Printing out electronic currency sounds like an odd thing to do. However, there are a few reasons why you might want to store your Bitcoins in a physical format.
You can do this using a paper wallet. Read on to find out why a paper wallet can be useful, and how to make a Bitcoin paper wallet of your own.
What Is a Paper Wallet?
A paper wallet is an offline method of storing Bitcoins (and other cryptocurrencies).
But you’re not printing out your digital Bitcoins into a physical form. Instead, you’re creating a printed copy of the keys for your Bitcoin address. These keys are what allow you to access your Bitcoins and send them to someone else.
The paper printout simply stores a copy of both your public and private keys, which are often displayed as QR codes for ease of use.
How Secure Is a Paper Wallet?
Remember, you should never share your private key—it’s a critical storage error you should avoid. Anyone who knows your private key will have access to all the assets you’ve stored at its address.
Therefore, paper wallets pose some unique security challenges. If you leave them lying around your home, anyone—from an electrician to a family member—could photograph it and empty its contents. Because of the nature of Bitcoin, you’d have no way to know who was responsible, nor would you be eligible for any form of compensation.
This concept was proved in comical fashion back in 2013. Bloomberg TV’s Matt Miller accidentally showed a private QR code on air after receiving a paper wallet as a gift from a guest. One eagle-eyed viewer was quick to swipe the coins, though he returned them once Miller made a new address.
Paper wallets also suffer from the physical properties of paper itself. Fire, water damage, ink fading, and accidentally ripping a sheet could all render your funds inaccessible.
On the other hand, paper wallets are one of the only two forms of true cold storage (the other being hardware wallets). That means there’s no risk of being hacked, malware, bugs, and other things that can go awry with internet-accessible wallets.
Should You Use a BIP38 Password?
When you make your paper wallet, you can opt to use a service that allows BIP38 passwords. Adding a BIP38 password encrypts your wallet’s private key. The key is only accessible using the password you chose.
Using a password prevents theft in the event that your wallet gets into the wrong hands or is accidentally exposed. However, there is no password reset function. If you lose or forget your password, you will lose access to your Bitcoins forever.
It’s also worth noting that a significant number of web- and app-based wallets do not accept BIP38 passwords. Therefore, when importing a paper wallet into another wallet, you will need to extract the unencrypted Wallet Import Format (WIF) key before proceeding. If you’re not comfortable with decrypting your key, don’t use a BIP38 password.
Lastly, if you’re planning on giving paper wallets away, then password-encrypting them is not a good move. Just keep the private key a secret and make sure to tell the recipient about the dangers involved.
How to Print a Paper Wallet for Bitcoins
In a moment, we will introduce you to some of the best websites for creating paper wallets for your Bitcoins. But before we do, there are four important security steps you need to be aware of.
- Download the Website: All the services let you download their page so you can create your wallet while offline.
- Disconnect: Your computer should not have an active internet connection while you make your wallet, even after downloading the HTML file.
- No Wi-Fi: Print your new paper wallet using a USB cable rather than over your Wi-Fi network.
- USB Operating System: If you’re particularly paranoid, you could use a fresh operating system on a flash drive, such as Ubuntu. You can guarantee it will be free of viruses and malware.
The creation processes for the wallets all work in much the same way. You need to move your mouse around the page to add a degree of “randomness” to your new address. Once enough entropy exists, you be able to print your new paper wallet.
Paper wallets made using Wallet Generator are foldable. They fold in such a way that your private key is concealed on the inside, while your public key (used for receiving coins) is visible on the outside.
In addition to Bitcoin, Wallet Generator supports a further 196 cryptocurrencies. They include Litecoin, Zcash, Dogecoin, and Bitcoin Cash. Ether is not supported.
The printout from BitAddress isn’t as fancy as WalletGenerator. It’s just a single-sided sheet with your public address in the top left-hand corner and your private address in the top right-hand corner. Both addresses are represented with a QR code.
Despite the lack of visuals, BitAddress isn’t any less secure than the other options.
The final site we recommend is BitcoinPaperWallet. It also uses a folding design to hide your private key from prying eyes.
You need to print the front and back of the wallet separately, then fold them in such a way that they interlock with each other. Don’t worry; you don’t need to be an origami expert; full instructions are available on the site.
The Community’s Opinion on Paper Wallets
Lots of people still rely on paper wallets for their security benefits and ease-of-use. If you create and store them in the correct way, they’re an excellent way of keeping your Bitcoins safe.
Officially, however, the Bitcoin community no longer recommends them. Bitcoin’s wiki calls paper wallets “obsolete and unsafe” and suggests usage has declined since 2016.
The community recommends using hardware wallets for keeping your Bitcoins in cold storage.