4 November 2020
As Bitcoin continues to penetrate the global payments industry, it is important that one must be aware and informed about its secure storage. Cryptocurrency wallets have provided varying levels of security that investors require; however, it can be difficult to determine which options best suit your specific needs.
Despite the sophisticated hardware that has come out in the last few years, one of the most secure yet easy to use solutions is the Bitcoin Paper Wallet. In this article, we will look at how and why this seemingly simplistic wallet has become an investor favorite to ensure their security.
What is the Bitcoin Paper Wallet?
The Bitcoin paper wallet is a kind of cold wallet that offers an offline mechanism to store Bitcoin. Similar to the hot wallets, the paper wallets also hold public and private keys for the associated addresses. However, these keys are printed on a piece of paper offering additional security.
Since the keys are printed offline, it eliminates the threat of theft or other electronic damage to users’ BTC holdings. Along with the private keys, the paper wallets also feature QR codes that facilitate fast cryptocurrency transactions.
By scanning the QR code, users can get additional information about the wallets and the account. However, to facilitate any transaction, the user must have a “live wallet” that is connected to the internet.
With the paper wallet, the users also need to be careful in a way that if they lose access to the paper wallet and the private keys, they can permanently lose their Bitcoin (BTC) holdings.
It is thus clear that they are suitable for investors who are willing to invest and hold their BTC for a long time. Storing Bitcoins on a paper wallet is like storing them securely in a vault while limiting the risks of external thefts and online attacks. Just make sure that the paper wallet doesn’t fall into wrong hands or get damaged.
How to Make A Paper Bitcoin Wallet?
One of the easiest ways to make a paper Bitcoin wallet is using the open-source BitAddress program. Just follow the below simple steps to create a Bitcoin paper wallet:
- Navigate to BitAddress.org and create a random private key by entering random letters and numbers. This randomness, also called entropy, ensures that the keys are secure and resistant to any strong algorithm-based computational attacks.
- Once you complete the above process, BitAddress will present a public key, a private key, and a QR code. The user just needs to select the “Paper Wallet” option and get the printable version. The user can choose as many printable copies of the wallet they want.
- Users can also encrypt this private key for additional security. They just need to check the BIP38 box and enter a password. Any time the user conducts a transaction, they will need the private keys along with the wallet password from where they can send Bitcoin. Later, the users can print the wallet.
While it is absolutely easy to create a Bitcoin paper wallet, one must take care of a few things to be extra careful.
- Just at the time the private keys are created, it is advisable to unplug the internet.
- After the private keys are created, users must clear their browsing history on their web browser.
- Before generating the private keys, users can also perform a malware check on their PC/Laptop to avoid any malware interference.
- While printing the Bitcoin paper wallet, most printers have their own internal storage and memory. Anybody reading this file will get access to the private keys and QR codes. Thus, it is highly advisable not to use shared printers. Also, avoid printers that can be easily accessed over the WiFi.
How to Use a Bitcoin Paper Wallet
There can be many reasons that you want to move your BTC from your paper wallet. Maybe, you want to liquidate your holdings, or send to your friends/family, or even move your Bitcoins to a cold wallet.
Note that loading Bitcoin’s to the paper wallet can be easy by just sending Bitcoin to the wallet address. However, one needs to be extra careful while moving or spending BTC from the paper wallet.
For sending Bitcoin from the paper wallet, one needs a software wallet application that supports paper wallets. Also, make sure your internet connection is secure and strong to avoid any hassles.
The two major steps involved in sending Bitcoin from the paper wallet are:
1. Send Private Key to Your Bitcoin Software Wallet
2. Send Bitcoin from Bitcoin Software Wallet to Recipient’s Address
- Download and open the Bitcoin Wallet app and proceed to create a new wallet by following the instructions.
- For safety purposes, write down the backup phrase on a piece of paper. All Bitcoin wallets usually have a backup phrase to restore the wallet. The backup phrase is extremely crucial losing which will cost one their entire BTC holdings.
- To begin the process of importing the paper wallet, go to the Menu section of the app and click “Addresses”. Then click on the ‘+’ or the Add icon.
- Scan the QR code of the paper wallet’s private key by initializing your phone camera through the wallet application.
- Click on “Transfer Funds” to initiate the process of getting your paper wallet to your Blockchain Wallet app. Proceed further and tap send to make sure you have sent all your funds from the paper wallet to the software wallet app.
- From the mobile wallets, the user can send Bitcoin to any other addresses they want.
Bitcoin Paper Wallet vs Edge Bitcoin Wallet
Similar to Bitcoin Paper Wallets, the Edge Bitcoin Wallet is also popular for handling crypto storage and use. However, the basic difference is that while Bitcoin Paper Wallet is like a “cold storage”, the Edge Bitcoin Wallet is strictly limited to use on mobile devices and functions more like a “hot wallet”.
Let’s compare the two on a few aspects:
Bitcoin paper wallets are more secure and have fewer chances of external attacks or online thefts. As most mobile devices are continuously connected to the internet, Edge Wallets are vulnerable to online attacks.
2. trading frequency
While the Bitcoin Paper Wallet is good for HODLers or long-term investors, the Edge Bitcoin Wallet is good for daily traders and instant payments due to its fast accessibility.
3. Backups and Recovery
With paper wallets, you need to have manual backups whereas the Edge Bitcoin Wallet has automatic backups that reduce the technical hassles.
If used correctly, Bitcoin Paper Wallets offer a secure way of holding your crypto and is suitable for long-term investors. It is advisable to have multiple copies of the paper wallet so that even if one is damaged, you can still access your BTC from others.