Hardware wallet vs software wallet for daily transaction

[Little Mouse]

Imagine, you have $10000 (in BTC) which you may need every now and then for your daily expenses. Which wallet would you prefer to use?
1. A electrum wallet
2. A hardware wallet (You can transact offline, you can transact using your mobile)

Which one would you consider using if you are considering the fact that both wallet can be hacked and your $10000 can be stolen. Which one is safe from your end? Remember, we are talking about a wallet which you are using for paying your daily expenses. We may not have such a city, but there's nothing wrong to imagine a world with BTC as global currency.

So please, which one and why?

And I really have tried to find out a better board to post this, I can't find any other board to post than this.

[PawGo]

The question is if you may do all that from home (using computer/laptop) or if it must be mobile (smartphone - app or amartphone+HW).

If you think about world where FIAT is completely replaced by BTC, there you will have different kinds of transfer needed.
First of all, I do not understand why not to split your BTC into several wallets/devices.
You may pay for your electricity/gas etc., some serious payments, using hardware wallet and computer.
If you go to shop, you may use prepaid card, like one from Binance. Or use app on mobile phone - depends on the recipient's capabilities.
The question if you may plug your HW into smartphone is a secondary problem.

[BitMaxz]

It all depends on how you protect your device.
If you know how to protect your wallet then Electrum should be enough for daily use but if you are a beginner and want an extra security layer then you must use a hardware wallet and hardware wallets like ledger nano support more coins than Electrum which only supports BTC.

[bitmover]

Imagine, you have $10000 (in BTC) which you may need every now and then for your daily expenses. Which wallet would you prefer to use?
1. A electrum wallet
2. A hardware wallet (You can transact offline, you can transact using your mobile)

Which one would you consider using if you are considering the fact that both wallet can be hacked and your $10000 can be stolen. Which one is safe from your end? Remember, we are talking about a wallet which you are using for paying your daily expenses. We may not have such a city, but there's nothing wrong to imagine a world with BTC as global currency.

So please, which one and why?

And I really have tried to find out a better board to post this, I can't find any other board to post than this.

You can use both together.

However, you don't need to carry all those 10,000 with you all the time. You can send 9,000 to your HW and keep 1000 in a Electrum mobile wallet. Once the balance goes down, just move more to the mobile wallet.

Personally, I keep most of my coins (95%) in multiple hardware wallet, and I always use electrum or Metamask when making a transaction. I don't like Ledger Live software as it lacks fees/transaction customization.

[NeuroticFish]

So please, which one and why?

A hardware wallet you can easily buy already at under 100$. It doesn't have to be the fanciest and most "offline". Of course, the more money you want to keep on it, the more it makes also sense to not get the cheapest HW.

Why? Because of the peace of mind. Because it's convenient and you can use same known setup even when you travel. Because ... better safe than sorry.
Yes, both can be hacked, but for HW they need physical access or the owner doing something really-really stupid. And yeah, Electrum works with HW too, at least on PC.

[OmegaStarScream]

I would go with Bitmover's suggestion. Splitting funds is probably the ideal solution here. You should keep the majority of your funds on a hardware wallet because it's more secure, but since you're planning to spend on a regular basis, a mobile wallet is may be more convenient for that, especially if you're going to do that when you're outside.

-snip-
I don't like Ledger Live software as it lacks fees/transaction customization.

Apparently, it's available: https://support.ledger.com/hc/en-us/articles/360021039173-Choose-network-fees?docs=true

[LoyceV]

However, you don't need to carry all those 10,000 with you all the time. You can send 9,000 to your HW and keep 1000 in a Electrum mobile wallet. Once the balance goes down, just move more to the mobile wallet.

This is the way to go It doesn't even have to be a hardware wallet, it could also be an offline Electrum installation.

2. A hardware wallet (You can transact offline, you can transact using your mobile)

For the record: using a hardware wallet doens't mean it's offline. You could connect it to an offline Electrum installation, and sign the transaction on the hardware wallet, but that seems a bit excessive.

Imagine, you have $10000 (in BTC)

Isn't it the same with fiat? I assume you don't keep all your money at the same place: some in cash in your wallet, some in your old sock or piggy bank at home, and some in the bank. You divide your money based on it's purpose.

