How to Use Paper Wallet?

The popularity of cryptocurrencies is rapidly rising, but so are the numerous risks for crypto traders. The fact that digital currency is traded and exchanged on the web is very attractive for hackers, who are constantly trying to trick, scam, and steal crypto assets from crypto enthusiasts, exchange platforms, and even whole blockchains. 

Getting scammed on the Internet and ending up with your crypto stolen is so easy that all you need to do is click on an unverified link on Facebook. This can initiate the installation of keylogger malware on your PC or mobile device, enabling a cyber attacker to remotely gain access to your exchange platform user credentials and steal all your crypto.

That’s why the moment Bitcoin (BTC) was launched as the first crypto back in 2009, developer teams started presenting various software-based solutions for safe crypto storage. These solutions are called crypto wallets and they are the only way to keep your digital currency safe since you can’t store your crypto in a physical wallet. 

Let’s take a closer look at the different types of crypto wallets available on the market, with a special focus on paper wallets, how to create one, and use it to store your crypto.

Cryptocurrency Wallets

Cryptocurrencies never leave their native blockchains. They just change digital locations on their blockchain networks. Blockchain locations are changed with the help of public keys, also called public addresses, and private keys, also referred to as private addresses.

Password sticky notes

Public Keys

A public key is visible on a blockchain explorer. In the case of Bitcoin, one of the most popular blockchain explorers is Blockchain.info. All Bitcoin public addresses are visible through the BTC block explorer and each of these addresses represents a blockchain location where someone is storing their Bitcoin. These addresses can’t get jeopardized if someone simply knows the exact address where you’re storing your coins because a public address is only used as a destination for receiving and storing crypto.

Private Keys

In order for a hacker to steal your crypto, they would need to get access to your private key. Private keys aren’t publicly visible anywhere and you should never share your private keys with anyone. A private key acts as a password that proves your ownership over a specific amount of crypto. You can’t move any crypto from a public address if you don’t possess the corresponding private keys that will authorize you to manage the digital currency which is stored in a specific public address.

Cryptocurrency wallets work based on public addresses and private keys. You’re free to share your wallet’s public address with anyone in order to receive crypto to your wallet, but the private keys must stay safe at all times. That’s why crypto wallet developers implement various encryption techniques and security measures to protect the private keys of your wallet. The private keys are exactly what cyber attackers are after, but luckily, wallet manufacturers implement various security measures such as seed phrases, passwords, and PIN codes to make stealing private keys very difficult for hackers.

Software Wallets

Software wallets or digital wallets are the first type of crypto wallets ever developed. However, they have gone through tremendous evolution since the early 2010s and today there are various types of software wallets that provide some of the best crypto security on the market.

Cryptocurrency coins leather wallet

Software wallets are also referred to as hot wallets or hot storage because they rely on a constant internet connection, which is why they are hot. These wallets are further divided into several categories.

Web Wallets

Web wallets are software wallets that can only be accessed through an internet browser by going to their designated web location and logging into your user account. Your private keys are protected by passwords and seed phrases which are randomly generated words, usually 12 or 24 words in total, that are used to recover your wallet if you forget the password. A subcategory of web wallets are browser plug-in wallets, such as the famous MetaMask wallet that works as a browser extension. 

Desktop and Mobile Wallets

Desktop wallets are wallet apps that require users to download and install the wallet on a PC or laptop computer. These wallets usually store your private keys on your computer, which means that even if someone managed to hack the wallet manufacturer’s central server, they wouldn’t be able to get to your private keys because they are stored on your device. The same storage principle goes for mobile wallets, which come in the form of mobile apps. 

Many desktop wallets are mobile wallets at the same time and work across all of the most popular operating systems for mobile and desktop devices like Linux, MacOS, Windows, iOS, and Android. 

Depending on the software wallet manufacturer, you might have various extra security measures available such as 2FA (two-factor authentication) for transactions and logins, along with passcodes. 

Some of the most popular software wallets include Exodus, Atomic Wallet, Coinbase Wallet, and Trust Wallet.

