Protecting your crypto holdings with a hardware wallet can be a worthwhile investment for those with an interest and stake in blockchain.
Advanced, custom-built software and hardware working in unison to protect your digital assets promises more security than any other form of technology known to humanity—except maybe for a simple piece of paper.
Paper wallets provide one of the strongest forms of private key protection available.
As an added benefit, they cost no more than the paper you print on and the minuscule fractions of printer ink required to create them.
Despite nearly two millennia separating the invention of paper from the first hardware wallet, they can both provide impenetrable levels of protection for your digital assets—provided, of course, that you take care to shield them from prying eyes.
However, there is a trade-off. If you look at it as "paper wallets vs. hardware wallets," then paper wallets have a higher degree of complexity in terms of setup, and necessary additional precautions must also be taken into account.
So, before we dive into the paper wallet creation process, let's take a closer look at what they actually are, and the strengths and weaknesses they bring to the cryptocurrency and blockchain asset storage experience.
A paper wallet is simply your public key (aka blockchain address) and your private key written or printed on a sheet of paper. Printed paper wallets predate hardware wallets by several years, first appearing in the early 2010s.
For ease of use, a printed paper wallet will generally include QR codes corresponding to the public and private keys, saving users the painstaking rigmarole of trying to copy and type each character in the long random hexadecimal strings.
This means that by scanning the QR code of the public key, users can easily send crypto to the address of the paper wallet.
If you want to send crypto out, you can do so by scanning the private key QR code or inputting its address—but they're generally made for storing rather than transacting.
The most important aspect of security in cryptocurrency is (and will always be) maintaining control and custody over your private keys.
Private keys are what ultimately allows you to perform transactions with your crypto. Without them, not even Satoshi himself/herself/themselves could hack into your wallet and steal your funds.
So, if you're the only one who has ever seen your private keys, they keep your crypto safe.
Paper wallets ensure great safety by preventing your private keys from being exposed online upon creation (as long as you take the necessary precautions).
Whilst it's great to have a free wallet that never exposes your private keys online at any point, there are several drawbacks to paper wallets.
Let's start with the obvious: paper wallets don't have the hardiest material, with not a sliver of steel or an iota of iron in sight when you hold one in your hands.
Paper can tear. It can burn. It can wash out if it gets wet, bleach from sunlight, or fall apart entirely.
In other words, making a paper wallet is a good first step to ensuring the safety of your private keys, but it could end up being counterproductive to security if you don't protect your paper.
Here are some tips to prevent your private key from falling to pieces:
Caution is advised when laminating laserjet printouts because laserjet toner is a form of plastic (rather than ink), which could melt and fuse under the heat of lamination—especially if the wallet is laminated while folded to hide the private keys from sight.
A secondary weakness to paper wallets is their user-friendliness—or rather, the lack thereof.
Paper wallets are primarily designed and used for long-term #hodling of cryptocurrency assets, so immediate access and transaction convenience aren't really a prime consideration in their design.
You can always "sweep" or import your private key into wallet software to make transactions by scanning the QR codes—but this undermines the appeal of their zero internet exposure, so it's generally only done at the end of a paper wallet's lifecycle, as explained by Ivan on Tech:
As a primarily long-term storage option without any spending action, there's a tendency to adopt an "out of sight, out of mind" approach with paper wallets—so be extra certain they're hidden away from the sight of others.
Just don't hide them so well that you end up unable to find them yourself. ;)
Finally, compared with hardware and mobile wallets, paper wallets suffer from a relative lack of multicurrency options, meaning you'll have to generate and print a different paper wallet for just about every cryptocurrency you're looking to store.
Bitcoin rules the roost in paper wallets, so the majority of generators are limited to BTC.
If you do feel comfortable pushing the boat on tech effort out a bit more than with a hardware wallet, we've put together a walkthrough to help you do it.
To help counteract their relative user-unfriendliness, most wallet generating websites thankfully do some heavy lifting for you by providing a clear list of instructions.
