If you are new to Bitcoin, here are several things you need to know about paper wallets, along with their advantages and disadvantages.

A Bitcoin, unlike fiat cash, has no physical representation. Wallets used to hold digital tokens are typically software that aid with transaction updates to the blockchain ledger. Paper wallets differ from so-called "hot wallets" in that they are not connected to the internet. However, they do not contain physical Bitcoins; the paper quality of these wallets relates to the cryptocurrency owner's mode of access.

bitcoin paper wallet

In recent years, Bitcoin users have resorted to looking for new ways to protect their investments. As the term implies, a Bitcoin paper wallet is chosen as a good solution because it is a printed paper that contains your cryptocurrency address, private keys, and a QR code.

They are cold storage wallets that are incredibly more secure than digital wallets because hacking and malware attacks are less likely to happen. However, setting up a paper wallet is a little complex. There is no backup system for paper wallets, so users must be exceedingly cautious when storing them. To transfer assets, users must connect their paper wallet to a PC or tablet. However, they must be extremely cautious to avoid malware penetration while it is connected to the internet.

Services like BitAddress allow the users to generate a random Bitcoin address and private key, which can be used to make paper wallets. After that, a document is created, printed, and stored in a secure environment away from water and moisture to avoid damage.

If you're interested in becoming a paper wallet user, here's a complete guide on how to create it and what you can expect from it.

 

How To Create Bitcoin Paper Wallet

It is not difficult to make a paper wallet; the challenge is to secure it properly. If you want to examine how the process works, the steps below explain how to create one using the BitAddress service:

  1. Clean up the computer before creating a paper wallet by scanning it with up-to-date, high-quality antivirus and anti-malware software. In addition, make sure the printer is directly linked to the computer and can print even when the computer is not connected to the internet.
  2. Go to BitAddress for further information (BitAddress is open-source software for producing paper wallets). While it is feasible to create a paper wallet online, doing so offline mode is far safer. To begin with, start downloading a zip file that contains a copy of the generator's webpage. The download link for Bitaddress.org is at the bottom of the page. Downloaded files will be erased once they have been used, so keep them somewhere safe.
  3. Before extracting the zip file, make sure it is free of malware. Advanced users can validate the file's integrity by obtaining and inspecting the author's PGP signature, normally provided on the same page as the zip file download link.
  4. Disconnect the computer and printer from the internet before creating a paper wallet. To begin with, pick a web browser like Chrome or Firefox and turn off all of its add-ons and extensions.
  5. To produce a new random private key, move your mouse around or type some random text.
  6. Afterward, select "Paper Wallet" and print the contents. The public address on the left would then be used to store your Bitcoins.
  7. By checking the BIP38 encryption box, you can also set a passcode to encrypt the paper wallet for more protection.
  8. Delete all downloaded files from the computer, empty the recycle bin, clear all cache, and reboot the computer before reconnecting to the internet.
  9. The wallets must then be funded. People have been stuffing their paper wallets with a varying number of coins, depending on whether they want to give them away as gifts or save them for the future.
  10. Once the paper wallets have been funded with cryptocurrency, it is crucial to preserve them carefully to keep them physically secure. Fold the paper wallets to hide the private keys, and optionally apply a tamper-proof seal sticker over the folded parts for protection.

That concludes your subject in creating your first Bitcoin paper wallet. In less than 5 minutes, your very own paper wallet was already created. By entering the number of addresses you want to generate in the 'Addresses to generate' field, you can generate as many paper wallets as you like. The addresses will all be different and unique.

 

The Advantages Of Bitcoin Paper Wallet

A paper wallet comes with several advantages, which make the user choose it as the primary choice. Some of them are explored in the following part:

 

Easy to Create and Totaly Free

A paper wallet can be created in less than 1 minute and is one of the most affordable types of crypto wallet. A crypto paper wallet works by generating and printing a single private key and Bitcoin address on paper from websites. It makes a paper wallet completely free and does not cost anything, unlike hardware wallets, which can cost a few dollars. You only need to make sure to have a stable internet connection to generate one and a printer to print the generated contents.

