A paper wallet is an offline wallet you can make yourself and keep on a piece of paper. This may sound a little confusing, but they’re actually one of the most secure ways to store bitcoins if you know how to make one.
How do bitcoin paper wallets work?
Paper wallets typically involve printouts of two QR codes, one for the public key (wallet address that you get paid to), and one for the private key (what you use for paying other people – like a bitcoin PIN number). The keys (strings of characters) themselves are also usually printed, the public key visibly and the private key concealed. You can scan the QR codes to transfer or receive bitcoin, or type the keys into the relevant section of the bitcoin client you use (Coinbase, Mycelium etc.).
Since you are responsible for keeping both keys, there’s no possibility of your wallet getting hacked into and funds stolen. But losing the paper (if you have no backup whatsoever) means you will lose access to your wallet.
What other types of wallets are there?
When it comes to bitcoin wallets there are a number of options from which to choose:
- Online wallets. Wallets that are hosted online. Also known as web wallets, these require you to sign up to an online service and access your wallet with an account name and password.
- Mobile wallets. These are wallets stored on your mobile phone in the form of an app. They make it easy to spend and transfer your bitcoin on the move.
- Desktop wallets. Desktop wallets work through software that you download onto your computer. Once you have installed a wallet client you can use its interface to store and transfer coins, as well as check your balance.
- Hardware wallets. Regarded as the most secure wallets around, hardware wallets are electronic devices specifically designed for storing cryptocurrency. They allow you to store your coins completely offline.
How is a paper wallet different to other wallets?
Well, unlike other wallets that are based on hardware or software, this one is made of paper. It means that your bitcoins are stored offline (like hardware wallets). Otherwise it actually works very similarly to other wallets. If you want to access, send or receive bitcoins between wallets, you will need to use the public key and private key printed on the paper to enable any transaction.
I thought bitcoin was a digital currency, how can it be stored on paper?
Because, in a physical sense, bitcoin is not ‘stored’ in a wallet. In the same way, there’s no physical money sitting in your bank account when you use a banking app, there are no bitcoins sitting in your wallet. A wallet is the addresses used to pay into and from your bitcoin. The public key (wallet address) allows you to receive bitcoins and provides evidence that you actually own the coins, whereas the private key allows you to send them.
Basically, a paper wallet is the bitcoin equivalent of replacing your bank card with a piece of paper that has a scannable version of your account number, and which can make contactless payments.
Are bitcoin paper wallets secure?
Yes. Paper wallets are by definition ‘cold wallets’, meaning that bitcoins are stored offline. This guarantees security because there’s no chance a hacker can access the private and public keys printed on the paper; you are responsible for them. However, given the fragility of paper and the possibility of losing your wallet, how secure a paper wallet is can depend on how safe you keep it. We recommend that you lock it away in a secure place.
If I lose or damage my wallet are my bitcoins retrievable?
Only if you have made and stored a recovery seed that will help you restore your bitcoin to a new paper wallet (read more about the recovery in our FAQs section). If not, then you will have no way to access your coins.
One way to safeguard against this is to print multiple copies of your paper wallet and keep the others safely locked away. If you choose to do this make sure they’re safe and only you know where they are. If someone were to access the keys printed on the paper, they would easily send your bitcoins to their address and you may never know their identity because of the anonymous nature of bitcoin transactions.
Are payments from/to paper wallets anonymous?
Yes, they are. Just like any other transactions between wallets, the blockchain records only wallet addresses (public keys) which cannot be traced back to a specific identity.
How do I make a bitcoin paper wallet?
It’s simple. Go to a wallet generator such as WalletGenerator or BitcoinPaperWallet and they make the process easy. All you have to do is move your mouse around over the highlighted text which will generate a wallet address related to the unique movements of your mouse. Print out the details of the wallet from the results.
If you want to keep the whole process of printing the wallet offline, you can even just write the keys that are generated out by hand on a paper and keep it safe. This will mean you don’t have the scannable QR codes though.
You’ll need to own some bitcoins first, which you can buy right here.
What are the risks of using a bitcoin paper wallet?
There are a few risks associated with making a paper wallet. These include:
- Making a paper wallet from an untrustworthy site. Make sure you’re using a reliable site that’s delivering you a genuinely unique address that nobody is recording. If someone else knows your private key they can access your bitcoins and spend or steal them.
- Losing your wallet/having it stolen. While there’s no possibility of your wallet getting hacked, it’s possible to have your paper wallet stolen or lose it. Again, if someone accesses your keys, it means you lose your coins completely. Make sure you keep your paper wallet safe.
- Damaging your wallet. Paper is fragile so you have to be careful not to damage your bitcoin paper wallet. If for whatever reason you aren’t able to see the keys printed on the paper, you cannot access your coins and you’ll lose them completely if you haven’t backed up your wallet or printed extra copies.
And what are the advantages?
A paper wallet offers a number of advantages over other wallets. These are:
- Cold storage. Paper wallets store your bitcoins completely offline because they aren’t connected to the internet. When used correctly, they can be like hardware wallets, keeping your coins away from hackers and other online vulnerabilities.
- Cheaper than hardware wallets. Compared to hardware wallets, which are also cold wallets, paper wallets are far cheaper. Whereas as the hardware wallets cost anywhere between £20 and £200, paper wallets cost next to nothing as they’re made of paper, making them a more affordable option.
- Fun way to make your own wallet. No other type of wallet is DIY in the same way as a paper wallet. You just need to generate your own keys (either manually or automatically), and print out them on a paper or write them down somewhere.
Should I use a bitcoin paper wallet?
It’s up to you. Paper wallets are a cheaper option for cold storage than hardware wallets. And because they keep all your bitcoins completely offline, you can choose them if you want to hold your bitcoins for a long period of time.
As long as you keep your paper wallet safe – and we mean it, don’t let it fly out the window, it belongs in a vault – then your bitcoins will be secure.