes to hardware wallets, choosing a reputable brand is crucial for security. If you choose an off-brand, you are putting your assets at risk by purchasing a potentially malicious device. Below are some of the most trusted hardware wallets on the market.
Ledger is arguably the most popular hardware wallet you can buy. With over 5 million customers, Ledger has built a reputable brand as the most secure wallet for storing digital assets.
Each Ledger device is manufactured in France and ships directly to your door. This way you know you’re getting a device you can trust. Ledger offers two wallets: the Ledger Nano X and the new and improved Ledger Nano S Plus.
Both devices are capable of storing NFTs and cryptocurrency and support more than 5,500 kinds of tokens, all of which can be managed through its convenient Ledger Live App.
- Ledger Nano X - $149
- Ledger Nano S Plus - $79
Trezor is an equally respected cold-storage wallet solution that has been around since 2013. Notably, Trezor was the first crypto hardware wallet created and continues to be a popular option amongst crypto enthusiasts and serious investors.
Trezor currently offers two wallets: the Trezor Model One and the more luxurious Trezor Model T. Both wallets are capable of storing crypto and NFTs and have a friendly user interface, making setup and managing your assets an enjoyable experience.
Every Trezor device is shipped with two security seals on the outside of the package to ensure the device you receive has not been tampered with. This level of care combined with a solid 10-year reputation is why Trezor remains one of the best wallets on the market.
- Trezor Model One - $69
- Trezor Model T - $219
It’s important to note that you should only purchase hardware wallets directly from the manufacturer. If you don’t, your risk buying a wallet that has been tampered with and may already be compromised upon receiving it.
The official websites for Ledger and Trezor are as follows:
What Is a Software Wallet?
A software wallet is a completely digital wallet that is available as a desktop extension or mobile application. Since software wallets are always connected to a device that’s linked to the internet, they’re more susceptible to hacks and various scams.
Though software wallets aren’t as secure as hardware wallets, they are still preferred by crypto enthusiasts for their ease of use and zero-dollar price tag.
That said, most software wallet developers do everything they can to create a user-friendly wallet that’s still secure as possible. Biometric features like facial recognition and thumb scanners, combined with two-factor authentication (2FA) help keep your assets safe when using most software wallets.
Of course, these wallets still generate a seed phrase that acts as your main line of defense against hackers. Additionally, many software wallets are compatible with hardware wallets, allowing for an even more secure storage solution.
However, some software wallets are limited to certain blockchains. For example, MetaMask only functions with networks and assets that are Ethereum Virtual Machine (EVM) compatible. So although they’re still compatible with both crypto and NFTs, they don’t work with all the networks on which these assets live.
Therefore if you interact with multiple blockchain networks you might have to utilize different software wallets, which can be a pain to manage.
- Easy to set up and use.
- Conveniently available as a desktop extension or mobile app.
- Free to download and use.
- Added security features like biometric software and 2FA.
- Compatible with both cryptocurrency and NFTs.
- Not as secure as a hardware wallet.
- More susceptible to hacks due to their online status.
- Some wallets are limited in their cross-blockchain compatibility.
Examples of Software Wallets
MetaMask is one of the most popular software wallets used by over 30 million people. It makes sense considering how easy it is to set up and even more simple to use. MetaMask allows you to manage your Ethereum-based crypto and NFTs using the browser extension or mobile app, available on both iOS and Android devices.
This wallet also provides users with an in-app browser that can be used to explore the decentralized web and interact with decentralized applications (dapps).
The only downside to MetaMask is that it only supports blockchains compatible with the Ethereum Virtual Machine (EVM), such as Ethereum, Avalanche, Polygon, and BNB Smart Chain, to name a few.
Coinbase is another popular software wallet that has managed to gain the trust of millions through their exchange (Coinbase Exchange) before releasing their software wallet, capable of managing Ethereum and EVM-compatible assets and interacting with dapps.
In terms of functionality, Coinbase Wallet is similar to MetaMask in that it’s easy to use and is compatible with equivalent networks.
One aspect that may put Coinbase Wallet ahead of others is its relation to the exchange. Having established a trustworthy and user-friendly exchange helped Coinbase Wallet gain traction quickly, and the funds from the exchange surely helped build a good product.
Also, Coinbase’s support team is regarded as one of the better customer support channels, especially when compared to other, less popular wallets.
Created in 2017, Trust Wallet has been a respected software wallet for years. Staying true to its name, Trust Wallet has fostered over 25 million active users and still growing. It’s different from previous wallets mentioned considering it’s compatible with both Bitcoin and Ethereum networks.
In fact, Trust Wallet supports over 65 blockchains and more than 4.5 million assets. Notably, this multi-coin wallet supports popular blockchains within the Ethereum ecosystem and works with any ERC20, BEP2, and ERC721 tokens while providing users the ability to store Bitcoin.
Like most other software wallets, Trust Wallet is free to download, easy to use, and available as both a browser extension and a mobile application.
Hardware Wallets vs Software Wallets: The Key Differences
Taking into consideration all that we’ve covered in this article, I think it’s time to point out the key differences between software and hardware wallets, to help you better determine which one is right for you.
Hardware wallet key differences
Below are key elements of a hardware wallet.
- A physical device that stores your wallet’s private data offline.
- Rarely ever connected to the internet.
- Utilizes the most advanced security technology to prevent physical and software attacks.
- Costs money and should be considered an investment.
- Supports numerous blockchain networks and digital assets.
- Compatible with many software wallets.
- Best for advanced users who are serious about wallet security and hold high-valued assets.
Software wallet key differences
Below are key elements of a software wallet.
- An all-digital software solution used to store your wallet’s private key.
- Always connected to the internet.
- Utilizes common security measures like biometrics and two-factor authentication.
- Free to download and use.
- Supports specific blockchain networks and digital assets.
- Compatible with popular hardware wallets.
- Best for beginners who are still learning how to use a crypto wallet and don’t have much to lose.
At the end of the day, deciding which wallet is right for you comes down to your personal preferences and where you’re at in your journey.
If you’re a beginner who’s still learning the ropes and not yet investing a lot of money into digital goods, a software wallet might be a good fit for you.
On the other hand, if you are serious about protecting your digital assets and plan to store high-valued assets or have a lot of funds in your wallet, a hardware wallet is an absolute must.
Regardless of which wallet you decide to use, wallet security should always be your number one priority. Luckily, you can take the same precautions whether you’re using a software or hardware wallet to increase your wallet’s security.
Common scams in the crypto space can be avoided if you put to use these wallet security tips below.
- Never share your wallet's secret recovery phrase.
- Turn off Discord direct messages (DMs) to avoid scammers.
- Use a secure hardware wallet.
- Protect your passwords and store them in a safe place (not online).
- Enable 2FA for all your accounts.
- Never share your computer screen with anyone.