[bitmover]

-snip-
I don't like Ledger Live software as it lacks fees/transaction customization.

Apparently, it's available: https://support.ledger.com/hc/en-us/articles/360021039173-Choose-network-fees?docs=true

I just found out that they are supporting Coin Control!!
https://support.ledger.com/hc/en-us/articles/360015996580-Using-Coin-control?docs=true




This is amazing and now Ledger Live has every basic bitcoin wallets functionalities. I will try it later.



 when transfering ETH/ERC-20 it lacks customization and it always charge more fees than necessary.
You can see in the image below that there is a range input to choose the fee (the minimum is not zero)

[NeuroticFish]

I don't like Ledger Live software as it lacks fees/transaction customization.

LL has a history of bugs, of adding more advertising before fixing the bugs and that's not good. I also expect Ledger as company keep an eye on what funds everybody has, where possible (exactly in the same way some Electrum servers do). But I've got used with Electrum, it does everything I need almost in the way I want it, so that's what I use.
And Electrum server can be installed locally too, so if one doesn't travel, he can have a good mix of protection (HW) and privacy too (local server) with this setup.

[CounterEntropy]

Given your use case, i.e. daily expenses, both Electrum wallet & Hardware wallet will provide same level of security.

Why?

Because, your Hardware wallet is not airgapped. Every now & then you'll have to connect it to the internet.

Why?

Because, first your Hardware wallet needs to update its UTXO set to create a transaction. This requires connection to the internet. Signing can be done offline. Broadcasting can also be done by copying the signed transaction to mobile/laptop. Though, it would often expose it to an internet connected device.

So, unless you are storing your fund on an airgapped Hardware wallet, your are as secured as an Electrum wallet user.

[LoyceV]

Given your use case, i.e. daily expenses, both Electrum wallet & Hardware wallet will provide same level of security.

This is not true. A hardware wallet is meant to protect your funds against software attacks. It's much, much more difficult to create malware that steals funds from a hardware wallet than it is to steal funds from a hot Electrum client.

I just realized the entire use case doesn't make sense: most people won't consider $10,000 a normal amount for "daily expenses". Something around $100 would make much more sense.

[NeuroticFish]

I just realized the entire use case doesn't make sense: most people won't consider $10,000 a normal amount for "daily expenses". Something around $100 would make much more sense.

It may not make sense for normal user, but it may make sense for OP.
If/when he has campaigns to be managed, especially (but not necessarily) if they're more than one and the payments are not in the same day of the week, he may have to handle bigger/big amounts of money/bitcoin on a weekly basis.

I don't know though what does a HW show when one makes a transaction with 20-40 outputs... 

[LoyceV]

If/when he has campaigns to be managed, especially (but not necessarily) if they're more than one and the payments are not in the same day of the week, he may have to handle bigger/big amounts of money/bitcoin on a weekly basis.

I'd say it's even more important to have a secure system when handling someone else's money.

I don't know though what does a HW show when one makes a transaction with 20-40 outputs... 

See:

using a Trezor to sign a transaction with 54 outputs was not fun 

With enough receiving addresses, creating an unsigned transaction online and signing it from an offline PC might be faster than using a hardware wallet.

[SFR10]

Remember, we are talking about a wallet which you are using for paying your daily expenses. We may not have such a city, but there's nothing wrong to imagine a world with BTC as global currency.

So please, which one and why?

There's no doubt a hardware wallet is the most secure option, but when you flash/display it in public, you might become a target of those that are around you ^{[usually, the ones who have it, use it for significant amounts (I do know using passphrases counts as a solution, but still...)]}!

Of course, the more money you want to keep on it, the more it makes also sense to not get the cheapest HW.

You have a point, but depending on the type of features you actually use and how buggy they might be, sometimes that doesn't apply to certain brands and models ^{[e.g. Ledger Nano X vs Trezor Model One]}.

[Pmalek]

I would love to be in a position where I can consider $10.000 to be my daily spending limit. I am not quite there yet.

I guess it depends on how and where you are spending those coins. If I am sitting in my home doing some online shopping for the day, a hardware wallet would by my choice. I wouldn't be in that much of a hurry to create, verify, and sign those transactions.

