Wallet Addresses

In UTXO accounting your funds are “contained” in UTXOs, not addresses.

Ada is not stored “on an address”, but instead within UTXOs. You can use a single address with a wallet to receive funds, but your ada will actually be on multiple UTXOs, as each transaction will generate a new UTXO.

Address != UTXO

Example

You start with empty wallet and send a receive address A to 5 people
They each send 10 ada to the address
The wallet will consist of 5 different UTXOs which all point to the same address
If you now send all this ada somewhere then 5 inputs will be selected for the transaction and NOT one, one for each of the UTXO’s.

It would work the same if you gave 5 different addresses to the 5 people, just that now you could identify who send you ada and who didn’t.

The balance of your wallet is the sum of all of the UTXOs plus the rewards account balance.

Multiple addresses used by a wallet

Daedalus is a hierarchically deterministic wallet, meaning that it can create multiple addresses from the same private key. You can literally send funds to a different address each time and they will wind up in the same wallet, or you can reuse the same address to send funds to.

From an external view (like from an explorer), you can not distinguish addresses and wallets. Only a wallet knows which addresses belong to it …. well that is until staking was introduced.

Staking breaks this because any Cardano wallet that’s currently registered for staking has every address easily linked to the staking address. This will change once the multi-delegation feature is finished.

Address reuse

All UTxO-based ledgers were conceived as ledgers in which each address must be used just once. Any change left after the transaction should come to a new address. Nonetheless, this does not prevent you from reusing each payment address.

  • Using the same address multiple times for receiving funds is a privacy issue.
  • Using the same address multiple times for sending/receiving funds is a security issue (and not only for you).

Staking Rewards

Staking rewards are sent as new transactions to a wallet using another address. When you send funds from your wallet the transaction may include funds from these staking UTxO’s depending on how the wallet decides to select the inputs for the transaction.