Crypto wallets are broadly classified into hot and cold wallets. Hot wallets are wallets that are mostly software wallets and mostly online, while cold wallets are those that are mainly offline. However, cold wallets are also generally considered to be hardware wallets, which leaves out an important kind of wallet – the paper wallet.
The paper wallet is technically a cold wallet, because it is an entirely offline wallet, but it isn’t a hardware wallet. This type of wallet has become less popular over time as technological development continued to grow. However, it is an effective and more affordable way to hold your assets in cold storage.
In this guide, we discuss what a paper wallet is, how it works, and why you should consider getting one, because it holds several advantages over both the hot and hardware wallets. Without further ado, let’s dive in.
What is a Paper Wallet?
As the name implies, a paper wallet is a crypto wallet on paper. The wallet details such as the private and public keys are printed on paper, so that they cannot be accessed online. This makes a paper wallet an effective choice for a cold wallet.
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Paper wallets are also easy to create and manage, as we’ll see shortly. You only need to head to a website like BitAddress or use an app to create one and start using it immediately. Some of them may have barcodes you can simply scan and carry out transactions.
Because you have full control of the wallet’s private and public keys, it is also a non-custodial wallet, which is a good thing. You’ll get to control the movement of your funds without anyone determining when and how you access them.
How a Paper Wallet Works
Because the wallet details including the private keys are printed on a piece of paper and sometimes embedded in a bar code, the only way to access the wallet is either to enter the private key on a software wallet, or to simply scan the barcode.
This instantly gives the user access to the wallet on their mobile wallet for instance. Fortunately, you can do all of this while your phone is offline, so you should disconnect from the internet when doing it, and also use a phone that is protected from viruses and other malicious wares that can compromise the security of the wallet.
How to Set Up a Paper Wallet
Setting up a paper wallet is easy. Before now, you had to go to a website to generate the wallet, but now you can just use a paper wallet app right on your phone. Install the app from the Google Play Store or Apple Store as the case may be, and then create your wallet.
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You can decide how many copies of the wallet you wish to print out, and then generate the wallet. Finally, simply print it out and keep it safe. Remember to delete the app once you complete the process, so that no one can access your wallet details on your phone.
Ensure to turn off all internet access on the device before creating your wallet, as criminals can access signals from your device and steal your private keys or other information that gives them access to your new wallet.
Pros of Paper Wallets
Paper wallets have so many advantages over both software and hardware wallets. The following are some of the advantages.
Affordable, since you don’t need to buy expensive hardware like Ledger
Offline storage, unlike hot wallets
Easy to move around because it is light
Cons of Paper Wallets
Paper wallets also have their disadvantages when you use them, and the following are some of the major ones.
It is easy to destroy by fire or other means
The writing can fade out after a long time of storage
Should you use a paper wallet?
Yes, if you’re looking for a cheap cold wallet option that can be easily set up with high security guarantee. You have to be careful though to ensure it is stored safely because it can be easily destroyed and you’ll lose everything.
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