What Is a Paper Wallet? Definition and Role in Cryptocurrency

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 became popular, but it remains an excellent 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.

KEY TAKEAWAYS

A paper wallet is a printed piece containing keys and QR codes to facilitate your cryptocurrency transactions.
Because they were removed from the internet, paper wallets were considered more secure than other forms of cryptocurrency storage at one point.
While many 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 with your keys printed on it. When you 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 store them.

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 wallet generator apps generally create paper wallets. 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, 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.

Fast Fact

A quick response (QR) code is a barcode your app generates that allows your wallet to scan your paper wallet into your hot wallet quickly.

Paper Wallet Considerations

Paper wallets have been 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 helpful if printed out clearly, stored securely, and protected from damage. However, it would be best to consider several factors before deciding to use a paper wallet.

Device Security

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 cyberattacks.

Often, these programs can search and monitor for a specific activity like cryptocurrency. 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.

Using your smartphone or tablet, you could temporarily place it into airplane mode to disable all signals before generating your keys. Printing from a device connected to a printer through a wired, non-networked connection would be best. When you’re finished, empty any recycle bins, temporary files, and caches and remove any digital backups that might be created.

Printers connected to more extensive networks often store information; hackers may be able to access this storage and find the keys during or after the generation process.

Printing

Printers are not always reliable, and problems while printing can lead to losing your keys and cryptocurrency. Paper jams, inkspots, or poorly aligned printer heads can all cause serious issues when creating your paper wallet.

The wallet or program you’re using may 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.

Physical Storage

Once you’ve created your paper wallet, you should consider how you will store it. You’ll need a secure place to keep them in, like a fireproof and waterproof safe. Depending on the fair market value of the cryptocurrency you place 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 proper way to store your tokens if you have no other storage method. However, it would help if you considered it a temporary method until you can access another way to store them.