Paper Wallet: A Crypto Relic or Still 一 Relevant?

Keeping your crypto safe is a priority, especially with the increases in crypto scams and cybersecurity threats. Self-custody through the use of hardware wallets has become the norm in the crypto industry, due to their offline storing of assets.

That said, paper wallets 一 though less popular now 一 are also an analog way of keeping crypto safe.

Paper wallets were once the gold standard for stashing your cryptocurrencies offline, but alternative noncustodial cold storage methods have overridden them. Still, some crypto enthusiasts wouldn’t store their digital assets any other way!

What are paper wallets? Should you use one? Let’s learn more.

What Is a Paper Wallet?

A paper wallet is a physical printout, containing your private and public keys, which you use to carry out crypto transactions. On the printed paper are two alphanumeric strings of characters, and two Quick Response (QR) codes that are randomly generated using a key generator.

Usually, a crypto transaction involves encryption and decryption using cryptographic keys. To access these keys, you need a crypto wallet that helps you transact and monitor your assets. In the case of a paper wallet, you have full custody of these keys without having to access the internet.

There are two ways to create a paper wallet. You can go completely offline where you use analog random number selection (by using a dice roll to pick numbers). Such a process is tedious and time-consuming, however. The easier alternative is using a private key generator, preferably one that’s not web-based.

The popularity of paper wallets was at its peak in late 2010, when major exchanges were allowing users to print paper directly from their accounts. However, their popularity began to wane in 2016 when easier, more convenient ways to store crypto hit the market.

Source: Blockgeeks

Why Use a Paper Wallet?

As blockchain technology continues to advance, so do the options available to handle your cryptocurrencies. Usually, there are three ways to store your crypto assets: Online, offline, or both.

To hold your crypto online, you need a hot wallet that’s always connected to the internet. The downside of such a wallet is that it’s highly vulnerable to crypto cybercrimes, such as hacking and phishing.

The alternative that helps keep your crypto safe is storing your assets offline using a cold wallet, such as a paper wallet or hardware wallet. However, you can opt for a combination of hot and cold wallets if you want the best of both worlds.

Some of the reasons why you would use a paper wallet include:

Cold Storage

A paper wallet removes the element of internet accessibility. As such, there will be no avenue for hackers and other malicious parties to exploit your crypto holdings. It’s almost impossible to steal assets stored in a paper wallet — unless a person gets hold of the physical paper you printed when creating the wallet.

Inexpensive

All you need to create a paper wallet is a pen and paper (or access to a key generator, and then you print the addresses generated).

Easy to Create

Creating a paper wallet is a straightforward process if you use a wallet key generator. Simply log in to a secure wallet key generator and create your private key, which consists of randomly selected alphanumeric characters. Once generated, print the paper wallet and keep it safe.

Is a Paper Wallet Safe?

Initially, paper wallets were considered the safest option for storing cryptocurrencies. However, the narrative has changed — and using a paper wallet isn’t recommended, especially when storing a large number of crypto holdings.

A paper wallet is still paper, after all. It’s fragile and prone to wear and tear, fire, water damage and environmental factors that could destroy it. There’s the option of laminating the paper wallet to preserve it, but that has to be done at home for security reasons.

That said, a paper wallet is analog. For cold storage of private keys, the best option is hardware wallets, such as Ledger and Trezor. With such wallets, you still get to enjoy the security of storing your crypto assets offline, and can easily connect to the internet when you need to transact.

Hardware wallets are somewhat expensive when compared to paper wallets, but their ease of use, safety and convenience make them the preferred noncustodial cold storage wallets.

Source: Medium

Besides hardware wallets, if you own a business, multisig wallets may prove to be helpful. They provide added security as the keys for a single wallet are shared among multiple people, so a single person won’t monopolize access to all the crypto funds. However, technical knowledge is needed to create multisig wallets.

Problems With Using a Paper Wallet

One of the reasons why crypto enthusiasts — especially traders — prefer hot wallets, such as the Bybit Wallet, is the ease and speed of transacting. However, if the platform isn’t secure, these wallets may fall prey to hackers. This is where paper wallets can provide more secure storage of your crypto.

However, some problems may arise when creating and using a paper wallet that you may need to consider, as follows.

Device Security

It’s important to run a device through a security software scan before using it to generate keys. Any device used for printing is susceptible to malware, bugs and viruses. You’re even more vulnerable if you print from a public computer, which may be devoid of security measures.

Cybercrimes are becoming increasingly sophisticated, and there are even programs designed to monitor crypto use with which hackers can view your actions in real time as you generate your crypto keys. If you’re using a mobile device to generate the keys, make sure to switch it to airplane mode while doing so in order to minimize exposure to online threats.

Printing

A critical part of creating a paper wallet is printing. Printers are prone to paper jams, ink spots and other malfunctions that can compromise the final step of creating the wallet.

At times, the software program may let you print the keys from the device. However, as the keys are deleted immediately after creation for added security, if your printer happens to be faulty, you might lose your keys even before they’re created.

Also, the quality of the paper you use to print matters! Some printing papers and ink are of low quality, which may lead to fading with time. There’s also the possibility that folds or tears can impair your ability over time to accurately read each number and letter correctly, which is crucial.

Storage

Once you’ve created a paper wallet, it’s important to choose a secure place that’s free from environmental threats, such as fire and harsh weather, to store it. Remember, if you lose access to your keys, there’s no way to recover your funds.

Source: Enjin

Getting Your Change Back

When transacting certain cryptocurrencies, there exists the potential loss of funds from change after a transaction. Cryptos that use the unspent transaction output (UTXO) model, such as Bitcoin and Dogecoin, have a change output in their transaction process. This means that you cannot simply send a part of your funds to the recipient and expect the change to automatically be returned to your balance.

There are two ways to ensure that you get your change back. First, you can set up a change address in the paper wallet, which requires some technical knowledge. If it’s not set up before your transaction, your change will be given to the miner instead. The second — and easier — way is to simply send your entire balance to a software wallet, and then send the required funds to the transaction recipient.

Conclusion

It’s becoming increasingly important to store your crypto keys offline in order to ensure the protection of your crypto funds. That said, paper wallets provided a viable cold storage option some years back. However, as the crypto industry becomes more refined, hardware wallets have proved to be a great alternative to paper wallets.

It’s quite a risk holding all your crypto wealth on a piece of paper which can easily be damaged or lost. There’s no denying that the popularity of paper wallets has waned over time. So it’s important to move with the times by embracing wallets that combine functionality and security for the effective management of your crypto assets.