Blockchain & Cryptocurrency Glossary

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Software Wallet

Pronunciation
[sawft-wair woll-it]
Analogy
A software wallet is like a digital wallet app on your phone—it holds your credentials and lets you pay, but is exposed to online risks.
Definition
An application that stores private keys on an internet‑connected device (computer or smartphone) and enables transaction signing and management of crypto assets.
Key Points Intro
Software wallets balance convenience and risk through:
Key Points

Key storage: Private keys stored in local encrypted files or keychains.

User interface: Provides UI for sending, receiving, and viewing balances.

Connectivity: Online or “hot” by default for quick transactions.

Backup: Seed phrase or keystore file for recovery.

Example
MetaMask is a browser extension software wallet that stores Ethereum keys and interacts with DApps directly in the browser.
Technical Deep Dive
Software wallets generate keys via BIP‑39 seed phrases, derive addresses using BIP‑44 paths, and store encrypted JSON keystore files. They sign transactions in JavaScript or native code and broadcast via RPC endpoints.
Security Warning
Malware or browser‑extension exploits can steal keys; use vigilant device hygiene and consider hardware wallet integration.
Caveat
Being online, keys are vulnerable to phishing and malware; limit holdings in software wallets.
Related Terms
Desktop Wallet
Mobile Wallet
Web Wallet
Hot Wallet
Hardware Wallet
Non‑Custodial Wallet

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