A Software Wallet is a form of cryptocurrency wallet that’s based on software, so installed as a mobile app or accessed via a website, or installed as software on a desktop or laptop computer.
The software itself stores your private keys that are used to access your cryptocurrency funds.
To secure your private keys, the software wallet is encrypted and normally requires a password to gain access to the wallet and records/information within it.
Remember, wallets don’t actually hold your digital assets.
Wallets are simply an interface to the blockchain, which holds your digital assets and all the transactions related to your wallet address.
Software wallets come in the form of desktop wallets, mobile wallets, and web wallets.
An example of a software wallet is the MetaMask wallet, which is used to interact with the Ethereum blockchain.
MetaMask wallet can be installed as a web browser extension or mobile app, allowing you to access your Ethereum, Avalanche, and Binance Smart Chain wallets.
MetaMask also offers a mobile wallet app that can be downloaded and installed on your smartphone, making it a mobile wallet in addition to a web wallet.
Exodus Movement Inc. is a company that provides the Exodus desktop wallet, which can be downloaded and installed on your Mac or Windows operating system computer.
A software wallet is considered a hot wallet in that it’s always connected to the Internet when in use.
For that fact, software wallets are considered less safe when compared to hardware and paper wallets.
However, software wallets tied to centralized exchanges are often thought as more convenient to the end-user, as they’re easily accessible from almost any Internet-connected device, your digital assets are easily transactable, and in the event your account funds are lost to a hack, they’re more than likely insured.