The paper wallet, or physical wallet, is considered one of the most secure ways to store Bitcoins and other cryptocurrencies. If properly constructed and certain precautions are followed, it is almost impossible to attack or steal from such a wallet.
What is a paper wallet?
A paper wallet is considered an extremely secure way to protect cryptocurrencies from cyber attacks, malware, and theft. While it is often said that the coins are stored offline, this information is not entirely correct.
Because in reality, no coin is printed in the process, but the information of the digital wallet.
This includes the public key, which is also the wallet address, and the private key, which is needed to spend the coins. Ideally, the information then only exists in this physical form and can no longer be stolen via the Internet.
What advantages and disadvantages does it offer compared to other wallets?
The Paper Wallet is one of the cold storage options. Since they are stored offline, they are not as flexible as hot wallets. However, their strength also follows from this, as they are less susceptible to hacker attacks due to offline storage. This makes them especially good for storing larger amounts that is set aside as an investment. So who is a paper wallet like this suitable for?
- Securely storing large amounts of money
- Storing cryptocurrencies that will not be accessed for several months or even years
Creating a Paper Wallet
To create a paper wallet, a program is needed that creates a random public key and a private key. It is important to make sure that it does not use pseudo-random numbers, as these could be predicted by hackers according to certain patterns.
For Bitcoin, for example, a paper wallet can be created on Bitaddress.org or Walletgenerator.net. Here, users can play with entropy by moving the mouse over the screen until the randomness is at 100%. A new window is then loaded with the private and public keys. These are visible in numbers and letters as well as in the form of a QR code. The page can then be printed out and carefully stored.
Another option for creating a paper wallet is offered by bitcoinpaperwallet.com. The basic principle is similar. However, unlike the two alternatives mentioned above, the Paper Wallet here does not look so plain. The paper is printed on both sides and the user also receives instructions on how to fold and cut the wallet to make it as secure as possible. Bitcoinpaperwallet also offers special hologram stickers, foils, and zip bags for purchase to further secure the wallet.
MyCellium offers a very special way to create a paper wallet. The Latvia-based company sells USB sticks that can be plugged into a printer to create a Paper Wallet. This bypasses the computer route and minimizes the risk of hacking and malware.
A paper wallet can also be created for Ether. MyEtherwallet can be used for this purpose. Through the website, the user receives a link and can download a zip file. This zip file is opened and executed on the computer and also offers the possibility to create and print a paper wallet.
After the Paper Wallet is successfully created, the user can now send the respective cryptocurrency to the wallet, using the public wallet address.
How to protect your wallet
Although the Paper Wallet is considered to be particularly secure, owners should not act too carelessly. The following points should be followed to eliminate all security risks as much as possible:
- The Paper Wallet Generator should be disconnected from the Internet to guarantee that no keys are sent outside and that the generator acts independently.
- Verifying the integrity of the code and the trustworthiness of the author beforehand is important. Hackers may have manipulated the download so that it creates predictable seeds. These do not provide any security.
- Carefully scan the computer for viruses and spyware. It is best to use different programs to do this, as not all malicious elements may be found by anti-virus software. Undetected spyware could relay all computer activity to hackers, giving them access to passwords and private keys.
- The wallet should never be stored on a computer hard drive, sent via email or other network connections. It is also advisable to enter or scan the key into the computer only immediately when you really want to use it.
- If possible, the Paper Wallet should be kept hidden and never visible or accessible to other people. Strangers could easily copy and use the private key this way.
- A web-based generator should not be used, as it could be tampered with. Hackers could also try to intercept the data.
- Some printers have internal memory or drives that keep copies of the printouts. This can become a risk. If it is a smart printer, it too could be hacked and the printed information would be visible to the hacker. If the printer is later sold or disposed of, there is a similar risk. Therefore, it is recommended to create the Paper Wallet on as simple a printer as possible with no memory, drive or Internet access.
- The Paper Wallet is made of paper, which experience has shown can be very fragile. Therefore, it is essential to protect the printout from moisture, fire, sunlight and other harmful influences. In this regard, a copy kept in a safe or other inaccessible protected space could be very useful.
Paper wallet is a good way to protect larger amounts and long-term investments. Nevertheless, this method is not completely without risks either. However, it is significantly safer than a hot storage variant if all precautions are taken and the points mentioned above are observed.