What are paper wallets? How to create and use one? Their advantages and disadvantages. Find out here –
A crypto wallet is your identity on the peer-to-peer networks that run the world of cryptocurrency. It contains your public and private keys and allows you to safely store and access your crypto holdings. However, the word ‘safe’ here depends on certain factors. By itself, a wallet is as uncrackable as anything can be — no computer in the world can hack into it without the private key.
Essentially, it is impossible to access without a password (that only you know), but the password is very simple (like a string of simple English words). What we can gather from this information is that it is very important to keep your wallet key safe, and we’re discovering one of the ways we can do that: paper wallets.
Tag along as we explain what these physical wallets are, as well as their advantages and disadvantages.
What are paper wallets?
In the world of cryptos, it’s extremely rare for something to have a literal meaning. A paper wallet is one of these rare instances. It is literally your public address and private keys printed on a piece of paper, either directly or as a QR code. It is a cold wallet (which does not need the internet to function) that was one of the earliest forms of storing your wallet information. In a nutshell, it is a public and private key that you own, without having any software.
To create a paper wallet, you have to generate a public and private key offline, ideally through a trusted channel that doesn’t save any of your data. Once you have these details, you can simply print them out on paper and delete all the other information from the computer. This way, the piece of paper you hold in your hand is the only way you can get into your holdings, and it is immune to all hacking.
In a world where everything is online, and one hack can turn your life upside down, you get a sense of security from holding on to your wallet in the palm of your hand. And there lie the advantages and disadvantages of a paper wallet. Let’s take a look:
How to create and use a paper wallet?
The process of creating a paper wallet is very simple. Plenty of websites allow you to generate completely random public and private keys that you can print and use as a paper wallet. Some of these websites will also allow you to generate these keys offline, fully disconnected from the internet. You just download a .rar file, disconnect your PC from the internet and run the file. It will create a set of keys, which you can print and tuck away safely.
You can give your public key to anyone who needs to send you an amount of cryptocurrency. Once they have sent the amount, you can head to a block explorer, enter your public key, and check the balance of your paper wallet.
If you want to move the holdings stored in your paper wallet, you can do so through a process called ‘sweeping.’ This entails moving the crypto balance from a paper wallet to a new private key on a software wallet. Once your holdings are on the software wallet, you can trade them on exchanges, swap them for other cryptos, etc.
Advantages of paper wallets
Paper wallets are entirely offline. Someone without direct access to you has no way of ever coming close to your stored cryptocurrency. Every other form of storing wallet information, whether browser extensions or software, is vulnerable because hackers know what to look for and where to look for it. How in the world will anyone know where you intend to keep a piece of paper?
Paper wallets are also inexpensive. You only have to cover the cost of paper and electricity that your PC and printer expend while generating and printing the keys.
Paper wallets are the closest thing to holding onto your crypto assets in a tangible form. They are a great way to store your cryptocurrency for the long term.
Disadvantages of paper wallets
The disadvantages of paper wallets are similar to the disadvantages of printing any vital information on paper. You could lose the paper itself and thereby lose access to your wallet forever. The ink on the paper could fade over time, and that’s just a disaster waiting to happen if you have old-school printers.
Further, paper wallets are designed to store only a single currency. You can only have one private and public key to store one kind of cryptocurrency. While you can generate multiple keys for different cryptos, safely storing and keeping track of them can be troublesome. Moreover, private keys are only suitable for long-term storage. If you intend to trade or make frequent transactions, you need to create and sweep the wallet every time, a cumbersome experience.
All in all, the advantages and disadvantages of paper wallets depend on how careful you are and what you intend to use the wallet for. However, paper wallets have recently lost their high seat at the table because of very capable alternatives in the form of hardware wallets (data hard stored onto a USB drive), exchange wallets, trusted web wallets, and more.