If you are new to cryptocurrency space things can be very confusing at first. With all different cryptocurrencies in existence it’s quite easy to feel lost. Each one has their own set of features and each one states to solve some kind of problems. However, what is common to all of them is wallets. Crypto currency needs to exists somewhere and that is why we have crypto wallets which resemble the real world wallets.
When you buy a crypto currency on an exchange your newly acquired currency is stored into a wallet. That currency is now in your exchange account but it is still in the hands of the exchange. That means that an exchange could seize your crypto or an exchange could get hacked and you could lose your crypto. To limit the impact of such hacks exchanges protected the assets with so called cold storage where funds are stored offline and are out of reach for hackers breaking into the system.
Anyway, the point is, the exchange is in charge of your assets. From here the expression: “Not your keys, not your coins”. If you really want to be the only custodian of your wallet you have to transfer the cryptocurrency to your own wallet.
A wallet is nothing more than a program running on your computer. Depending on the currency, it can come in different forms. Usually you have full wallets and light wallets.
A full wallet is a wallet that transfers the whole copy of a blockchain to your computer. That means quite a lot of data will be stored on your computer. It might not be the best choice for everyone. For example, today, on 2020-08-13, a full wallet for Bitcoin takes about 290 GB of disk space, for Ethereum 155 GB and for Cardano about 5 GB.
The older the cryptocurrency the bigger the chain since transactions are being appended to it day by day, hour by hour.
A full wallet for Cardano ADA is Daedalus. Daedalus is a full node created by Input Output Global (IOG, previously IOHK). That means that the wallet is also used to confirm transactions but not for minting blocks. As a user you won’t notice anything as everything is going on under the hood. All you’ll see is just wallet management functionality. The wallet installation can be found here. Make sure you only install from official website. Check that the site you open has the lock displayed as shown on the screenshot below.
By clicking on the lock you can view more details. Select certificate and a window like the following will open. There you can check who issued the certificate and for whom. If you are in doubt google for the issuer and see if it is a trusted entity.:
Daedalus wallet comes for MacOS, Windows and Linux. Installation is pretty straight forward and the UI is pretty good and intuitive. To run Daedalus you will need to ensure your computer time is in sync or your wallet won’t be able to connect to the network.
Sometimes you might run into problems with connectivity and you’ll notice that a restart can help. You also need to have your computer clock set accurately or Daedalus will not sync with the blockchain or the sync icon will keep spinning in a loop without actually getting 100% synced. Windows 10 can keep your computer clock in sync automatically but if you run into clock syncing issues just set the clock manually as a workaround. It does not need to be exact to the millisecond. You can find accurate current time here.
If you don’t really have enough disk space your option is to run a light wallet. A light wallet does not store the whole blockchain on your computer and is therefore much lighter on resources. Depending on the crypto currency, light wallets come as desktop applications or browser extensions.
Cardano has an offical wallet named Yoroi that comes as an extension for Chrome based browsers (Chrome, Brave) or add-on for Firefox and as a mobile application for Android and iOS. The wallet is created by Emurgo which is a one of the three established independent entities (Input Output Global, Cardano Foundation and Emurgo) that work towards the same goal: developing Cardano platform and grow its adoption. Again, check that you install only from the trusted sources. You can find Yoroi for chrome here and for Firefox here. The mobile versions can be found on Google play or App Store.
Yoroi is not a full node and it does not process any transactions. It’s just an interface to a node running in the backend on Emurgo’s servers.
Both Daedalus and Yoroi are secure so it’s perfectly safe to you any of the two or both.
Since Cardano is an open source project everyone with the right skills can create their own wallet. An example of a third party wallet is Adalight Wallet which is also a light wallet. Many more wallets will probably emerge. Always be sure you are using trusted wallets.
What exactly is a wallet?
As described above we can have different types of wallet software. Once you start a wallet program you’ll see that you can create a wallet. At this point many people usually get confused. A wallet as a program is just a tool to create one or more wallets. So within a wallet you can have many wallets and you can and should name each of them. Having multiple wallets can come handy. Maybe you want to have one for car repairs, other for investments and another one for hobbies for example.
Each of those wallets show the balance in ada and all the transactions that have ever been processed for a particular wallet. The currency in the wallet is really not stored anywhere on the hard drive. You can safely delete (read on!) the wallet without losing your funds because the ledger with the balance of your wallet lives on the blockchain. It is the blockchain. A copy of the blockchain is on tens of thousands of computers with wallets installed and on nodes that are constantly updating the ledger. In case you delete your wallet or your computer’s hard drive crashes all you need to do is to use a recovery phrase. A recovery phrase is a set of 24 words which creates unique cryptographic keys in the background which you don’t need to worry about. You don’t have to deal with keys and you don’t need to know how they work as you don’t need to know how a computer works to use it. All you need to care about is the recovery passphrase and ensure that it is stored safely and that you have at least one copy of it. In case you lose the passphrase and your wallet deleted no one will be able to help you to recover your funds as there are no central authorities in a decentralized blockchain system and everything is encrypted, thus making it impossible to decrypt or revert. And here is the essence of the blockchain. A blockchain is an immutable ledger meaning it’s not possible to change it. If it was possible crypto currencies would not longer work how they are supposed to – decentralized and trustless.
To recap, you are in charge of your own funds unless you keep your crypto currency on an exchange or a third party as we’ve already mentioned in one of the previous sections.
Besides having full wallets and light wallets as a program running on your computer Cardano also has paper wallets which can be created both in Daedalus or Yoroi wallet.
A paper wallet does not differ much from the wallet described in the previous section. The only difference is that the passphrase along with a nice wallet logo is printed on paper.
You can also buy a hardware wallet like Trezor or Ledger if you prefer. Hardware wallets support many cryptocurrencies and they are quite secure and easy to transport. They are more convenient than paper wallets but that does not mean that paper wallets are any less secure.
Hopefully you know understand what a crypto wallet is and how it works. When using a wallet you should be aware of the freedom it brings you but you should also be aware of the consequences if you are not careful enough.
We would recommend having all your assets in one of the wallets described above. Whatever wallet you choose just make sure you have a backup of your passphrase! We can’t stress enough how important this is.
With great power comes great responsibility.Uncle Ben, Spiderman
In case an exchange is down for whatever reason (hack, DDos attack or any other cause of failure) you won’t be able to access your assets. With your own crypto wallet and the list of keywords in your hands you have a complete control over your assets. You can receive or send the cryptocurrency you hold anytime 24/7/365 as stopping a decentralized P2P network is pretty much impossible unless the internet itself stops working. In today’s world where everything is connected and online that is pretty much impossible and if that happens on a global scale we will have much bigger problems to worry about.