 

Very Secure and Helpful

When you give someone a paper wallet as a gift or promos, you also give them the keys that go with it. It will indicate that the cryptos are now in the paper wallets of the recipients. A BIP38 password can be added. This method will secure the cryptos against physical theft since even if the paper wallet is stolen, the thief will require the password to move assets from the paper wallet. You can even give a paper wallet and then deliver the password to its recipient separately.

 

Prevent Hacker From Accessing Your Digital Assets

Since paper wallets are not linked to the internet, paper wallets are incredibly safe. The major advantage of these wallets is that they allow you to leave your funds securely. All linked keys are kept in a separate location. Cyber-attacks and virus attacks pose no threat to the system.

In fact, many cryptocurrency users choose to use a paper wallet since they do not have to worry about hardware or software malfunctioning. All they have to worry about is a piece of paper. This method is considered the safest way to store Bitcoins if you are not planning on spending the funds in the short term.

Paper wallets are the safest option if you plan to store Bitcoins in the long term because storing Bitcoins online or at an exchange is not always secure since they are frequently hacked. Even having a live wallet on a computer poses a serious threat.

However, just like you would with costly valuables or cash, it is essential to keep the wallet safe from the risk of being physically damaged. In this case, you can reduce the risk by printing a tamper-resistant wallet. 

 

Easy to Import into Software Wallet to Make It More Secure

You will need to import the private key or seed into a software wallet when sending Bitcoin from your paper wallet. While the procedure for each wallet varies, the general concept is the same. In order to import the paper wallet into the software wallet, you need to download the software wallet. Let's say you will use Metamask. Once the software wallet is installed on your computer or phone, you need to import an existing seed or private key into it. Moreover, you can also scan the QR code of your paper wallet with the software wallet, which is the best method to import the paper wallet.

A software wallet also provides recovery phrases to increase security. It is a human-readable representation of an infinite number of possible combinations of the user's public and private keys. You must pick the words correctly on the subsequent page to guarantee that the recovery phrase is securely maintained.

 

The Disadvantages of Bitcoin Paper Wallet

Along with the advantages of a paper wallet, there are also the disadvantages of using it. Let us break it down below:

 

Bigger Risk Exposure to User and Device Errors

Transferring paper wallets to literal paper requires the use of a printer. Many printers come with a built-in hard drive where the paper wallet can be kept. Anyone who accesses the file can view the private key and steal the Bitcoin it contains. Shared printers, such as those in school facilities, corporations, and internet cafes, are frequently tracked centrally as well. Any radio transmission listener could gain the private keys and steal the money if the printer is accessed through wireless connections.

For many users, the greater risk associated with a paper wallet is due to human error. If a printer utilizes low-cost ink, the wallet may run, bleed, or fade over time, making it unreadable. The same risks apply if the document is lost, stolen, ripped, or otherwise destroyed. Problems can also arise if a user misreads a key or if the wallet software no longer recognizes the private key format of the printed wallet.

 

Vulnerable to Physical Damage

A paper wallet has a high risk of being damaged, especially if stored for an extended period of time. The text might get blurred or torn if the paper wallet is not well saved. Another problem with a paper wallet is that the private keys are written in tiny letters in most cases.

Sometimes the characters are misread as another letter, such as a "B" instead of an "8" or a "1" instead of an "l". If even a single character is typed incorrectly, the entire private key becomes invalid. There is a checksum for private keys in WIF format, but common users have no tools to fix inaccuracies.

Paper wallet disadvantage

Seed phrases provide considerably more mistake correction because they utilize natural language vocabulary. So, words written in sloppy handwriting are frequently readable. Even if one or two characters are missing, the term is usually still readable. The seed phrase words are carefully selected from a word list in which several letters of each word are sufficient to identify it uniquely.

