What Is a Paper Wallet?
A paper wallet is a piece of paper used in the cryptocurrency market. Paper wallets have private and public keys printed out. Some may also have a scannable barcode created by an app. It allows investors to store and access their cryptocurrency offline. When an investor prints out their keys, they are removed from the cryptocurrency network while the tokens remain. But they are inaccessible without the keys.
Key Takeaways
- A paper wallet is a printed piece of paper containing keys and QR codes used to facilitate your cryptocurrency transactions.
- Because they are removed from the internet, at one point, paper wallets were considered to be more secure than other forms of cryptocurrency storage.
- While many people believe that the risks of losing, misreading, or damaging a paper wallet outweigh the potential security benefits, it remains an option for storing your keys.
How Paper Wallets Work
A cryptocurrency wallet allows you to store your public and private keys. A paper wallet, on the other hand, is a piece of paper with your codes and private keys printed out on it. They are generally created by generator apps for paper wallets, which may also create a barcode. To use the codes, the wallet app on your device should be able to scan—or sweep—the paper wallet, which transfers the coins to the software wallet.
These programs can generally be used when you're disconnected from the internet. Ideally, also you'd use the program on a device with up-to-date antivirus and malware detection software. Thiswon't always be feasible, but at the very least, you should run a free malware check on your computer before generating the keys.
When you choose to print your keys, they are generally removed from your digital wallet and the network. This means no one can hack your paper wallet or retrieve your keys unless they physically take the paper on which you have them stored. Removing them from your digital wallet also means that if you lose your paper wallet, you'll not be able to gain access to those cryptocurrencies again.
Paper wallets were generally used before cryptocurrency became popular and there may be instances where you need to store your cryptocurrency on paper. Storage technology has improved since the method became popular but remains a valid way to store your keys in certain circ*mstances.
A QR code is a barcode your app generates that allows your wallet to quickly scan your paper wallet into your hot wallet.
How to Create and Use a Paper Wallet
As noted above, paper wallets are generally generated using an app. Here are some of the steps you can take to create your own paper wallet:
- Choose your app
- Create your wallet
- Decide the number of copies you want to print.
- Enter a PIN or password to encrypt your wallet if prompted.
- Generate your wallet.
- Print.
Don't forget to delete the app once you're done.
You can use your paper wallet with a wallet app that scans the barcode generated when you create it. You may also enter the keys to transfer your crypto into the app so you can start making purchases or transfers.
How to Safeguard Your Paper Wallet
Paper wallets were considered one of the safest ways to store cryptocurrency for several years. However, they have fallen out of favor with many cryptocurrency fans because they are susceptible to environmental factors, can degrade with time, be misplaced, or otherwise be damaged.
They can still be useful if printed out clearly, stored securely, and kept safe from damage. However, you should consider several factors before deciding to use a paper wallet.
Device Security
These programs can often search and monitor for a specific activity like cryptocurrency use. They can scan browsing history and caches in the system where temporary information is stored or even view your screen while you're generating your keys.
Here are a few ways you can keep your device secure:
- Ensure that your device is safe from cyber-attacks, malware, and viruses by using security software to scan it.
- When you print your keys, the security gap lies within the devices you're using to print them out.
- Computers, phones, and tablets can all be hacked into or infected by malware, ransomware, viruses, or other forms of cyberattacks so it's essential to ensure your device's wireless and Bluetooth are off because hackers can use those signals to access your device and wallet.
- Consider placing your smartphone or tablet on airplane mode to disable all signals temporarily before generating your keys.
Make sure you don't take or keep digital pictures or scans of your wallets because hackers can acquire those pictures.
Printing
Printers are not always reliable, and any problems while you're printing can lead to the loss of your keys and cryptocurrency. Paper jams, inkspots, or poorly aligned printer heads can all cause serious problems when you're creating your paper wallet.
It's possible that the wallet or program you're using will allow you to print your keys before they are deleted from your device, but you should make sure that is the case before you print to prevent losses caused by a faulty printer.
Certain types of printer ink can bleed over time, and different kinds of paper accept and hold ink differently. If you're going to print out your wallet, ensure you use a printer that you know works well, paper that will last a long time, and ink that will not fade or bleed.
Here's another thing. Print from a device that is connected to a printer through a wired, non-networked connection. When you're finished, make sure you empty any recycle bins, temporary files, and caches and remove any digital backups that might be created. Remember, printers connected to larger networks often store information; hackers may be able to access this storage and find the keys during or after the generation process.
Physical Storage
Once you've created your paper wallet, consider how you're going to store it. You'll need a secure place, such as a fireproof and waterproof safe, to house your wallet. Depending on the fair market value (FMV) of the cryptocurrency you're placing in a paper wallet, you might consider safe deposit boxes at your bank or financial institution.
Is a Paper Wallet a Good Idea?
Paper wallets were once the most secure method for storing cryptocurrency. It is still a valid way to store your tokens if you have no other storage method. However, you should consider it a temporary method until you can access another way to store them.
Is a Paper Wallet a Cold Wallet?
Yes. A paper wallet is a form of cold storage because it removes internet accessibility.
How Do You Get a Paper Wallet for Cryptocurrency?
Creating a paper wallet can be as simple as writing your keys down on paper to using an app to generate a QR code, and printing the key and code.
The Bottom Line
Digital currencies are virtual forms of money. The most common forms are cryptocurrencies. Since they're digital, it only makes sense that holders would store them in a digital wallet. Although this is the most common form of storage, you can still hold your digital currencies in a paper wallet by downloading an app and generating your wallet. Keep in mind, that there are risks to doing so. Your wallet can be prone to damage and you may be subject to security risks if you don't take the necessary precautions.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own cryptocurrency.
