Key takeaways
- Crypto wallets are of three major types: custodial wallets, self-custodial browser/app-based wallets, and self-custodial hardware wallets;
- For custodial wallets, third parties such as exchanges hold the private keys(password) to your crypto on your behalf and have complete control. For self-custody wallets, only the user holds the password and has complete control over their assets. Browser/app based wallets are hot wallets, which provide fast access but are less secure when compared to hardware wallets;
- Users can use Cardano Wallers to transfer, receive, store, and manage their Cardano (ADA) cryptocurrency and Cardano Native Assets;
- It can be challenging to select an online ADA wallet for cryptocurrency storage because many Cardano wallets are available. The most preferred Cardano self-custodial wallet apps are Yoroi, Daedalus, Nami, Eternl, and Lace.
Cardano is a revolutionary and environmentally-sustainable blockchain platform with smart contract capabilities that offers users permissionless access to applications. Cardano offers a host of services like payment services, decentralized applications (DApps), identity services, and much more with solid security, sustainability, and reasonable fees.
The most popular way to store digital assets has been using third-party custodial wallets such as exchanges or crypto banks. However, there is a risk associated as the custodians have full control over your funds. These funds can be lost due to malice or negligence by the custodians, users lost over $350M stored with Celsius. There are other disadvantages in using exchanges as they do not support decentralized financial applications or digital assets like NFTs, which means you stand to miss out on the digital economy.
On the other hand, users can also self-custody their funds through a digital wallet to have complete control over their funds. Crypto wallets let you store digital assets, stake, use financial applications, and buy NFTs which lets you be a part of the digital economy.
So, what’s a wallet and how does it work?
What is a Cardano wallet?
A Cardano wallet is the tool that enables communication with the Cardano blockchain. Crypto wallets are based on the public: private key cryptography, the private key serves as a password, and the public key as a username. The public key is stored in the blockchain itself as an account, and it can be accessed by signing using private keys. There are various wallet types and providers who abstract this process and provide simpler access to using the blockchain.
Various types of crypto wallets:
- Custodial - The exchange or 3rd party has control over your password. This allows a very user-friendly interface but at the risk of losing control over your funds.
- Non-custodial (self-custodial) browser/app wallets - The password is stored in an app or browser with encryption, this allows a user-friendly interface and the user has control over and responsibility for managing their own funds.
- Non-custodial (self-custodial) Hardware wallets - The password is stored in a physical device, this gives the highest level of security but adds friction to usage.
Users generally use multiple wallet types, browser/app-based wallets for daily usage while hardware wallets to safekeep assets long-term.
Read more: An Intro to Crypto Wallet Types
Selecting a browser or app ADA wallet for cryptocurrency storage needs can be challenging because many Cardano wallets are available.
Here’s an introduction to the most used browser/app wallets:
Yoroi wallet
Yoroi is an open-source self-custodial crypto wallet for the Cardano community and ADA holders. Developed by EMURGO, one of the founding entities of Cardano, Yoroi wallet is Cardano’s first light wallet and accessible via a browser extension and a mobile application.
With a light wallet, users won't be required to download the complete blockchain. Yoroi establishes a connection with an outside hosted Full Cardano node (Emurgo). Yoroi enables a fast setup, straightforward operation, and minimal sync time.
Yoroi now supports dApp integrations such as Cardano NFT marketplace Fibo and with more dApp integrations coming on the way, it will be highly useful for Cardano’s DeFi users and NFT traders. It stands out through its user-friendly interface, which makes it ideal for onboarding new users.
Yoroi makes it easy to stake ADA coins inside the wallet interface to earn passive rewards. Users can choose staking pools by applying filters like Return on Investment, staking cost, pool size, and mission. These features have made it the most popular Cardano light wallet among users. Yoroi also connects to popular hardware wallets such as Ledger and Trezor.
Download Yoroi here.
