What Is a Paper Wallet?
A paper wallet is a piece of paper with your private and public keys printed out. Some paper wallets might also have a scannable barcode created by an app. It is a way to store and take access to your cryptocurrency offline. When you print your keys, they are removed from the cryptocurrency network, but the tokens remain; however, they are inaccessible without your keys.
Paper wallets were generally used before cryptocurrency became popular. Storage technology has improved since the method was popular, but it remains a valid way to store your keys in certain circumstances.
You might encounter a time when you need to store your cryptocurrency on paper; therefore, it's essential to understand what a paper wallet is, how it works, and the risks if your circumstances require you to create one.
- 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.
Understanding a Paper Wallet
A cryptocurrency wallet is a place where you store your public and private keys. A paper wallet is a piece of paper with your keys printed out on it. When you choose to print your keys, they are generally removed from your digital wallet and the network. 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 are generally created by paper wallet generator apps. These programs should be able to be used while 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. This won't always be feasible, but at the very least, you should run a free malware check on your computer before generating the keys.
The keys and QR codes are printed out, and the paper wallet is created. 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.
A quick response (QR) code is a barcode your app generates that allows your wallet to quickly scan your paper wallet into your hot wallet.
Paper Wallet Considerations
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.
It's essential to ensure 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.
Often, these programs can 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.
It's also essential to ensure your device's wireless and Bluetooth are off, because hackers can use those signals to access your device and wallet.
Make sure you don't take or keep digital pictures or scans of your wallets because hackers can acquire those pictures.
If you're using your smartphone or tablet, you could place it into airplane mode to disable all signals temporarily before generating your keys. It would be best if you could 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.
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.
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 a poorly aligned printer head 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.
Once you've created your paper wallet, you should consider how you're going to store it. You'll need a secure place, like a fireproof and waterproof safe, to keep them in. Depending on the fair market value 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.
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.