A Bitcoin paper wallet is an offline mechanism to store Bitcoins (BTCs). As there is no physical presence of cryptocurrencies and are mainly software programs, they can be stored in specialized wallets. Most of the available Bitcoin wallets are software programs that use the internet to store the largest digital coin. However, paper wallets are different from hot wallets because they don’t use the internet to store bitcoins.
Without any further ado, let’s check what it really is and know the answers to some of the most sought-after questions.
What is a Paper Wallet?
A paper wallet is an offline method of storing Bitcoin and other cryptocurrencies. It involves printing out your public and private keys on a piece of paper. You can then store this paper in a secure place. As the keys (public as well as private) are printed in QR codes, you can scan them for all your transactions in the future.
Paper wallets are very safe because they provide users with full control. In fact, you don’t have to worry about any hardware’s well-being. Most users worry about their software wallet because they may lose their funds due to a hacking or malware attack. Paper wallets relieve you of all these tensions. You simply have to take care of a piece of paper. Paper wallets were very popular in the early days of cryptocurrencies. However, in recent years, users are exploring other methods of storing their holdings securely.
If you’re interested in generating your crypto paper wallet then you’ve to visit a wallet generator website. It’ll create keys and corresponding QR codes at random. This process of wallet generation is done by using the internet. That’s why it is recommended that you delete the internet history after the creation of keys.
If you create a paper wallet, always load it first and then move the digital coins to your main cryptocurrency wallet. In case, you give a paper wallet to anyone, this means that you just made an offline transaction of cryptocurrencies.
When you give a paper wallet to someone, you also give him/her the associated keys. This means that the recipients now have the cryptos in the paper wallet. You can add a BIP 38 password. This will protect any physical theft of the cryptos because even in case of theft of the paper wallet, the thief would need the password to move funds from the paper wallet. You can also send the paper wallet gift through the mail and then deliver him/her the password independently.
To completely avoid any malware interference, try using a brand new computer or laptop for generating the wallet. Even if this is not possible, run a malware check on your computer before you generate the keys.
Once the keys are generated, print out the codes and put them in a secure place. Always make sure that the paper doesn’t get damaged or lost. The codes must be scanned for accessing additional information about the wallets. However, you must have a “live wallet”, which can be connected to the internet. This will help in transactions. The live wallet helps in sweeping the paper wallet, thereby enabling users to transfer digital currencies from the paper wallet to the live wallet.
Why use Paper Wallets?
There are many reasons why you should use paper wallets:
- Helps you to give it to another person as a gift.
- Helps in usage as a giveaway or promo scratch-off card.
- To learn and have fun in the wallet generation process.
- To make offline transactions.
Pros and Cons of Paper Wallets
The advantages and disadvantages of paper wallets are given below:
- Paper wallets are extremely secure as they are not connected online. This is the greatest benefit of these kinds of wallets. All the keys associated are stored offline. The vulnerability from cyberattacks and malware attacks is nil.
- By adding passwords, an additional layer of protection can be provided. With this extra layer of protection, it is not possible anymore to transfer funds from the paper wallet until and unless the password is given correctly.
- The possibility of a paper wallet getting damaged is high, especially when kept for a longer period of time.
- The illegibility of the keys due to fading is a real possibility. Once this happens, you’ll not be able to scan the wallet anymore. In that case, you can’t access the Bitcoins sent to that address.
- While printing a paper wallet, printer-related printing issues are a high possibility. The printer-related issues usually take place in the case of non-laser printers because the ink tends to run. That’s why it’s preferred that you use a laser printer while printing a paper wallet.
- The printers that are connected to larger networks usually store information. In fact, the possibility of malware being surreptitiously installed in those printers for stealing information is also common. That’s why paper wallets printed from these kinds of printers are high-risk ones. During the wallet generation process, malware present in the printer can steal your keys.
- User error risk can take place if the ink bleeds during printing or fades with time. This may render the wallet inaccessible.
