Cardano, like other cryptocurrencies is a self-custodial monetary system, meaning you are in charge of keeping your Cardano safe and secure. There are no banks that will look after your ADA for you.
With that in mind you need to make sure to are taking all the necessary measures to ensure your Cardano is not stolen, lost or misplaced.
There are many scams in the crypto space because it is simple to manipulate people who don’t know any better.
It is just as common to get scammed through your bank, in fact the transactions themselves are a lot easier, but the banks have multiple layers of fraud prevention in place to help minimise the likelihood of something happening to your money.
Keeping your cardano safe really comes down to 3 things
- Holding your Cardano in your own wallet, not an exchange
- Securing your wallet seed phrase
- Not telling anyone about your crypto
- Holding your Cardano in your own wallet, not an exchange
- Securing your wallet seed phrase
- Not telling anyone about your crypto
Your Own Wallet
Obviously cryptocurrencies are digital, not physical, so you wont have them in a physical wallet.
Instead you hold your Cardano on a digital wallet, and there are a few options you can choose form.
Daedalus
Daedalus is a full node, meaning it contains a full copy of the blockchain and helps to decentralise the network.
For that reason it also requires a bit of hard drive space on your computer to download, and update the latest version of the blockchain.
This is good if you have the space on your computer, however if you want something a little simpler you can take the second option.
Yoroi
Yoroi is a lite wallet meaning it is not a full node.
Yoroi is a chrome extension, so you can also run it on Brave, and there is also a mobile version of the wallet which you can use.
This is my recommendation for normal Cardano holders.
ADALite
AdaLite is another lite wallet although I find Yoroi has a bit better user experience and more involved in the ecosystem.
For that reason I would recommend ignoring ADALite.
Why Not Leave It On An Exchange?
Leaving your Cardano on an exchange is a bad idea.
If you don’t own the seed phrase for your wallet then your crypto technically isn’t yours.
Leaving your Cardano on an exchange is like buying your shopping but leaving it in Sainsbury’s instead of taking it home.
If the exchange gets hacked, you have lost all of your tokens and there is no liability on the exchange to give you your money or crypto back.
If they decide to stop transactions or freeze your account, there is nothing you can do – This happens more often than you might think too.
Exchanges are great for buying and trading crypto, but if you are planning on holding or staking your crypto (recommended) then you need to actually take ownership of your crypto.
Hardwallet Support
Hardware Wallets (Hardwallets) are an additional layer of security which will help prevent you from falling victim to phishing attacks or other hacks.
My preferred hardwallet for Cardano is the Ledger Nano which you can find here
When you have your ledger you can set up a new wallet on Yoroi or Daedalus and connect it to your Ledger.
This will mean you need to connect your ledger to sign a transaction, so no one can remotely send transactions for you or restore your wallet to another device through a hack.
This extra safety layer isn’t necessary, but it is recommended if you want to really keep your Cardano secure.
You can still stake your ADA with a hardware wallet, there is just an extra step you need to do in order to send your ADA somewhere.
Securing Your Seed Phrase
Having your ADA on your own wallet means you are responsible for its security.
If you use a hardware wallet, that device will hold the private key for your wallet.
If you do not use a hardwallet, you will instead have a seed phrase made up of a random string of words.
When you first set up your wallet you will be prompted to secure this seed phrase in some way.
MAKE SURE YOU PUT THIS SEED PHRASE SOMEWHERE SAFE!
If you lose this key and anything happens to your wallet or computer, you will need the key to restore your wallet!
There are several methods of doing this with varying degrees of paranoia. The truth is that if you have any amount of money in crypto, you need to keep it safe, so take every reasonable measure you can to keep your crypto protected.
Do Not write your seed phrase on any computer or phone. The truth is that anything digital can be hacked, physical hacks are much more difficult.
Write your seed phrase down on a piece of paper and put it somewhere safe and secure.
You may want to keep an extra copy somewhere else, like a trusted friend or family member’s house.
You may want to split your seed phrase, so there is no single complete copy of the seed, and put one half somewhere safe, and another somewhere else safe.
The more layers of security you use for your crypto the more secure it is.
Personal Security
The last point is not to tell anyone about your crypto.
The truth is that people are greedy and jealous and you never know who can overhear you talking to friends or family.
I live in the center of a huge multicultural city and if i go around talking too loud to everyone about my investments i am essentially advertising myself as a target.
This may seem paranoid, I get it, but you wouldn’t go around shouting about the size of your bank account would you?
Better to be safe, and keep your hand close to your chest.
Take Your Crypto Seriously
There are stories all over the internet of early investors in Bitcoin who now have millions locked up in lost wallets.
You have spent your hard earned money and invested in a revolutionary new technology very early in the game.
Do not lose this investment through silly mistakes and a lack of security.
No one else is responsible for your crypto, so take it seriously.
Once you have set this stuff up you wont need to worry about it again, so take the time to do it right, and then you can relax knowing your investment is secure.