Show Notes

Here are links and resources mentioned in today's video. Enjoy!

• If you're ready to take the next steps into the world of bitcoin, cryptocurrencies, and blockchain...and really wrap your head around all this stuff, then be sure to check out Understanding Bitcoin: Navigating The Divide To History's Next Great Era!

Transcription

Now before we begin, of course this video is all about software wallets vs hardware wallets -- so is it safe to assume that you already know what a crypto wallet or bitcoin wallet is? After all, comparing software and hardware wallets is the next step, right?

Just really quickly, to make sure you and I are on the same page, your wallet is simply a place for you to store your bitcoin and other cryptocurrencies. I think of the various wallets that I have as bank accounts -- different bank accounts that I've set up in various places to store my crypto in.

And of course, each wallet -- whether it's a software wallet, a hardware wallet, or some other kind of wallet -- each has a public key and a private key.

You know what these are, right? Again, just to make sure we're both on the same page -- cuz I know, this stuff can get confusing! -- here's the simple way that I describe your wallet's private and public key:

Your public key is like your bank account number. Anyone who knows your bank account number can't access your account, but they can deposit money into it. It's exactly the same thing with your wallet's public key.

Your private key is like the pin number or password you've set on your bank card. Here, you need your pin number in order to access funds in your account, right? And if someone else finds out what your pin password is, they can gain access to the funds you've stored in your account. Once again, this is exactly what your wallet's private key is -- so keep it safe!

Okay, with that out of the way, let's dig into software wallets versus hardware wallets.

Okay first up, let's talk about software wallets. These are sometimes referred to as soft wallets or hot wallets, and are the most widely used type of crypto wallet.

A software wallet is a simple applications you’d install on your computer or smartphone to store your bitcoin. Exodus and Samurai are two examples of soft wallets you could use, although there are many others available.

Now to dig a bit deeper, there are actually three types of software wallets: Desktop wallets, mobile wallets, and online wallets.

Desktop wallets should hopefully be self-explanatory. These are applications that run directly on your computer. So an application like Coinomi or Exodus are examples of desktop wallets.

Also self-explanatory -- I hope! -- are mobile wallets. These are apps that you'd run on your smartphone that you'd literally carry with you everywhere you go. Just imagine -- going to a farmers market, a garage sale, or a local charity event and pulling out your phone to pay with bitcoin!

Finally online wallets are quite a bit different than desktop and mobile wallets. We'll talk more about these types of wallets in just a second.

Next up though, another option you can use is a hardware wallet. These are sometimes called cold wallets. A hardware wallet is similar to a USB drive with special software installed on it to store your bitcoin and other cryptocurrencies.

Both Trezor and Ledger are top choices if you’re interested in hardware wallets, but there are of course others.

What’s great about a physical hardware wallet is that you can transfer bitcoin and other cryptocurrencies to and from the wallet just as you would with your software wallet. And when you’re done, you’d unplug the USB cable and put your hardware wallet in a safe place.

This means that hardware wallets have excellent security — they’re physically disconnected from the internet when not in use. This means that hardware wallets are much more secure than other types of crypto wallets.

On a hardware wallet, your bitcoin is safe and secure, especially over the long term.

Anytime you want to move crypto to or from your hardware wallet, all you'd do is plug the hardware wallet into your computer, and conduct your transactions from there. In fact, the Trezor hardware wallet interfaces seamlessly with the Exodus software wallet. This makes it dead easy to move crypto to or from your hardware wallet.

Okay now earlier we touched on a third type of software wallet called online wallets, right? Well, your online wallet is in fact a part of your crypto exchange account, where you initially transfer money to purchase crypto.

Now while it's simple and easy to just keep your bitcoin and other crypto on your exchange account -- and while you can access your account from any internet-connected device -- it's much safer to store your crypto either on a software wallet or hardware wallet.

And that's because, it really boils down to your private keys. With your online wallet in your exchange account, it's the exchange service who control your wallet's private keys. In other words, you have to trust them...and hope they'll never get hacked.

With a software wallet, your private keys are saved on your computer or mobile device, which is much more secure. However in rare cases, your device could still be hacked.

Lastly, with a hardware wallet, your private keys are of course stored offline, which makes it impossible to hack.

So, while you can certainly keep a small amount of bitcoin and other cryptocurrencies in your exchange accounts for regular transactions, it's strongly recommended to keep the majority of your holdings on a software or hardware wallet -- the general rule is, anything over $1000 should be stored on a hardware wallet, but you can go with whatever feels right for you.

Now interestingly, no matter which type of crypto wallet you go with, your bitcoin and other tokens aren't actually stored in your wallet. Really, your crypto is stored down on the blockchain -- your wallet simply provides you with a simple interface for accessing them.

Really, it's your wallet's private keys that grants you access to the crypto that's currently assigned to your wallet's public address -- that's how it works.

But honestly, for regular folks like you and I, we don't need to know all the technical stuff about how all this stuff works. Instead, most importantly, we just need to know that it DOES work...and using the wallet type -- or combination of wallet types -- that'll work for us.