5 Differences Between Digital Wallets and Hardware Wallets

What are the differences between digital wallets and hardware wallets? Storing your crypto coins safely is an important aspect of crypto trading and investing.

However, a majority of crypto traders and users are unaware of the best ways in which they can store their crypto assets and use them as and when required readily.

If you are one of them, you are in the right place eventually. You can rest assured that by the end of this article you will be confident in choosing the right type of wallet to store your crypto assets.

Ideally, the most straightforward and easiest way to store your crypto assets is in a wallet with a crypto exchange. However, it cannot be said with emphasis that it is the safest way as well.

These crypto storage solutions may offer the least resistance but these are also extremely insecure because these can be hacked easily by malicious actors.

You will not have any private key to access your holdings and this means that you do not own them, technically.

This is where digital and hardware wallets come in. This article lays out all the major differences between hardware and digital wallets, two of the most commonly used wallet types.

You will also find all those things that you should consider while making your choice between a hardware wallet and a digital wallet in this article.

With all this knowledge you will be able to enter the world of crypto investing with more confidence knowing that your crypto assets are stored safely.

5 Differences Between Digital Wallets and Hardware Wallets

Differences Between Digital Wallets and Hardware Wallets

Though both hardware and digital wallets will offer you the ability to store and use your crypto assets safely and securely, they both come with their significant attributes, pros, and cons.

It is elementary that you know about the differences between these two common storage solutions to choose the best one if you want to enjoy ultimate security and easy accessibility.

1. Basics

A digital wallet is one that you can open with a crypto exchange. Alternatively, you can download one such wallet through a mobile or a desktop app.

When you have such a wallet, it will allow you to hold on to your private keys yourself without having to rely on a third party. Through this wallet, you can store, receive, and send your crypto coins.

Though the processes may be different for each provider, for all digital wallets it is primarily important that you keep all information safe in some other place in your smartphone or computer.

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On the other hand, a hardware wallet is a relatively more secure solution to store your crypto coins. These hardware wallets will keep the private keys offline and safe.

These keys will not be accessible to others and therefore will minimize digital threats. These wallets generate a set of private keys that you need to keep safe. These hardware wallets are typically secured by a PIN.

2. Best for

If you wish to invest a large sum of money in crypto coins or if you do not want to exchange your crypto assets any time soon then a hardware wallet will be the best option for you to choose.

On the other hand, a digital wallet is a good option for those who want a quick access to the crypto assets and also exchange them on a regular basis and want to monitor them closely.

3. Advantages

There are different advantages offered by these two different wallet solutions. As for the digital wallets, these allow making fast transactions.

These are not only easy to use but will allow you to have control of your private keys, provided you are not using one that is hosted by a crypto exchange.

On the other hand, the advantages of using a hardware wallet include more security with a PIN that makes the device inaccessible to any unauthorized person.

Moreover, the device can erase data after several access attempts are made unsuccessfully by an unauthorized person.

Apart from that, it will allow you to sign off on transactions physically, act as a long-term storage of huge crypto balances, and offer you direct control over the crypto assets. Since these wallets are offline, they cannot be hacked digitally.

4. Disadvantages

The disadvantages of using digital wallets include the security risks associated with making online transactions such as hacking and virus infection of your computer and smartphone.

And, in the case of losing your phone or if it is damaged you can even lose all of your crypto assets. Moreover, you will not have direct control over your crypto coins if the exchange or a third party hosts the wallet.

Just like digital wallets, the hardware wallets too come with some specific downsides. The main disadvantages of using hardware wallets include their cost since these are quite expensive.

These wallets are also not very beginner-friendly and have a learning curve and it is also quite inconvenient to use for making day-to-day transactions.

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5. Working Process

The working process of a hardware wallet and digital wallet is different. In a hardware wallet, the crypto coins are not stored within it. Instead, all of it resides on the blockchain.

Ideally, it is the private key that the hardware wallet stores which allows access to your address on the blockchain where the crypto assets are. However, since the blockchain is everywhere, therefore the hardware wallet must interact with the crypto tokens.

On the other hand, the working process of a digital wallet is pretty different. After you have registered with the service provider and got on board, you will need to link your debit card or your bank account with it.

You can add one or more than one debit card and bank account. This will help you to add money to your wallet when you need to make a transaction or a payment.

Which is Better – Digital Wallets or Hardware Wallets?

In order to understand which among the digital wallets and hardware wallets is better, you will first need to understand the importance of the ownership of crypto assets.

Typically, owning crypto coins is not like owning other types of assets because these are digital and therefore intangible.

This means that you cannot touch this asset even if you own it.

While traditional investments are stored usually in a brokerage account or a bank, crypto assets are different and are stored in a ‘wallet’ which you will need to own in the first place.

This wallet is an address where you store the coins on the blockchain. These wallets usually have private and public keys.

A private key is like the password of an email address. This will allow you to access your inbox.

In the case of wallets, this password allows sending crypto coins. This key also helps in authenticating a transaction.

A public key, on the other hand, is an address that you can share freely with others so that they can send in the crypto coins to you.

This is an incoming-only address, more like your email address, but is anonymous.

This means that giving this address will not allow others to send the coins from it but only to it.

The problem with the keys is that, if you lose them, you will lose the money because anyone who has it can claim them.

And, since cryptocurrency is decentralized, you will have little to do and there is no one with an authority to resolve such ownership disputes and enforce them.

Therefore, in the end, it can be said that each of the two types of wallets come with their own advantages and disadvantages.

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For that reason, it is important to find out which one of them can provide everything that you are looking for irrespective of the type of crypto coins that you want to deal with.

Ideally, if you are a beginner to the crypto scene, you should use a hardware wallet.

There are several good reasons to say so but the most significant one is that it minimizes the risks of storing crypto.

These wallets are less, if at all, vulnerable to online security and data breaches.

It is good to use in a mobile or in a desktop operating system and still not worry about malware and other vulnerabilities.

Moreover, the hardware wallets are much safer and also corroborates with the developed landscape of crypto.

Typically, these wallet solutions are more preferable since it offers a nice combination of usability and safety.

However, there is one thing that you should remember, especially if you are a beginner. The hardware wallets are also not absolutely secure.

The hackers can still get through the main servers of the manufacturer of the hardware wallet.

In that case, they can push malicious firmware, and, if they do, it is quite harder to pull such attacks to the supply chain.

Therefore, considering all the aspects of these two wallets, it can be said that you can use any one of them depending on your preference.

But, if you are looking for a bit more secure wallet that comes with an innate interface that comes with all of the necessary features in it, a hardware wallet will be a better choice.

Of course, if the cost of it is not a matter of concern to you.


When you have to choose between a hardware wallet and a digital wallet, you should do so by understanding the basics well from articles like this one. This will save you and your crypto account from being a soft target of the malicious actors.