What Is A Paper Wallet?
A paper wallet is a printed piece of paper containing the public and private keys used to facilitate cryptocurrency transactions.
Paper wallets provide offline (also known as “cold”) storage of cryptocurrencies. They were popular between 2011 and 2016 during the early years of bitcoin. Many investors considered them to be more secure than other forms of cryptocurrency storage because they stored the keys that facilitate transactions offline. As a result, they were relatively unsusceptible to hacking.
There are two primary categories of bitcoin storage, hot and cold wallets. Hot wallets refer to storage options provided online, while cold wallets function offline. Both storage types use public and private keys. However, the difference is that hot wallets are online storage while cold wallets are offline. Often, people regard cold wallets as the safer option, as hot wallets can sometimes be susceptible to hackers.
Cryptocurrency users interested in storing their bitcoin in paper wallets use a wallet generator website to create their keys and corresponding QR codes. After completing the process, the data is wiped from the site, so keys do not save internally. Ideally, this procedure should be done using a new computer to prevent any malware interference. However, since that is practically impossible for most people, an alternative method is to unplug internet access when creating the wallet and clear the browser history afterward.
Unlike traditional fiat, Bitcoin does not have a physical representation, so paper wallets do not precisely hold Bitcoin. Instead, it keeps the information of a digital bitcoin wallet. The information printed out includes the public key, which enables deposits, and the private key, which allows withdrawals. When a person wants to withdraw their funds, they can “sweep” the wallet to a “live wallet” (an online wallet). The term “sweep” refers to the act of scanning and transferring funds from a paper wallet to an online wallet.
Paper Wallet Example
A paper wallet is essentially a piece of paper with a printed copy of your bitcoin’s public key for deposits, the private key for withdrawals, and QR codes. Typically, people use it when they plan to hold bitcoin for an extended period. When done correctly, it is a secure way to keep bitcoins safe from cyber-attacks. However, its pitfall is that the paper could be lost, stolen, or damaged.« Back to Glossary Index