Meanwhile, QR codes were not meant to store cryptographic data securely. Water crumpling and even folding the paper can damage and render QR codes unreadable.

 

Unencrypted Private Keys are Easily Exposed

There are two types of keys in cryptocurrency: a public key and a private key. The public key is almost identical to your bank account. Meanwhile, a private key is your ATM PIN. You give out your bank account number to everyone who wants to send us money, but only you know your ATM PIN. The public and private keys in your wallets work in the same way. Your public wallet address is shared, but your private keys must be kept secret.

When sending data across a network, the sender encrypts it with his private key and generates a hash. As a result, private keys can be easily shared with other users, or they can be used to transfer Bitcoin instead of receiving them if they are unfamiliar with the system. Another problem is that you do not follow the setup instructions correctly and end up with a malware-infected printer or machine. In that instance, it will be vulnerable to hackers gaining access to your private keys.

 

Raw Transactions are Considered Dangerous

The raw transaction is completed in binary format,  in which hexadecimal is commonly used to represent them. The numerous Bitcoin Core commands with "raw" in their names are sometimes referred to as raw format.

A good example of some wallet address that appears to be a paper wallet is a good example of a costly mistake of the raw transactions. Between April 2014 and January 2017, the owner appeared to have been buying Bitcoin regularly. The owner made a raw transaction error and transferred 50 BTC as miner fees.

 

Things to Consider

  • To ensure safety, it is important to always keep your recovery seed safe. Every wallet has a recovery seed that you may use to reclaim your keys if you erase your device or lose it and need to replace it. Keep a backup of this recovery seed somewhere safe, ideally not in your cloud or on your hard drive.
  • Before finalizing transactions, double-check the addresses. Even if hostile actors cannot remotely hack the hardware wallets that sign Bitcoin transactions, they can still scam you using other techniques. Some cryptocurrency spyware, for example, alters the Bitcoin addresses you copy to your clipboard.
  • While you may assume you are copying a friend's Bitcoin address into your wallet, you may wind up with an unknown address belonging to a hacker. So, it's crucial to double-check that the address's source is real before confirming any transaction. You do not have to examine every character in the address; check the first and final four letters in the site where you acquire the address.

 

Paper Wallets vs Hardware Wallets

Although paper wallets are more preferable to digital ones, it is better to use a hardware wallet if you are serious about becoming a long-term investor. A hardware wallet can reduce the dangers you cannot control, such as large data breaches at cryptocurrency exchanges or malware that exploit zero-day vulnerabilities in mobile and desktop operating systems.

A hardware wallet functions similarly to a USB drive plugged into any device with a USB port. It is a physical wallet for electrical devices that can save all of your private keys securely. Because of its security features and protection against malware and viruses, it is one of the finest wallets for storing cryptocurrency. Physical buttons, an LED screen, and a backup recovery feature are all included in hardware wallets.

Nonetheless, hardware wallets are not entirely safe. Hackers can break into the servers of hardware wallet manufacturers. However, supply chain attacks are far more difficult to carry out here. Ledger, for example, can perhaps push out malicious firmware updates for Ledger wallets in a recent security breach. 

In addition, the situation has changed dramatically in recent years, and hardware wallets have become much easier to use, providing the users with a good balance of security and convenience.

 

Conclusions

A paper wallet is one of the best free Bitcoin wallets available. While most people do not usually utilize paper wallets to store Bitcoin, they can be a great offline storage alternative when done correctly. However, do not store all of your cryptocurrency in a paper wallet because it has some flaws to be considered.

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Despite being fully offline, paper wallets are difficult to utilize. You must first import your private key into a software or web wallet to use your Bitcoin. Your assets can also be lost if your paper wallet is burned or damaged. Thus, make sure to practice all the important measures to ensure your security if you eventually decide to use a paper wallet.

 

Apart from storing, dealing with Bitcoin transactions also needs to be done safely. If you believe in the safety of cash transactions, there are actually 5 ways of buying Bitcoin with cash.