No Dumb Questions: Episode 8 Is this even safe

Can an outsider see how much ada you have in your wallet, or is it private like banks?

Blockchain ledgers are publicly viewable. On the one hand, this is a design feature that provides safety and security: shady activities can’t really be hidden. On the other hand, the idea that anyone can peek in your wallet and see what’s in there can be pretty unnerving, or might feel unsafe in other ways.

So is this even safe? It certainly is a new and different way to think about your money. As you wrap your mind around using a publicly viewable blockchain wallet, consider these ideas:

• Unlike your bank, there is no KYC attached to a self-custody wallet. When you spin up your own Cardano wallet, and you keep the keys, at no point is your name, address, or government ID associated with your wallet. You get to choose when, how, and with whom your wallet address is shared.
• One way to retain some privacy is to use different wallets for different things. The idea that certain wallet balances and activities are visible to certain groups of people who may know you is less off-putting. For example, I use one wallet to receive reviewer rewards from Project Catalyst. The amount that I get paid for that is public knowledge anyway, so the idea that it’s visible doesn’t bother me. What you probably want to avoid is holding a single wallet where someone can look and know everything about your financial life.
• As blockchain tools proliferate, there are various privacy-preserving measures and paths you can take. As a beginner, it’s important to know that wallets themselves are essentially public. As you get deeper into the ecosystem, you will learn more about how to make that more palatable!

Do cryptocurrencies ever fail? If yes, what happens to the people who hold money on those chains?

Yes, absolutely they can fail. In fact, recent estimates put the number of failed chains at 2000-3000. So many failed cryptocurrencies!

Reasons for failure can include poor adoption, scams, mismanagement, regulatory issues, or technological flaws. Consider: literally anyone with a little technical ability can start up a blockchain – so lots of people have tried! Many of these failures are here and gone in a blip, such that you probably never heard of them. But even big-name chains have failed; a memorable example would be Terra Luna (LUNA). When this happens, people’s money is lost forever.

In a world where even major national fiat currencies sometimes fail, there’s no such thing as no risk. And in the blockchain world, there’s probably more than the average amount of risk to be quite honest.

So is this even safe? You’ll have to make your own final decisions, and you should do your own research before holding a lot of value on any one blockchain. Here’s the fundamental things to look at:

• Decentralization → Is it controlled by a small group (high risk)?
• Adoption & Use Case → Does it have real-world utility, or is it hype?
• Security & History → Has it been hacked or exploited before?
• Development Activity → Are developers actively improving it? Check GitHub and project roadmaps.
• Regulatory Risk → Is it banned or at risk of being classified as a security?

Some good old fashioned common sense works here as well. Does something seem too good to be true? If so… don’t say your mama didn’t warn you! Blockchain offers some new ways to solve real-world problems and allow more of the world to access useful financial tools. However, there is nothing inherent in the technology that will make you get rich quick, and anyone who says otherwise is selling something.

Are there any risks with staking Cardano?

Staking in Cardano is one of the features that make it our favorite. Staking your ada with a good pool allows you to use your money to help secure the network, and earn rewards (more money!) for letting your money do that passive work. On top of that, staking is liquid- which simply means it’s not stuck anywhere. You can have your ada staked one minute, and spend it all on candy in the next minute. There’s no lockup time or waiting period to access your money when it is staked. The other great thing is that it’s always in your control – you don’t have to actually GIVE your ada to a stake pool operator and then worry that they might die or wander away with it. Your money remains safe in your wallet the whole time it is staked. (Other chains do have different rules when it comes to staking, liquidity, lockups, and custody, so these cool features are a differentiator of Cardano).

So is this even safe? Despite all the happy news we just went over, there’s a few things you should watch out for with staking your ada:

• Pick your pool and Drep: If you stake your ada to a pool that is not very active, or is messing up on the job too often, or even retires from the network while you are staked, your ada may not be earning maximum rewards, or any at all. Various pool explorers will allow you to search and compare different pools. If you are looking for a pool, we recommend ours! Ticker: LIDO. Once you’ve selected a pool, don’t forget to pick a DRep, become a direct voter, or one of the automatic DReps. If you’re looking for a DRep visit gov.tools. Until you select a DRep or become a direct voter, you will still earn staking reward, but you won’t be able to withdraw the rewards.
• Self-custody: Some centralized exchanges will offer to stake your ada for you. This might be marginally better than not staking at all, but we encourage you to do your staking yourself. For one thing, staking through an exchange does not mean you are really getting your own rewards. You are getting some percentage, as decided by the exchange, and subject to change whenever they decide. Also, many pools offer perks, opportunities, and community benefits that you will totally miss out on when your ada sits on an exchange!

The bottom line answer is that staking ada is very safe! The warnings above are more about maximizing your rewards as opposed to safety per se. In fact, the whole network, as well as your personal investment, is even MORE safe when you do stake your ada!

Can your staked crypto be stolen?

Your ada, in a self-custody wallet, with the keys in your sole possession, is very safe from being stolen.

But what if your ada is being held on a Coinbase or any other exchange? You don’t really own that crypto the way you would if you held your own keys. Other people, including Coinbase employees, or anyone who hacks their system, could hypothetically steal your money.

Here’s some more risky business: A relatively common “social-engineering” hack involves tricking users into exposing their keys. For example, if you follow a link or receive an email that asks for your keys in exchange for customer support or access to something – that is definitely not safe. No legitimate business will ever ask for your keys. And anyone who does is definitely trying to steal your crypto.

So is this even safe? A common refrain in crypto is “not your keys, not your crypto.” The examples above all involve someone holding your keys for you, or tricking you into giving them away. Keeping your secret keys in your sole control is the main thing you can do to keep your money safe from sticky fingers.

Is there any way that ADA sent to the wrong addressed can be reclaimed

No, but you could ask very nicely.

So is this even safe?

You should be very certain of the addresses you are using before you send money. Most interfaces offer an easy way to copy/paste an address. If you somehow mis-copy an address, it’s more likely that a transaction will simply fail, because it’s unlikely that your mis-copy will actually be a different legitimate address! If you are intending to send a large amount of money to someone, there is nothing wrong with starting with a small test transaction to make sure it gets where you meant for it to go! As you get practice, you will gain confidence in how the sending process works.