Daedalus
The IOG team supported desktop wallet Daedalus, the oldest running wallet of Cardano. Daedalus is a full node self-custodial wallet, which means users download the complete Cardano blockchain and validate each transaction while keeping complete control over their ADA. Unlike light wallets, Daedalus doesn’t require any 3rd party infrastructure which makes it truly trustless and highly secure. It provides stronger security and decentralization to the network as a higher number of independent verifiers reduces the chances of any malicious activity happening on the network.
Cardano’s principle of inclusive accountability focuses on providing users the ability to run nodes with consumer-grade hardware. A Cardano node size is 30x lower than its competitors, with <30GB required for storage. However, full nodes require much more space than alternatives that are available and also have a long syncing time where they synchronize with the blockchain.
Users can use Daedalus to store, receive, and stake ADA and native assets like tokens and NFTs. Daedalus users can filter the stake pools through rankings and information provided by the wallet, and choose which one they want to delegate ADA. Daedalus doesn’t provide browser support or dApppp integrations as it is desktop-based. It can be paired with a hardware wallet, to provide the strongest security guarantees to safekeep your funds.
Download Daedalus here.
Nami
Nami Wallet is a self-custodial browser wallet for Cardano which provides dApp support. It is a light node with the option to connect to your own full node, giving users the flexibility to choose their level of trust. Users can create several accounts and handle all Cardano tokens, including native assets and NFTs.
Unlike Daedalus/Yoroi which accepts many addresses per wallet, Nami only utilizes one which can be used to create sub-accounts. Sub-accounts provide you with a way to segregate your funds with more privacy and anonymity because there is no mention of the other account on the blockchain. Each account allows users to delegate funds.
Nami has historically only supported its own pool - Berry Pool - for staking which does not provide freedom to the users. Nami had an early mover advantage in providing dApp support and is widely supported in the ecosystem. It is one of the most common wallets used by DeFi & NFT power users.
Download Nami here.
Eternl
Eternl is a web wallet, browser extension, and mobile wallet. The wallet has recently achieved remarkable development progress. Users can set up several accounts, manage all Cardano native assets, and view NFTs in the wallet.
Only wallet browser extensions could connect to dApps on Cardano up till today. With Eternl, users can link their wallets to dApps in the Eternl dApp Browser. Eternl was the first provider to launch a Cardano dApps browser.
Staking Vault is Eternl's funding mechanism. Stake ADA by selecting a stake pool. Eternl can be connected to Cardano dApps like DEXs (decentralized exchanges) and Cardano NFT marketplaces and is used in most of them.
Download Eternl here.
Lace Wallet
The IOG development team has developed a new light wallet called Lace for Cardano. Several features are created expressly for interoperability, allowing users to use other blockchains besides Cardano's. The creators believe that interoperability is the most crucial component, and they will soon begin developing integration to side chains and connecting to other blockchains. Lace should eventually develop into an investor's all-purpose wallet.
Lace seems to be benefiting from the various technological advancements by the IOG team, it will be utilizing Mithril which does stake-based signature aggregation that provides info into Cardano state without downloading the whole blockchain, and full node-like security while being fast. This along with Decentralised Identities provided through Atlata Prism, could kickstart a new norm for Web3.
The light wallet seems to be focused on building a user-friendly interface and simplifying using Cardano which could help onboard more users. It would allow a simple, speedy, and seamless experience for all users. The project is now in the testing phase but will shortly move into the implementation phase.
Read more: Cardano introduces Lace: A new light wallet
The bottom line
The use of Cardano and other cryptocurrencies requires crypto wallets. They are one of the fundamental infrastructure components that enable the sending and receiving of funds through blockchain networks. Before shifting funds, it's essential to understand how each wallet operates because each has pros and cons.
Cardano is blessed to have intense competition in wallet providers, which is true to the nature of a decentralized system. The wallets are actively developing and iterating to provide the best user experience and security guarantees.
