The world of cryptocurrency is in a constant state of development, and with this development, comes a massive increase in the availability of options with regards to nearly crypto-related service. If you’ve considered purchasing a cryptocurrency, such as Bitcoin, you’ve likely already come across the debate between picking a hardware wallet versus a software wallet. If you aren’t familiar with the differences between the two kinds of methods to hold crypto, don’t worry, we’ll go over the various kinds of ways you can securely hold onto the crypto you buy.
Hardware wallets, also known as cold storage, are physical devices that are used to keep the private keys for your crypto. These devices are completely separate from online exchange platforms like Binance. In order to access your holdings, one has to connect the hardware wallet into their computer. Once you access the cryptocurrency, you can store the cryptocurrency there and it won’t be stored on an online server any longer, meaning that from then onwards only the person that holds the hardware wallet (and its pin) could have access to the private keys.
Cold storage is the most secure method of holding cryptocurrency. It can definitely be inconvenient to lack immediate access to your cryptocurrency. There are major advantages to this method. Firstly, you’re in complete control of the fate of the crypto held on the hardware wallet. Compared to other methods of holding onto cryptocurrency, such as via an exchange or a software wallet, there’s absolutely no need to trust an external entity that is vulnerable to security breaches. Even if by some misfortune someone were to hack into your computer, they would be completely unable to access your cryptocurrency from your wallet without knowing the particular passphrase that you’ve selected. Even losing the hardware wallet isn’t as devastating as it might seem, as you can simply restore your holdings to a new wallet. It is advised, however, that you avoid keeping your crypto on the same hardware wallet for extended periods of time for security reasons.
If complete control and security over your crypto holdings is your main priority, then this is likely the best way for you to maintain your crypto. The main downside that you’ll have to keep in mind is the ever present threat of scams: if you happen to purchase from a non-reputable vendor, there is a risk that your wallet’s seed phrase may have been compromised, and potentially your entire holdings on that wallet may be at risk.
If you do decide to choose a hardware wallet, it may be helpful to know that it can take months for a hardware wallet to arrive once purchased depending on the vendor. Fortunately, this problem is decreasing due to the sheer number of vendors and options that are available these days, but it is certainly something to check before making a final purchase. While there are many reputable hardware wallet vendors on the market, one of the most popular ones is the Ledger Nano series, which typically don’t run on battery and can store hundreds of cryptocurrencies. Hardware wallets can be a bit pricey, but the peace of mind for the extra security is often worth it.
As the name suggests, this type of wallet are any non-physical programs that you can download onto your computer to hold onto your crypto. Just like hardware wallets, you do have the ability to restore or recover your cryptocurrency holdings by using a recovery phrase in the event that you happen to lose your wallet, get hacked, or forget the password to the wallet.
As these wallets are still connected to the internet, the biggest issue is that they are highly vulnerable to malware or viruses that may target it. Furthermore, any recovery code or password could be seen and ultimately accessed by a hacker. Naturally, the risk of this occurring is fairly remote, the costs can be massive depending on how large your crypto holdings are. Making up for this risk is the sheer convenience offered by software wallets: it’s much easier to access your cryptocurrency holdings, as well as for eventually selling them. As long as you have the password for the software that you’re using, and you’re good to go.
There is a variety of software wallets that are available depending on what you feel most comfortable using. With security a priority for most users, desktop wallets and other online wallets are not as popular, and you’ll also have to keep in mind what kinds of cryptocurrencies can be stored by the software wallet you’re considering using. Some wallets are limited in the kinds of cryptocurrencies they can store, as well as how many different kinds, so it’s definitely something you’ll have to investigate before deciding on one. You could also use a mobile wallet, which suffers from the same issues as desktop wallets, namely the vulnerability to internet-based threats, but mobile wallets do have the added benefit of being easily accessible, able to handle in store QR payments.
One of the most popular software wallets today include Copay, a free Bitcoin software wallet, and Exodus. Exodus is particularly popular for its ability to store hundreds of coins. If you’re still uneasy about the decreased security typically experienced by software wallets, it’s not a complete wash: Electrum is one such software wallet that is compatible with both Ledger and Trezor hardware wallets, adding an extra layer of security to your crypto holdings. These wallets, while somewhat less secure, are much easier to set up and start using, which is a massive draw for beginners and those not fully knowledgeable about cryptocurrency best practices.
No matter what cryptocurrency you’re most interested in investing in, there’s a wallet out there for you. Planning on holding large amounts of crypto for the long haul? You’re probably best off getting a hardware wallet. If you’re looking to make frequent trades or want to conveniently access your holdings, then you’re probably better suited for a software wallet. No matter what you end up deciding, make sure to exercise caution!
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