What is a paper wallet?
As the name suggests, a paper wallet consists of a piece of paper on which the public and private keys of a cryptocurrency address are physically printed. These keys typically appear as QR codes and their respective alphanumeric strings.
Once a paper wallet is generated, its owner can receive cryptocurrency transactions by sharing its address with others. Transactions can be made by manually entering a key or scanning a QR code with a smartphone.
Some paper wallet providers give users the option to generate new addresses and keys while offline. To do this, users need to download the wallet generator as an HTML file and execute it while disconnected from the internet.
Because addresses can be generated offline, paper wallets are often considered an alternative to cold storage. Their security is also related to the fact that they present a completely analog format, which means that they are not susceptible to hacking or other attacks that can only be performed in a digital environment.
Paper wallets were very popular between 2011 and 2016, but their use is now discouraged due to the many associated risks. Due to the physical fragility of paper, they can be easily damaged or destroyed. It is also important to consider the security of the equipment used to generate them, i.e. a clean computer and a printer that does not store file data after printing.
Another danger of using paper wallets comes from the misconception that funds can be sent multiple times from the same address. For example, suppose Alice has 10 BTC in her paper wallet and she wants to send 3 BTC to Bob while keeping the remaining 7 BTC. If Alice sends 3 BTC from her paper wallet to Bob, the remaining 7 BTC will be transferred by default to another address (called the change address). This means that her paper wallet will not have any balance and she will not be able to access the 7 BTC because they were transferred to a change address that does not belong to her.
Alice can manually set up her transaction output to include Bob's address and another address she controls (to send the change back to her) - but this requires some technical knowledge. If Alice fails to create a change output for herself, the miner validating the transaction block may take the remaining 7 BTC. Therefore, she would be better off sending her entire balance (10 BTC) to a cryptocurrency wallet software (e.g. Trust Wallet) and then sending 3 BTC to Bob.
As the name suggests, a paper wallet consists of a piece of paper on which the public and private keys of a cryptocurrency address are physically printed. These keys typically appear as QR codes and their respective alphanumeric strings.
Once a paper wallet is generated, its owner can receive cryptocurrency transactions by sharing its address with others. Transactions can be made by manually entering a key or scanning a QR code with a smartphone.
Some paper wallet providers give users the option to generate new addresses and keys while offline. To do this, users need to download the wallet generator as an HTML file and execute it while disconnected from the internet.
Because addresses can be generated offline, paper wallets are often considered an alternative to cold storage. Their security is also related to the fact that they present a completely analog format, which means that they are not susceptible to hacking or other attacks that can only be performed in a digital environment.
Paper wallets were very popular between 2011 and 2016, but their use is now discouraged due to the many associated risks. Due to the physical fragility of paper, they can be easily damaged or destroyed. It is also important to consider the security of the equipment used to generate them, i.e. a clean computer and a printer that does not store file data after printing.
Another danger of using paper wallets comes from the misconception that funds can be sent multiple times from the same address. For example, suppose Alice has 10 BTC in her paper wallet and she wants to send 3 BTC to Bob while keeping the remaining 7 BTC. If Alice sends 3 BTC from her paper wallet to Bob, the remaining 7 BTC will be transferred by default to another address (called the change address). This means that her paper wallet will not have any balance and she will not be able to access the 7 BTC because they were transferred to a change address that does not belong to her.
Alice can manually set up her transaction output to include Bob's address and another address she controls (to send the change back to her) - but this requires some technical knowledge. If Alice fails to create a change output for herself, the miner validating the transaction block may take the remaining 7 BTC. Therefore, she would be better off sending her entire balance (10 BTC) to a cryptocurrency wallet software (e.g. Trust Wallet) and then sending 3 BTC to Bob.