When you venture into the world of crypto, one of the first terms and concepts you’ll need to become familiar with is a “wallet”. Wallets come in all shapes and sizes, with various features, but they can be broken down into 2 main categories; hardware wallets and software wallets. Before you jump ahead and learn about the differences, it’s important to get a basic understanding of how wallets work.
Crypto Wallet Basics
In simple terms a wallet is nothing more that 2 long strings of text called your private key and your public key. Your private key is essentially your account for that currency, your public key is the address used to send currency to that account. Keys exist in pairs, and your private key is what you need to keep confidential at all times. There are plenty of software and hardware options to assist us keeping our private keys safe, as well as providing some backups and safety nets should something go wrong.
Most crypto users will have several wallets, if we look at CoinJar (a popular Australian crypto platform) we can see we are given a wallet for each of the cryptocurrencies they support – as well as fiat currencies. Comparing this to another popular local platform CoinSpot, you can send and receive from using many of the popular coins (although you can’t receive with all of them – this is quite common when a large volume of coins are supported).
When using an online wallets, it will look very similar to a traditional bank account (even though they are very different behind the scenes). You typically have the ability to send and receive funds, as well as view activity statements.
Software Wallets vs Hardware Wallets
Now we know the basics about wallets, let’s look at the difference between software and hardware wallets: