Introduction to Storing ADA
In the same way that you keep your cash and cards safely in a wallet, you’re going to need somewhere to securely keep your ADA.
It is worth noting that the above statement is more an analogy than a factual description. In a crypto wallet, there are no actual coins stored. The “coins” we refer to do not actually exist anywhere in a physical form. What is stored in your crypto wallet is the record of your transactions on the blockchain.
Some of the options below are more secure, some are more convenient but each has its pros and cons
Luckily for you, I’m going to take you through all of the options available to you.
Where can I store my Crypto?
- Centralised Exchange Wallets (Web-based)
- Mobile Wallets (Software)
- Desktop Wallets (Software)
- Online Wallets (Software)
- Hardware Wallets (Hardware)
- Paper Wallets
A Quick Word on Public and Private Keys
When you buy crypto, you are issued with two “keys” (again, not real keys); public and private keys.
Public Keys are analogous to an email address, they allow anyone to send you (or vice versa) cryptocurrency. These can be shared with anyone.
Private keys, however, should be exactly that; private. These should not be shared with anyone and should be kept safe. Your private keys are all you have that proves your ownership of your crypto.
This is where the well-known phrase, “not your keys, not your coins” comes from. I’ll be mentioning this throughout this article (and in a lot of the others in the Cardax Academy).
What’s the Difference Between Hot and Cold Crypto Wallets?
Wallets are generally considered to be either hot or cold.
Hot Wallets are always connected to the internet and therefore you can send and receive crypto at any time.
The majority are much more secure than holding on an exchange as they provide you with your keys. However, they are still connected to the internet so they are still at risk of being stolen (although hugely less so than with an exchange).
Cold wallets in contrast are kept offline, either as hardware or paper wallets. While you can still receive funds at any time they are not designed for regular transactions. They are particularly useful for long term, secure holding.
Centralised Exchange Wallets (Web-based)
When you buy any crypto on a centralised exchange (e.g. Binance, Kucoin etc), a wallet address is created for you and all your purchases are stored there. Whilst this may seem like a sensible option, it is very strongly suggested that you move them to your own wallet. Centralised exchanges do not give you the keys to your crypto. Remember what I said earlier; “not your keys, not your coins”.
Put simply, your coins are not 100% safe in a centralised exchange wallet.
Why Shouldn’t I Keep my ADA on a Centralised Exchange
Firstly, exchanges can freeze or hold your funds at any time. This may be if they suspect something suspicious is happening. They can (and do) pause trading or withdrawals of a particular cryptocurrency.
As mentioned earlier, exchanges don’t give you your keys; “not your keys, not your coins”.
Centralised exchanges are always at risk of being hacked and having your coins stolen. A quick Google search will reveal countless crypto thefts from exchanges. We are not talking about small amounts either, we are talking about thefts in the hundreds of millions of US$ (at least).
So, while you need to have your coins on a centralised exchange to buy and sell them, you really should be moving them to your own private wallet as soon as you can.
Remember; “not your keys, not your coins”.
(I’ll try not to say that again, but no promises...it is hugely important after all!)
What are Crypto Software Wallets?
More secure than keeping your coins on an exchange, software wallets are downloaded to your computer or mobile device (or are third party online wallets). They are considered “hot” wallets as they are connected to the internet so they are very convenient for sending and receiving your crypto.
Mobile Wallets (Software)
As their name suggests mobile wallets are those that are used on a smartphone or tablet. Most mobile wallets are non-custodial, meaning you are in complete control of your crypto (your keys, your coins!). The main advantage of a mobile wallet over a desktop wallet (see below) is its portability. However, this could also be seen as a drawback too.
I know we all like to think we guard our devices with the same fervour that we guard our kids or pets, but devices do get lost or stolen.
That said, our phones or tablets usually have a lock code on them and most mobile wallets will issue with a “seed phrase” when you set it up.
What is a Seed Phrase and How do you Back it up?
A seed phrase is usually a string of 12 or 24 random words that act as a master password for your crypto wallet. In the event that you lose your phone or tablet or you accidentally delete the app, you can use your seed phrase to get it all back. It stands to reason then, that you should keep a copy of your seed phrase safe and offline! Lose it and you risk losing your crypto for good!
