Hardware vs software wallets

There are two main types of crypto wallets, and you wanna know the difference to manage your crypto efficiently.

Crypto holders who are keen on finding a good home for their assets normally choose between software and hardware wallets.

A software wallet is basically an interface that enables users to store and manage their crypto assets. Most commonly, software wallets come in the form of mobile or web apps, as well as browser extensions that are connected directly to the internet.

Advantages of software wallets:

Disadvantages of software wallets:

A hardware wallet is a device that enables users to interact with blockchains, while addresses and private keys are kept offline. Hardware wallets can connect to blockchains using USB, Bluetooth, QR and NFC.

Recent collapses of major crypto platforms have pushed users towards taking self-custody of their coins, and hardware wallets have been a popular self-custody solution, thanks to their increased security.

Usually, hardware wallets are protected with extra security layers, such as a built-in security element chip, multi-factor authentication, random-number generation, biometric data scanning or self-destruct mechanisms.

Although in hardware wallets, private keys are stored offline and cannot be stolen, a user signing a transaction while the device is connected to the blockchain makes their funds exposed to possible threats. Therefore, the safest way to store crypto would be to keep funds in a hardware wallet that is never used for transaction signing (“cold” storage). Additionally, users can segregate and protect assets within one device by selecting the active wallet (which is used specifically for signing and has no assets at other times) and the “cold” wallet (used for storing). So when one needs to make a transaction, they would transfer a required amount of coins from one address to another and have an extra protection layer. It is possible with a 1inch Hardware Wallet multi-seed feature, as you can add several wallets that has unique seed phrases and private keys.

Advantages of hardware wallets:

Disadvantages of hardware wallets:

Based on their needs, a user can decide whether they need a software or hardware wallet. Normally, software wallets are better suited for trading, while hardware wallets offer a perfect solution for long-term crypto storage.

A user may also want to use a combination of software and hardware wallets, which would enable them to diversify assets and use different wallets for different tasks, as well as to verify transactions in a hardware wallet when needed. As a result, users would be able to achieve a balance of benefits and tradeoffs allowing them to handle crypto in an efficient and safe way.

Stay tuned for more new articles focusing on industry details from the 1inch Hardware Wallet!

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