Big corporations rely on AWS cloud systems for storing the entire company documentation. Individuals use Dropbox and advanced Samsung 2.5-inch hard drives as the best way of keeping personal memories alive. All these virtual safes have become a regular part of our daily routine but still, we can’t say that paper has died out.
It’s even more fascinating that physical storage is highly appreciated among seasoned bitcoiners — a group of exceptionally tech-savvy traders. In general, cryptocurrencies occupy very little space but do require a pretty high degree of protection. That’s because digital coins never get to leave their native ledger — the blockchain. We only store a pair of random 256-bit strings or keys.
While the compressed version of the public key serves as a wallet address, the private key is used to prove that the coins are our property — something like a password. The keys are generated by specially-designed programs known as crypto wallets. Apart from providing storage space, wallets play a crucial role in sending and receiving crypto assets.
Now, let’s see whether and how we can monitor and manage our cryptocurrency holdings if they’re kept in paper wallets.
Different Types of Crypto Wallets
The crypto storage industry is equally abundant and diverse as the traditional digital-storage market. Initially, we draw a clear line between hot and cold storage. The criterion is simple, hot wallets require an internet connection to perform basic functionalities, while cold can store crypto offline. To understand the perks and drawbacks of paper wallets, we’ll walk you through all types of existing crypto storage options.
Hot Wallets
All hot wallets are exceptionally user-friendly, free, and simple to navigate. On the one hand, you’ve got web or online wallets, which usually come together with the account you open on a centralized crypto exchange (CEX).
As the largest marketplace for trading crypto, CEXs like Coinbase and Kraken allows you to store your newly-purchased coins on their platforms, which sounds very handy to avoid additional transfers. The catch is that the exchange keeps your private key, i.e. it has your coins, so, in some way, you’re putting full trust in a virtual establishment. Despite the robust security measures and the improved regulatory framework, such custodial packages aren’t the safest storage solution in the long run.
On the other hand, crypto wallets that come in the form of mobile and desktop apps allow you to store your private keys on your device. While mobile apps are convenient for those who use crypto as a payment method, desktop wallets offer more professional touch and room for a greater number of functionalities. From a security perspective, this is a better scenario, but it comes with a caveat — you’ll have to take full responsibility for your keys. After all, desktop and mobile apps are “internet-fueled” programs and hence, prone to virtual scams and malware.
Cold Wallets
Paper wallets belong to the category of cold storage. They come akin to a printed piece of paper containing all operating data — QR code, the wallet address, and the set of keys. Once you have all this information in your pocket, you can easily manage your funds — move crypto from your balance, transfer crypto to a software wallet, and check your total balance. Sure, you’ll need a software platform to initiate any of these actions, but the private keys will ultimately stay at your disposal.
The term cold wallet today is more closely associated with hardware wallets — drive thumbs devices with built-in software to accommodate your private keys. Similar to paper wallets, hardware wallets can pair with software programs (hot storage wallets or their native interfaces) for sleek management of your cryptocurrencies. However, the software you use has nothing to do with storing your private keys.
Hardware wallets are specifically-designed gadgets that continuously improve in terms of design, access, and functionality. For instance, the advanced Ledger Nano version and Trezor Model T have a BlueTooth connection, relatively large screen, and in-device support for over 5,000 assets, including NFTs and smart tokens.
Thereby, there is no wonder why these sophisticated devices have replaced paper wallets as supreme representatives of cold crypto storage. However, as we already mentioned, quite many users believe in nothing but plain paper. Objectively, this unpopular opinion is legit since paper wallets have literally no contact with any digital setting.
How to Create a Bitcoin Paper Wallet?
Creating a paper wallet doesn’t take longer than a few minutes, nor does it require any specific “blockchain wisdom.” There are so-called wallet generators available online for free. However, you should consider this before creating your first paper wallet:
Paper wallets belong to the early crypto era. This means that there is no wide choice of blockchains supporting this storage method. Certainly, you can easily create a Bitcoin paper wallet and, here and there, find a reliable wallet generator for a few crypto classics like Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), and Dogecoin.
