Key takeaways
- A paper wallet is a method of storing cryptocurrency. The process involves generating a public and private key pair, typically through a key generator program. These keys are then printed onto paper as two strings of characters and two Quick Response (QR) codes.
What is a Paper Wallet?
A paper wallet is a physical medium for storing cryptocurrency. It typically contains printed private and public keys, sometimes accompanied by a scannable barcode generated by an application. This method enables investors to store and manage their cryptocurrency offline. By printing out their keys, investors effectively disconnect them from the cryptocurrency network while retaining ownership of the tokens. However, access to the stored cryptocurrency is only possible with the corresponding keys.
Paper wallets are categorized as non-custodial cold storage wallets. This means that you manage the keys independently, and the wallet is offline and disconnected from the internet. Although paper wallets were previously regarded as a top choice for securing significant amounts of cryptocurrency, alternative cold storage methods have since become the preferred option.
How does a paper wallet work?
Paper wallets are generated using dedicated generator applications. The application produces a public address for receiving cryptocurrency and a private key essential for proving ownership and spending the cryptocurrency. These wallets often feature a QR code embedded within the paper document. It facilitates easy scanning and signing for transactions.
To safeguard against potential threats, utilizing paper wallet generator apps offline is highly recommended. This helps prevent hackers from intercepting private keys. Additionally, it’s advisable to scan your computer or smartphone for malware or cyberattacks to ensure their security.
While some paper wallet generators offer the option to save keys in PDF format on your computer, this practice is strongly discouraged due to the constant exposure to online threats. Similarly, storing digital pictures or scans of paper wallets should be avoided to prevent hacking risks.
Challenges of Storing Paper Wallets
Paper, being a delicate material, is vulnerable to various forms of damage, such as water, fire, moisture, and environmental factors. Often, some individuals opt to laminate their paper wallets for protection. It’s essential to undertake this process at home to avoid exposing private keys inadvertently.
Moreover, safeguarding paper wallets from loss or theft is paramount. Some individuals choose to print multiple copies and store them in different locations, similar to duplicating door keys. However, in this scenario, the first individual to access the crypto retains control, rendering the other copies obsolete. Alternatively, some people divide paper wallets into segments that must be combined to reconstruct the secret key. Although this approach reduces the risk of theft, it also heightens the possibility of misplacing key parts depending on how they are stored.
Furthermore, disabling wireless and Bluetooth signals on your device is crucial. Hackers may exploit these signals to gain unauthorized access.
Additional precautions should be taken to enhance security when handling funds stored in paper wallets. Apart from generating paper wallets offline, it’s wise to print the document from a device connected to a printer via a wired connection rather than wirelessly. After printing, ensure the secure disposal of any digital storage mediums used during or after the generation process.
Ensuring the Security of Your Paper Wallet
Paper wallets have long been hailed as one of the safest means of cryptocurrency storage. However, their popularity has waned due to their susceptibility to environmental elements, potential degradation over time, and risks of misplacement or damage.
Nevertheless, if printed clearly, securely stored, and protected from harm, paper wallets can still serve as a viable option. However, before opting for a paper wallet, it’s crucial to consider several factors carefully.