Cold Storage

Unlike hot wallets, cold storage or cold wallets don’t rely on a constant internet connection to work. That’s why cold wallets are generally considered a safer option than software wallets because the fact that they work offline and aren’t connected to the Internet means that it’s impossible for a cyber attacker to remotely steal your private keys.

Ledger wallet hardware with glasses

Hardware Wallets

Due to high numbers of cyberattacks targeting crypto exchanges and software wallets, various developer teams started working on more advanced, secure solutions for crypto storage in 2013. This resulted in Trezor, a veteran cyber security company launching their Trezor One hardware wallet in 2014.  A few years later, the French blockchain security company Ledger launched their Ledger Nano S and these two hardware wallets soon became the most popular solutions for storing large amounts of crypto safely, beyond the reach of hackers.

Hardware wallets are essentially fancy USB devices that are specialized for storing private keys safely, with the help of extensive security measures. These devices use advanced cryptographic solutions and state-of-the-art security firmware along with microchips with built-in protection against most types of cyberattacks and manual hacks. 

A hardware wallet is truly a cyber attacker’s nightmare, especially if you use a Trezor or Ledger device because these hardware wallets have never been successfully hacked.

Paper Wallets

Paper wallets are the original, old-school crypto cold storage solution. As the name implies, a paper wallet is literally a piece of paper, designed to store both public addresses and private keys in alphanumeric and QR code form.

Although hardware wallets are very secure, some crypto holders still have more faith in paper wallets because of the small possibility of a successful manual hack against hardware wallets. A paper wallet can’t be hacked and the main thing you need to worry about is keeping it in a safe place only known to yourself.

When you create a paper wallet online and print it out, you can use the public address on the wallet to send crypto to it and fill it with assets. You can send as much crypto as you want, but when you decide to move the stored assets to another location or spend them, always keep in mind that you need to clear out the whole amount of stored cryptos. 

Password paper wallet

Apart from keeping the paper wallet to yourself, you also need to keep it out of harm’s way, because if you spill some liquid over the paper wallet, tear it, or the QR codes fade away due to intense sunlight, your wallet will become useless and you’ll lose all the stored crypto.

If someone manages to steal your paper wallet then they’ll be able to steal your assets, unless you use BIP38 password encryption when creating a paper wallet. This option lets you incorporate a passphrase within your wallet, which means that when someone tries to access the stored crypto, they’ll need to provide the correct passphrase.

The best way to use a paper wallet is to store cryptocurrency that you wish to hold as a long term investment. In case you’re looking to store low or moderate amounts of digital currency for regular trading, it’s best to use a software wallet.

Creating a Bitcoin Paper Wallet

Many altcoins such as Ethereum (ETH), Ripple (XRP) and Litecoin (LTC) can be stored in paper wallets, but Bitcoin paper wallets are definitely the most popular. This is how you can create and use a BTC paper wallet.

  • Go to the Bitaddress.org paper wallet generators to create a new wallet. Just move your mouse around the screen until the progress bar reaches 100%. This will generate a totally random public address and a private key for your new Bitcoin wallet.
  • After the progress bar is filled, you’ll see your public Bitcoin address and private key in an alphanumeric and QR code format. 
  • Select the BIP38 password protection feature to add an extra layer of security to your paper wallet in case you lose it.
  • Enter your desired BIP38 passphrase and remember it or keep it written down someplace safe.
  • Click the Print option to print out your new paper wallet.
  • Now you can send bitcoins to your wallet’s public address.
  • In case you want to spend the BTC from your wallet, send it to an exchange platform like Coinbase, Kraken, Bittrex, or transfer it to another wallet, you need to import your paper wallet into a software wallet that supports importing paper wallets. Trust Wallet and Coinbase Wallet are some of the most popular software wallets that can import paper wallets.

A Few Words Before You Go…

The popularity of paper wallets has considerably dropped due to the widespread use of hardware wallets as the most versatile type of cold crypto storage. However, using a paper wallet to store large amounts of crypto is still a good idea and a very secure way to store crypto in case you want to keep those assets as a long term investment. Just follow the instructions from this guide and you won’t have any problems creating and using a BTC paper wallet.