Concerning safety, we clarified that paper is immune to cybercrime, but generators aren’t. For the most part, they are open-source platforms, and hackers can possibly throw up a modified website version and thus, steal your private keys. So, before choosing an appropriate web generator, do detailed on-spot research on the website. This shouldn’t be necessarily challenging — the number of such generators is quite limited.
For the purpose of this article, we’ll use the popular Bitcoin paper wallet BitAddress:
- Once you have landed on the BitAddress page, you only need to hover around with your mouse or type something in the empty field to activate the generator.
- Click paper wallet, and BitAddress will automatically create the keys for you.
- For security reasons, it’s better to archive the result first, then go offline and re-visit the web archive to print out the wallet. Try to use a printer that doesn’t run on a public network.
- At choice, you can also add a passphrase or encrypt your Bitcoin wallet as an extra security layer. Just navigate to the BIP38 encryption box and the system will automatically convert your private key into a 58-character Base58Check-encoded printable string.
Remember that this is a casual approach to generating a paper wallet. Whale-bitcoiners use more advanced methods that require a considerable amount of time, extra software and hardware tools to clean any digital footprint that could possibly trace their private keys.
How to Check My Paper Wallet Balance?
Now that you know that paper-wallet systems can serve only for loading new coins, let’s find the easiest way to check your balance.
What we need is a blockchain explorer. Explorers are a commonly-used tool among crypto traders as they deliver various types of blockchain data in real-time. They take the data from a particular node and API and re-arrange it so that users can search for all blockchain-related information in a more user-friendly way. Since the blockchain is a public ledger, you can easily find the current balance of your paper wallet through a reliable explorer.
As we mentioned in the previous section, the number of cryptocurrencies and blockchains that offer paper storage is rather limited. That’s why we’ll start looking for a blockchain explorer that is designed for the needs of the native blockchain of your crypto.
Select a Blockchain Explorer
To make the things easier for you, we’ve listed the blockchain explorers based on the blockchain they represent:
- Bitcoin: Blockchain.com (previously called Blockchain.info), BTC.com, BlockCypher;
- Litecoin: BlockCypher;
- Ethereum: Etherscan (gives the Ether value in USD), Blockchain.com, eth.btc.com;
- DogeCoin: BlockCypher;
- Bitcoin Cash: bch.btc.com and Blockchain.com.
Locate Your Public Key
Once you navigate to the desired block explorer, you must enter your wallet address as the explorer requests (explained below). That’s the first step of restoring your current balance, transaction records, and the current exchange rate of the crypto in USD.
Once again, you shouldn’t be concerned about safety. Your private key is nowhere to be shown in this balance checkup. You only need to expose it if you want to send your crypto to another user.
Copy the Public Key Into a Clock Explorer or Scan the QR code
A Few Words Before You Go …
At this point, you may be wondering: Is a paper wallet a good choice for my crypto needs?
The dynamic of cryptocurrency trading nowadays requires more flexible wallet packages. Modern wallets have built-in options for sending and receiving cryptocurrencies from and to other users’ wallet addresses, crypto exchanges, and other virtual marketplaces. In this respect, paper wallets are an obsolete technique for storing and managing crypto, especially if you plan to take an active position in the current crypto scene and diversify your portfolio with next-gen crypto assets.
However, paper storage can do a great job if you’re a one-off investor with a strictly defined interest in Bitcoin and don’t plan to move your bitcoins around very often. The in-pocket presence of your holdings can give you an incredible sense of security and peace of mind.
Needless to say, keep your wallet in a place that is waterproof and safe. Finally, if the fair market value and the amount of the cryptocurrency you’re keeping in a paper wallet are notably large, you should consider a safe deposit box at your native bank or other institution.