- Paper wallets can also become ineffective if the paper gets torn, stole, lost, or damaged otherwise.
- The use of raw private keys in paper wallets can also lead to security and user error risks.
- Unencrypted private keys are susceptible to exposure to others, which can then be used by scrupulous elements to siphon out your funds.
- The users unfamiliar with the key system may send BTCs instead of receiving them.
These are the benefits and negative aspects associated with paper wallets.
How To Make or Generate a Paper Wallet?
You can make or generate a paper wallet by following these steps:
Step #1: Visit a private key generator website to generate a private key.
Step #2: You can print the wallet on a piece of paper when the private and public keys (including a string of characters and QR codes) are generated. With the availability of the public key of the paper wallet, one can send the cryptocurrency as often as one likes.
Step #3: Once the paper wallet is created, use the private key to move the digital coin balance to a software wallet. This process enables you to transfer funds to a new private key on your software wallet.
Crypto Paper Wallet Vs Hardware Wallet
Though both paper and hardware wallets are cold wallets, there are significant differences between the two:
- Ease of Use
All the private keys are stored offline in a USB-like device in a hardware wallet. Most of these devices have a display screen so that you can see the private keys, providing them with a better, easy-to-use interface.
In the case of paper wallets, the private keys are printed on paper. In case, you may many such private keys, then there may be confusion. Even if you have many such papers printed, even then the difficulty in managing them is high.
Both paper and hardware wallets are extremely secure because they are offline and no hacker or malware can steal the cryptos. However, hardware devices provide you with more security because the storage of private keys is done on electronic devices offline.
There are many hardware devices that provide extra security elements such as chips. This means that there would never be any security breach even if there is any virus or malware on the machine.
Though the password protection option is there on paper wallets, that aspect is no match with the added chip security element in hardware.
- Backup or Recovery Option
Hardware comes with a backup recovery option. However, this option is not available in a paper wallet. Moreover, you may lose all your digital coins if you lose your paper wallet and also forget the private keys.
A paper wallet is more prone to damage (in terms of paper, fading, etc.) than a hardware wallet. When it comes to long-term storage options, hardware is always the best, much more than the paper option.
Paper wallets can be generated free of cost. However, hard wallets are available at a cost of US$60 to US$200.
Hardware wallet supports many different cryptos. It helps you to keep all of them in one place and manage them easily. However, in the case of a paper wallet, it is not that easy to manage.
Are Paper Wallets Safe?
Yes, they are safe from hackers and malware because they are not connected to the internet.
How to Create or Generate Paper Wallet Safely?
To generate a paper wallet safely, follow the steps mentioned below:
Step #1: Visit a website of a wallet generator.
Step #2: Save the wallet generators as a web archive.
Step #3: Go offline. (You may also run the wallet generator online. However, it comes with malware risks).
Step #4: Click the web archive file and generate the key offline.
Step #5: Use a printer to print. Always avoid one that is connected to a public network.
Step #6: Run the generator file and operating system either on another offline computer or a USB drive.
Step #7: Destroy the printer after creating the wallet.
Step #8: Add a BIP 38 password, which encrypts your private key. It provides you with an additional protection level.
FAQs (Frequently Asked Questions)
How do I check my paper wallet balance?
To check your paper wallet balance, simply put the Bitcoin address on a paper wallet checker or scan the QR code. It fetches your BTC balance by checking several blockchain services.
Can paper wallets be hacked?
No, paper wallets can’t be hacked. If the wallet generator system (where the wallet is situated) is hacked with a keylogger, then it is possible to siphon off all your funds from the wallet.
How do you recover a paper wallet?
The steps associated with recovering a paper wallet are given below:
Step #1: Click the Add Wallet.
Step #2: Click the Restore file.
Step #3: Select the certificate tab of the paper wallet.
Step #4: Enter the paper wallet recovery phrase in the field of the Paper wallet.
Step #5: Enter the name of a wallet.
Step #6: Enter a spending password.
Step #7: Click on Restore wallet and the restoration is done.
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