When you are completing any transaction in your Nami Wallet, you can encounter a “Transaction Failed” or “Invalid Collateral” error. This can be very surprising, especially because you can’t meet this type of error in any other wallet than on the Cardano network.
That’s because in order to successfully execute a smart contract, it is necessary to set collateral in your wallet. This practice is also known as unspent transaction output (UTXO), and it’s there to ensure better protection of the network from attacks.
And if there’s anything wrong with the collateral set, you may get a Transaction Failed error due to invalid collateral.
In this guide, we’ll quickly explain what collateral in Nami Wallet is and how to properly enable and set it to avoid getting an error. Let’s dive in!
What’s Collateral in Nami Wallet?
Before we dive into setting the collateral in Nami Wallet, let’s quickly explain why collateral is important on the Cardano network and why you are essentially asked to lock some of your assets away.
Cardano works a bit differently than other networks. On a standard network, your transaction enters some kind of queue, then is picked up by a validator or miner, and only after that the transaction is confirmed.
However, Cardano implements a two-phase validation. The first phase checks whether the transaction is entered properly and you are paying the transaction fee now. Only after that the transaction goes to the blockchain to be confirmed.
This fee is paid from the locked collateral since it can’t be deducted from the transaction itself, as the transaction is not yet entered into the blockchain.
Two-phase validation and collateral are used to guarantee that nodes are compensated for their work. Although on other networks, it is checked whether or not you have enough to cover the gas fee before the transaction is picked up for validation, this still costs processing power. And collateral is there to cover that.
Additionally, it helps secure the network from spam and other types of attacks.
Nami recommends setting collateral at 5 ADA. This comes at around $1.6 and can cover thousands of transactions of yours. Now let’s take a look at how to enable Collateral in Nami Wallet.
How to Enable Collateral in Nami Wallet
There’s a dedicated button for setting collateral in Nami Wallet, hidden on your profile page. You can set it as high or as low as you can, but the recommended amount is 5 ADA. That amount will be then essentially locked away from your main address holdings.
There’s a chance, but very minimal, that you can lose that amount of Cardano. For instance, when interacting with an insecure dApp. However, as the collateral is quite low, you won’t lose more than that.
Step 1. Launch the Extension and Tap on the Profile Icon
The first step is to launch the Nami Wallet extension from the extension tray of your browser.
Then, once the wallet opens up, click on your profile icon located in the top right corner.
Step 2. Select Collateral
From the list that appeared, select collateral.
Step 3. Enter the Amount and Confirm your Password
Then finally, enter the collateral amount. As we already said, Nami recommends setting 5 ADA collateral. From our experience, that’s enough.
In the field below, enter the password you set when creating your wallet. If you forgot it, you can check out our guide on How to Reset Nami Password.
And finally, confirm the transaction. And that’s it you shouldn’t now face the transaction failed error you did before.
What if the Transaction Failed Even After Setting Collateral in Nami Wallet?
If the transaction failed error didn’t disappear after setting collateral, you can be sure it’s not an error on your side.
In that case, you can’t finalize the transaction either because the network is congested or there’s something wrong with the smart contract or other Cardano wallet.
In that case, give it some time and try to enter the transaction at another time when there are not many transactions pending on the network.