In Bitcoin, wallets don’t really retailer cash. Wallets maintain non-public key materials that allows the consumer to spend particular Unspent Transaction Outputs (UTXOs) which might be tracked on the blockchain.
{Hardware} signing gadgets typically shouldn’t have the aptitude to course of the blockchain. Subsequently they can’t by themselves study which UTXOs are owned by the consumer. That is the place the software program pockets comes into play: The software program pockets retains observe of a “watch-only” pockets and subsequently learns concerning the UTXOs and transactions related to the consumer. This info is used to create transactions. The {hardware} signing machine solely retains observe of the non-public key materials and can present signatures for the transaction created by the software program pockets. To that finish, the transaction must be introduced in a particular format to the {hardware} signer’s interface. This translation layer is normally applied in some software program wallets.
The keys don’t want to depart the {hardware} signing machine. Reasonably the partially signed (or unsigned) transaction is transferred to the {hardware} signing machine, the {hardware} signing machine provides the related signatures, and the signed transaction is returned from the {hardware} signing machine to the software program pockets. There are numerous methods to get the transaction knowledge to the {hardware} signing machine, the only is to plug it into the pc with the software program pockets, however some {hardware} signers e.g. learn animated QR codes, or some customers create the transaction on the web machine and use a separate airgapped offline machine to connect with the {hardware} signing machine.