Desktop Wallets (Software)
Desktop wallets are essentially the same as mobile wallets but instead of being used on a mobile device, you guessed it, they’re stored on a desktop (or laptop). Like mobile wallets, desktop wallets are also non-custodial (your keys, your coins!)
Web Wallets (Software)
A web wallet is a cryptocurrency wallet that is accessed via a web browser. They can be in the form of a website or a browser extension. Some are custodial, some non-custodial, so it’s important to find out before you use one; remember...“not your keys, not your coins”.
Mobile and Desktop wallets are considered more secure than web wallets.
So now you know all about hot wallets, we should dive into cold wallets (often referred to as cold storage). As cold wallets are not connected to the internet, they are more secure but less convenient for buying and selling.
A Hardware wallet is one of the most secure ways of storing your crypto, they are non-custodial (see above; I’m not going to mention “your keys, your coins again”....oh bum, I did!).
They resemble a USB stick and connect to your computer by USB or Bluetooth when you make transactions. Although this could be seen as making them hot wallets (because they would then be connected to the internet), they are still considered “cold” as transactions are signed whilst they are still offline. They are also protected with a PIN.
Obviously, they could be physically lost but, like mobile and desktop wallets, they have the additional security of a seed phrase, so if you do lose yours, it can be replaced and by using the seed phrase, your crypto can be recovered.
Another form of cold storage, paper wallets are literally that, a piece of paper! They are printed off and kept safe. They will have a user’s private key, public key, and wallet address printed directly on them, quite often as a QR code.
While they are completely secure, they are not often used anymore and have been replaced by hardware wallets (see above).
Wallets in the Cardano (ADA) Ecosystem
On Cardano’s Proof of Stake (PoS) blockchain, the same guidance above applies. However, like all blockchains, there are blockchain specific wallets.
In this section, we will discuss each of the best Cardano (ADA) wallets, their pros and cons and a couple of other options that should be considered.
We’ll start with the two most well-known wallets; Daedalus and Yoroi. Both of these allow staking directly from your wallet and allow other features like governance voting.
The Daedelus wallet is a “full node” desktop wallet. This means it downloads a full copy of the Cardano blockchain to your desktop. This allows you to independently validate every transaction on that copy of the blockchain.
The Daedelus wallet gives you maximum security without having to use centralised third-party servers. Daedalus also offers you a newsfeed and different themes to change the feel of the wallet.
The second of the main ADA (Cardano) wallets is the Yoroi light wallet. It is described as “light” because it doesn’t need to download a copy of the blockchain every time you want to make a transaction, this gives it the benefit of speed.
Yoroi light is both a mobile wallet and a browser extension, both of which can be interlinked (i.e. you can access your wallet on both your desktop and your mobile device seamlessly.
Your keys are encrypted and not shared with the Yoroi servers or third parties, making it super secure.
ADA Hardware Wallets
As we mentioned earlier, most longer-term holders will now move their ADA to hardware wallets. I know what you’re thinking; if I move my ADA to cold storage, I might not be able to stake it and get my juicy rewards…
There are several hardware wallets available that will link with your Daedalus or Yoroi wallets, allowing you to still stake your ADA. While this isn’t advice on which models to get (as new models are coming out all the time), we will just give you an overview of what is out there.
Both Ledger (Nano x and Nano S) and Trezor (Model T) allow you to safely stake your ADA while maintaining your hyper-secure cold storage solution.
Ellipal produces hardware wallets that are completely “air-gapped” (meaning the wallet is completely disconnected from every other system or device), whilst this means you can’t connect it to your Yoroi or Daedelus wallet for staking, The Ellipal Titan wallet does allow staking, even while maintaining Air gapped security.
All three of the above hardware wallet manufacturers have multi-asset wallets. Not only do they allow the secure storage of ADA, but also a huge amount of other coins and tokens.
(The models mentioned here are the latest at the time of writing, so please check what the latest models are before making a purchase)
In my humble opinion, staking your ADA in hardware wallets like the ones mentioned above is the best option for you. The perfect balance of security, user-friendliness and convenience.
However, at the end of the day, you should choose what option feels best for you and your crypto plan.
...and remember “not your keys, not your ...”!