Even among the people with a good understanding of Cryptocurrencies, coin storage is always a complicated concept. This is because, virtual currencies, unlike fiat currencies are not tangible. Consequently, they are not stored physically making their storage quite different and confusing to some people. Digital assets can be stored in paper wallets, software wallets, or hardware wallets. Here’s a guide on the commonly misunderstood coin storage method, paper wallet.
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Definition Of Paper Wallet
Paper wallet can be defined as an offline cold storage mechanism for saving or storing Cryptocurrencies such as Bitcoin and Ethereum among others. This coin storage method involves printing public and private keys together on a piece of paper. Apart from a paper, such details could also be printed on a plastic material or any other substance that is considered durable.
Given that these keys are printed as QR codes, you only need to scan them during any transaction. As long as the paper is kept in a safe place, there is no risk of losing your funds. As a user, you have full control of your keys and funds when using a paper wallet to store your Cryptocurrencies.
How To Create A Paper Wallet
As mentioned, a paper wallet involves printing the information stored in a digital wallet. The two sets of data that are printed are the public key and the private key. The private key enables one to spend the funds while the public key (wallet address) enables the other people to send funds into that wallet.
To create a paper wallet, you need internet connecting, printing material (mostly a paper), and a printer. Visit any open-source wallet generator website of your choice. WalletGenerator.net, BitcoinpaperWallet.com, and BitAddress.org are some of the sites you can visit to generate a paper wallet.
When generating the keys, it is advisable to unplug internet connection. After creating the keys, you should also wipe your internet history. Use a new computer or run a malware check on your device before beginning this process. Once the keys have been generated, print them on a piece of paper, and store it in a secure place.
When To Use A Paper Wallet
Due to its simplicity and low cost, the paper wallet is the best coins storage method for newbies. Using software wallets is risky for those just joining the Crypto sector as they may have trouble even when selecting the best ones. Hardware wallets are expensive and only ideal for serious Crypto traders.
Given that the paper wallets are the safest wallets in the market, they ideal when you want to store your coins for a long time. You only need to ensure the paper is free of any damage by water, fire, or even theft. Regardless of the number of coins you have stored, you will have little to worry about when using a paper wallet.
Paper Wallet Risks
Despite being regarded as the safest places to store Cryptocurrencies, there are risks of losing your coins from your paper wallet. Some of the commonest risks of this coin storage method include;
Human errors: No person is perfect. You may forget where you have stored your paper wallet leading to the loss of your funds. You could also accidentally tear the paper making it almost impossible to recover your funds.
The quality of printers used: While printing a paper wallet, the type of printer used will determine the quality of the details printed on the paper. Although the laser printer is the best one to use, those without may use low-quality printers that cause the ink to run when the paper gets into contact with water.
Exposed to disasters: Natural disasters such as fire or floods can destroy the paper wallet leading to the loss of the stored funds.
Theft: Someone could steal your paper wallet by reading it or taking its photo. It is always advisable not to go around bragging about your Cryptos as you may become a target for criminals.
Wear and tear: Although a paper can store information for a long time, when it is poorly stored, it’s lifespan significantly reduces. You could print your set keys in a more durable material like plastic. Making multiple backups can also reduce the chances of losing your funds when the wallet is damaged.
How To Keep Your Paper Wallet Safe
Regardless of the kind of wallet that you are using, the private key is the most important detail that you should not lose. You should guard it at any cost since losing it means losing your funds. Here are some tips to ensure your wallet is safe;
Engraving Into Metal
One of the greatest problems of using a paper to print your set of keys is that it deteriorates. You could use a more durable material like metal. Such a material can withstand both water and fire.
Encrypt Before Storing Online
The existing cloud storage options such as exchanges are prone to hacking. However, you can securely store your data online by encrypting it yourself before uploading it. Encryption makes the raw data inaccessible to other people.
Keep The Wallet Under Lock And Key
If you want to keep your paper wallet in a physical location, ensure such a place is not easily accessible. Given that small home deposit boxes are a high target for home invaders, using a safe, which you have sole access is advisable.
Final Thought
Using an offline wallet such as a paper wallet eliminates the risks associated with relying on a third party. Although no method is 100 percent secure, the use of a cold wallet such as a paper wallet reduces the chances of losing your funds through ransomware attacks, exchange closure or any other cybercriminal activity. Although paper wallets are secure, you should keep your private keys to yourself and those you think matter.
Sam Mitchell is a Freelance Writer & Fitness Instructor from South Africa, living in Australia. She comes to the team with extensive writing and Social Media experience, covering a wide variety of genres from blog posts, book reviews, Whitepapers, blogs and guides to news pieces…and more. Sam has been Freelancing for over 17 years, working with many different clients. You can get in touch with Sam at www.stmwritingsolutions.com