For this example, we'll be using walletgenerator.net, as they're one of the few that offer multiple cryptocurrency options on their site, including Litecoin and Dogecoin. Note that you still have to click and select each individual currency, generating a new wallet for each one chosen.
Before beginning, make sure your computer is free of malware and other digital gremlins—that's just general good practice.
Disconnect: Disconnect from the internet after fully loading up the page, or follow their instructions to download the website from their Github in order to run the wallet generator offline (make sure you extract all the files into the same folder).
Generate: Click "generate new address" and create your wallet offline by moving your cursor or typing into the textbox in order to introduce randomness into the generation process.
The green dots you see on screen represent the movement of your mouse. If you move it slowly, you can even turn the wallet generation process into a short and fun drawing exercise as an added bonus.
To understand how much more random input is required, follow the progress of wallet generation either numerically or via the colored bar toward the top right.
Lo and behold! Once you've contributed enough random inputs, your public and private keys will be generated.
Print: Click on the Paper Wallet tab to display this information as a printable, foldable paper wallet, with fields designed to obscure information if the paper is held up to light.
FYI: If you do this, you'll get a different public/private key combination than displayed in the Single Wallet tab. Don't panic—that's how the site works.
Resist the temptation to print wirelessly. Instead, go old school and print via a USB cable connection to remain completely offline throughout the entire process.
Now, your paper wallet is complete (but, of course, we strongly encourage you to strengthen your paper using the recommendations above).
Test: As always in crypto, before you transfer a large amount to your new wallet, inspect your wallet with a block explorer (like EnjinX for Ethereum addresses) and carry out a small test transaction.
If the address shows up on the explorer, send a tiny bit of crypto by scanning the public key/blockchain address QR code. Then, use the explorer to make sure it arrived safely. If it did, you're good to go.
Advanced Security Measures: For the ultra security-conscious hodler, paper wallets can be generated in an even more secure manner, but it's much more complex and time-consuming.
This means either using a brand-new laptop that's never been connected to the internet, or (more cost-effectively) a new operating system. Here's a tutorial from 99Bitcoins on how to do this:
If you want to make a paper wallet for ETH (and any of the token standards that exist on the Ethereum blockchain), then MyEtherWallet (MEW) is your best port of call.
Disconnect: After extracting all the files from the provided ZIP folder, disconnect from the internet, and click the index HTML file to run the website offline in your browser of choice.
Create Wallet: You'll get a warning saying you're unable to connect to the network—no worries about that. To generate a wallet, click on "Create Wallet", and choose the "By Keystore File" option.
Password: Think up a strong password and download the keystore file. You don't need to hang onto these for long, just long enough to complete your first sign-in and print off your paper wallet(s).
Access: Click the "Access My Wallet" prompt. Choose the "By Keystore File" option, and input the password and keystore file as requested. Now, you're inside the MEW interface and can get to the paper wallet option by clicking the little printer icon underneath address details.
Print: Click the print button at the bottom of the paper wallet to bring your wallet from the digital world to the physical—just remember the precautions about printing offline so you don't risk undoing all the good work of generating offline.
That's it! You now have an Ethereum paper wallet, allowing you to store ETH, as well as ERC-20 and ERC-1155 tokens in cold storage.
Keep your paper wallet safe as per the recommended precautions, and you should have a good form of long-term storage.
As noted previously, one of the drawbacks of paper wallets is that they don't really allow you to keep multiple cryptocurrencies on the same physical interface (i.e., the sheet of paper) as compared to hardware or mobile wallets.
Google is your friend here, but some other examples for popular coins include:
Paper wallets are a great option for long-term storage of crypto and blockchain assets for people confident in their tech knowledge and willing to go several extra steps to ensure the sanctity of their private keys.
In the context of paper wallets vs. hardware wallets, the medium of paper does come with its drawbacks, but as long as you take the necessary precautions outlined above, you can enjoy some of the safest, most unhackable storage around—all for the price of a sheet of paper and a bit of printing.