Software encoders are the different applications and programs you use to convert raw video files to a viewable format. They mainly use the CPU’s processing power to convert these files through the software. An example of a great software encoder is OBS Studio, one of the most popular software encoders in the world today.
On the other hand, hardware encoders use a separate processing unit located on the device itself to process and convert raw video files. They usually provide high-quality streams, lower latency, and great reliability. However, hardware encoders can be quite expensive and can be hard to upgrade when needed.