WHAT’S A PAPER WALLET?
A paper wallet is a tangible item that has been printed out with both a new public address and a private key. For enhanced security, it enables its users to hold bitcoin delivered from another wallet. Because users hold the private keys and may and should print them off offline, removing the risk of exposing them to internet connection hacks, paper wallets are regarded as non-custodial cold storage.
A bad actor can only physically take possession of the sheet of paper on which your private key is printed in order to obtain it and steal your money.
Paper wallets are still popular among Bitcoin users due to their affordability and security, despite the fact that digitally secure devices like hardware wallets have mostly replaced them over the years. They are primarily utilized today as Bitcoin ATM receipts.
HOW DO THEY WORK
Paper wallets are made using specialized generating programs, which print out both a private key and a public address that may be used to prove ownership and spend bitcoin. A QR code may also be printed on the paper wallet or document so that it may be quickly scanned and signed in order to complete a transaction.
Any programs that generate paper wallets should be used offline to avoid hackers from discovering the private key. A excellent practice would be to use security software to examine your computer or smartphone to see whether it has been affected by malware or other cyberattacks.
The ability to save private and public keys in PDF format on your computer is provided by several paper wallet generators. A PDF is continually vulnerable to online threats, hence it is strongly advised against doing this. In a similar vein, you should avoid taking digital photos or scans of your wallets to keep hackers from spotting them.
Additionally, make sure that Bluetooth and wifi are off on your smartphone because hackers may use such signals to gain access to it.
You should take further precautions to safeguard any money kept in paper wallets. Printing the document from a device linked to a printer through a wired and not wireless connection would be a good idea in addition to working offline when creating a paper wallet. Make sure to get rid of anything that could be used to digitally store the keys during or after printing.
Additionally, you could create and utilize many paper wallets; for example, you could create a distinct wallet for each expense you pay with bitcoins and use a different wallet for long-term bitcoin storage.
ADVANTAGES AND DISADVANTAGES
ADVANTAGES:
Paper wallets have a few benefits, such as:
Maximum defense against security breaches, hardware malfunctions, operating system issues, and more.
Useful for long-term money storage.
Can be manufactured easily as gifts, while Opendime and Satscard are currently the preferable options for gifting.
They are simple to create and print.
DISADVANTAGES:
Additionally, they have the following flaws:
The user will never be able to access the address where their funds are in the event of loss, theft, or paper degradation. If you opt for this approach, make sure your paper wallet is kept in a safe or other form of secure storage.
Both flooding and fire, two key sources of failure, can result in destruction.
Unlike hardware wallets, the private key needs to be imported to software at some point in order to move the bitcoin.
Due to the way Bitcoin handles change in transactions, you run the danger of losing your entire amount when you withdraw a portion of your money.
CONSIDERATIONS:
If you require rapid and simple protection for your bitcoin asset, paper wallets are simple to retrieve, and you may receive and keep your private keys in a matter of minutes.
They have, however, been supplanted by more useful and secure procedures, including hardware wallets that continue to function offline. They are extremely safe, similar to paper wallets, but do not present risks like the probable destruction of paper documents.
STORAGE:
Since paper is frail, perishable, and easy to misplace, customers' primary concern should probably be paper wallet storage. Therefore, it should be kept in safe, fireproof, and waterproof boxes or third-party custodial deposit boxes with the utmost care.
Additionally, you must guard against losing or having your paper wallet stolen. It is advised that you make at least two copies and store them safely, never online. Additionally, think about laminating your paper wallet. Make sure to do so securely to avoid giving your secret keys to nefarious individuals.
PRINTING:
You should identify and foresee any potential issues with your system before printing out your private keys. For instance, problems with your paper wallet can result from paper jams, ink smudges, or a misaligned printer head.
Since paper deterioration is the biggest deterrent to utilizing this method of storage, it is best to ensure the creation of your paper wallet on a sturdy piece of paper and with a working printer. Additionally, avoid printing on computers used at work or in public, and then eliminate your print queue. To make sure the print queue is indeed empty, print something else afterward.
SUMMARY
Early Bitcoin users who wished to store their funds safely may have used paper wallets, but today there are more efficient and secure alternatives, such as hardware wallets, that do away with the drawbacks of paper wallets.
They are still being used by people to test out the technology and short-term store bitcoin until they find a better alternative. When transferring or storing data online, more safety measures must be taken. To be safe, it is advised that you go by the recommendations in this article if you must use a paper wallet.