Summary
- A paper wallet is a type of crypto wallet that allows you to store your crypto offline.
- Paper wallets are one of the most secure ways to store your Bitcoins since they are offline and not susceptible to hacking.
- Paper wallets are made up of two parts: a public key and a private key; the public key is used to receive Bitcoins, and the private key is used to spend Bitcoins.
What Is a Paper Wallet?
Before we proceed, we are going to assume that you already understand what a crypto wallet is, and that there are software wallets (or hot wallets) and hardware wallets (or cold wallets.)
If you do not know what these are, read this first: What Is a Crypto Wallet and how does it work? – Phemex Academy
A paper wallet is a physical record of your crypto balance and transactions on, you guessed it, a piece of paper.
It typically contains two QR codes, one for your public key and one for your private key. A public key is like your bank account number, it allows others to send you money. A private key is like your PIN, it allows you to access your coins, transfer them, and spend the money in your paper wallet.
A question that you may be asking is, “Is a paper wallet a type of cold storage?” The answer is, yes, a paper wallet is a cold storage wallet, which means that your cryptos are stored offline.
This makes paper wallets one of the most secure ways to store your Bitcoin since there is no digital footprint for hackers to exploit.
An example of paper wallet for Bitcoin (Source: walletgenerator.net)
Paper Wallet vs Hardware Wallet: What Is the Difference?
Paper wallets are a type of cold storage wallets; cold storage wallets can be digital or physical.
Digital hardware wallets are USB devices that look like a flash drive. They store your private keys offline in what is called a “secure element.” They enable you to sign transactions without being connected to the internet.
Some hardware wallets also have a display so you can double-check the transaction before you confirm it. Hardware wallets are more expensive than paper wallets, but they offer a higher level of security.
Paper wallets are cold storage wallets that are created by printing out your public and private keys on a piece of paper.
The main advantage of paper wallets is that they are very cheap and easy to create. All you need is a printer and a piece of paper.
How Does a Paper Wallet Work?
A paper wallet works by generating a public and private key pair, which are then printed out on paper. The private key is meant to be kept offline and secret, while the public key can be shared with anyone. Transactions are signed with the private key and verified with the public key.
When you want to spend your Bitcoins, you will need to import the private key into a Bitcoin software wallet. You can do this by scanning the QR code or by typing out the private key.
How To Make a Paper Wallet?
There are a few different ways to make a paper wallet. Here is how to get started:
- Find a paper wallet generator: Although there are several generators online that help you create wallets, it is a good idea to use an offline generator to prevent your keys from being hacked. You can do this by visiting a site like bitaddress.org or bitcoinpaperwallet.com.
- Download a paper wallet offline: To save or download a paper wallet generator offline, you can right-click and click on “save as”. Make sure that the file is saved as a .html file.
- Open the downloaded file: Scan the file for malware, and disable any extensions or apps that are integrated into the browser. This is to make sure that your computer is not being tracked by anyone or infected with any malicious software.
It is also a good idea to use incognito or private browsing for extra security and then open the file offline by double-clicking on it. - Generate your keys: If you’re using a paper crypto wallet generator for the first time, it is recommended that you generate a new wallet.
- To do this, you can click on “generate new address”. A random string of characters will appear. This is your public key.
- To generate a private key, you can click on the “generate random private keys” button. Another string of characters will appear. This is your private key.
It is important to note that the instructions for each generator could differ. So it is necessary to follow the instructions on your chosen paper wallet generator to create a new wallet.
- You can also choose to add a passphrase for extra security: A passphrase is like a password, but it is longer and more secure.
- Print out your wallet: Once you have generated a public and private key, you can print out the wallet. Make sure to use a printer that is not connected to the internet so that your private keys are not exposed.
Make sure to print out multiple copies and store them in different safe locations. You can laminate the paper or use a waterproof storage to protect it from being damaged.
How to Send Bitcoin to a Paper Wallet?
Say you bought some bitcoins from an exchange and have stored it on a Bitcoin software wallet. You can send it to a paper wallet for even higher security.
To do this, scan the public key of your paper wallet with your Bitcoin wallet (it should support QR codes). Or, you can type it out manually in the Bitcoin wallet. From there, you will be able to send Bitcoin to the paper wallet.
How to Transfer Bitcoin From a Paper Wallet?
If you want to transfer your Bitcoin out of a paper wallet, you will need to import the private key into a Bitcoin wallet. You can do this by scanning the QR code or by typing out the private key.
Once you have imported the private key into your Bitcoin wallet, you will be able to spend your Bitcoins.
How to Sweep a Paper Wallet?
If you want to move all of your Bitcoins from the original key on a paper wallet to a brand new private key on a software wallet, this is called “sweeping.” To sweep paper wallets, you will need to import the private key into a Bitcoin wallet.
To do this, just import your private key into the sweeping page of the software wallet of your choice and click on the “sweep” button.
Advantages of a Paper Wallet
Paper wallets have a few advantages over other types of wallets. Here are some of the benefits:
- Security: Paper wallets are one of the most secure ways to store your Bitcoins since they are offline and not susceptible to hacking.
- Anonymity: When you create a paper wallet, there is no personal information required. This means that your identity remains anonymous.
- Simple: Paper wallets are very easy to use and don’t require any technical knowledge. They are easy to create and only require a few simple steps.
- Long-term use: Paper wallets are a good way to store your Bitcoins long-term since they are not connected to the internet.
- Gifting: Paper wallets are also a good way to gift Bitcoins to friends or family since they are easy to use and can be stored securely.
Disadvantages of a Paper Wallet
Paper wallets also have a few disadvantages that you should be aware of. Here are some of the drawbacks:
- Risk of loss: Paper wallets can be lost or destroyed easily. If you lose your paper wallet, you will lose your Bitcoins.
- Convenience: Paper wallets are not as convenient to use as other types of wallets since you need to import the private key into a Bitcoin wallet to use them.
Damaged paper wallet (Source: reddit.com)
Conclusion
While there are several types of wallets to choose from, paper wallets are a good option for those looking for extra security and anonymity.
Paper wallets are a great way to store your Bitcoins securely. They are offline and not susceptible to hacking. However, they can be lost or destroyed easily and can be less convenient to use than other types of wallets as they can be easily lost or damaged if not stored properly.
Overall, crypto paper wallets are a good way to store your Bitcoins. However, as with any type of wallet, you should be aware of the disadvantages before using them.