It's totally different if you are outside. Using a hardware wallet isn't the most convenient option. Plugging it in, double-checking everything both in the software client and on your hardware wallet's screen takes time. I always try to get out of shops as soon as possible because it's usually crowded and loud, people are in a hurry... For that purpose, I would use a mobile wallet because simplicity and convenience is higher on the priority list than the safety of funds when it comes to coins intended for daily use.

[LoyceV]

If I am sitting in my home doing some online shopping for the day, a hardware wallet would by my choice. I wouldn't be in that much of a hurry to create, verify, and sign those transactions.

I really dislike the process of using a hardware wallet at home too: get the device, plug in the cable, use 2 tiny buttons to enter a PIN, go through the menu structure to confirm the transaction.... It's all a lot of work and totally not worth it for small transactions.
I have several wallets with small amounts (say $10 worth of crypto) that I use without password. It's great to pay a few cents for a VPN or a few dollars for hosting. I even found out Coinpayments doesn't accept €0.25 in Bitcoin LN, it was below the minimum, so I had to switch to LTC.
I love the convenience of scanning a QR-code or copying an address, punching in the amount, and clicking Send without any further authentication! Of course, you shouldn't do this for large amounts, but it would be perfect to buy a coffee.

[hugeblack]

Even if you are negligent, the probability of hacking the hardware wallet is less than the possibility of hacking your desktop wallet, but the difference will be fundamental if you use altcoins, as hardware wallets represent a better option than downloading closed source wallets.

For Bitcoin, the choice is up to you, but a hardware wallet, with a little caution and stop downloading unknown apps, will increase the protection of your currencies more than desktop wallet.

I will go with HW.

[o_e_l_e_o]

I just found out that they are supporting Coin Control!!

Can you actually choose which UTXOs to include though? As you've shown in your screenshots, it seems you have to pick one of three options, one of which serves no useful purpose (FIFO). The other two are useful from a fees point of view, choosing to minimize the transaction size when fees are high or consolidate your coins when fees are low, but both are bad from a privacy point of view. Does the list of UTXOs which pops up after you select an option include every UTXO in your wallet and allow you to actually choose which ones to use? If not, then this set up is passable only for fee management, and if privacy is your aim then this is awful and might even be worse than no coin control at all.


In terms of OP's question, I think of it like this:

A software wallet (mobile or desktop) is analogous to your physical wallet. The coins stored in such wallets are analogous to cash. How much cash would you carry around with you for daily spending? $100? Put that much bitcoin in those wallets.
A hardware wallet is analogous to your checking account. You can store many thousands of dollars in here if you wish. You withdraw from your checking account at an ATM, and you top up your mobile wallet from your hardware wallet.
Proper cold storage is analogous to your savings account. The bulk of your coins should be stored here. You rarely make withdrawals from this account - only for big purchases.

[bitmover]

I just found out that they are supporting Coin Control!!

Can you actually choose which UTXOs to include though? As you've shown in your screenshots, it seems you have to pick one of three options, one of which serves no useful purpose (FIFO). The other two are useful from a fees point of view, choosing to minimize the transaction size when fees are high or consolidate your coins when fees are low, but both are bad from a privacy point of view. Does the list of UTXOs which pops up after you select an option include every UTXO in your wallet and allow you to actually choose which ones to use? If not, then this set up is passable only for fee management, and if privacy is your aim then this is awful and might even be worse than no coin control at all.

Yes, you can choose which of UTXO you actually want to use.
I just tested it now in my wallet. You can see all those UTXO from the same address, and you can choose which one you want to spend.



This is just like electrum, but with a more friendly interface.

[o_e_l_e_o]

You can see all those UTXO from the same address, and you can choose which one you want to spend.

Does it only show UTXOs from the same address, or maybe only from addresses which already fit whichever algorithm you pick? I don't want it to select anything for me, I don't want to have to pick "minimize fees" or "merge coins" - I simply want a list of every UTXO in my wallet with the option to choose the exact ones I want to spend.

Regardless, it's a bit of a theoretical point since I'll never use Ledger Live since it connects to Ledger servers and I don't trust them with my data or privacy one bit.