Interestingly, despite the myriad of sophisticated storage solutions, old-gen bitcoiners still trust the paper most. Paper Bitcoin wallets sound like a long-forgotten mythical tool, but it’s still in use, even more frequently than you could imagine. Why is that so?
Paper wallets are considered the safest method for storing Bitcoin as they have no direct contact with any digital device. In terms of functionalities, these blockchain wallets are obsolete compared to modern software and hardware wallets, which offer full-featured portfolio management systems and gateways for direct Bitcoin transfers.
In this article, I’ll walk you through the features of Bitcoin paper wallets against what is called standard crypto storage today and show you how to transfer Bitcoin from these wallet types.
Types of Bitcoin Wallets
By this point, you’ve probably learned that your Bitcoin wallet is a prerequisite for storing, transferring, and managing your crypto assets. It generates two elements that enable your interaction with the blockchain — a public and private key. On the Bitcoin network, they come in the form of 256-bit alphanumerical strings.
Experts often use the email analogy to explain the role of the public vs private key. The public key, or more precisely, the compressed version of the public key, serves as your email address. You share your address with other users so they can send you bitcoins. On the other hand, the private key is your password. You use it to access your coins and confirm their transfer. Given the virtual nature of Bitcoin, your private keys are the only proof that you own those assets.
My point is that all topics related to cryptocurrency storage revolve around private keys. Where are they stored? Are your public keys safe? Are you the real owner of your keys? As a matter of fact, the storage of private keys creates the main distinction between digital wallets. Now, let’s see the category to which paper wallets belong.
Hot Wallets
Hot wallets are a broad term that covers crypto storage solutions that require an internet connection to perform their main functionalities — storing, monitoring, and transferring Bitcoin. They appear as web or online wallets or wallet applications (desktop or mobile) and provide exceptional ease of access and navigation.
Web wallets usually come as part of centralized crypto services in the form of custodial support and store Bitcoin on their servers.
Some web wallets and most wallet apps allow you to store your keys on your device. Such non-custodial solutions are much safer for your private keys. Still, internet exposure makes all types of hot wallets vulnerable to hackers and other malware, so they’re not recommended as a long-term solution, especially not for large savings.
Cold Wallets
Paper wallets, together with hardware wallets, belong to the category of cold storage. When it comes to cold wallets, you do need support from wallet software to handle your Bitcoin transfers, but in the storage part, they both keep your private keys outside your computer or iOS or Android system.
Before the rise of hardware wallets, paper was the only method to achieve such a level of security, as paper wallets allow you to print out your private key. However, nowadays, hardware wallets are the ultimate representatives of cold crypto storage. They’re thumb-drive-like devices with independent software that keep your private keys safely stored.
The best thing is that hardware wallets can be linked to more sophisticated software and platforms for a better user experience. And if that program is somehow compromised or the device on which it runs gets infected, this won’t affect the safety of your private keys.
But what about paper wallets? Do they use the same software solution for crypto transfers? For starters, let’s see how paper wallets work.
How Do Paper Wallets Work?
You don’t need any tech skills to create a paper Bitcoin wallet for yourself. There are a few reliable paper wallet generators you can find online for free. I use BitAddress, but you can also try BitcoinPaperWallet or WalletGenerator. Since paper wallets are part of the early crypto era, don’t expect a paper wallet option for new-age coins or DeFi tokens. Apart from BTC, you can also generate a paper wallet for Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).
The process itself is pretty straightforward. Once you visit the wallet generator page you will need to start hovering around the page with your mouse until the system generates a random unique string. When done, you can optionally include a BIP38 password for added security and print out the “wallet”. This valuable piece of paper contains the key pair and a scannable QR code. The code will help you access your Bitcoin through a third-party software wallet.
Now that you have ensured storage space, you can head to a crypto exchange of your choice (Bitbuy, Binance, Coinbase, etc.), buy the desired amount of Bitcoin, and transfer your newly-purchased coins to the Bitcoin address you’ve just created.
To check your balance, you need to rely on a blockchain explorer like Blockchain.info, for example. The explorer will let you monitor your transaction history and the current balance of your paper wallet.
At this point, you may ask about your fund security. Don’t get confused by the fact that you’re accessing your “balance sheet” from a public website. The blockchain is open to everyone, and so is your public address. Nobody can move or steal your bitcoins without entering the matching private key. So, let’s find out how you can transfer these funds.
Sending Funds: Import vs Sweep
The main task in sending your funds from a paper wallet to another wallet is the transfer of your private keys. The two transferring methods you can use are import and sweep.
When importing a private key to a software wallet, you’re just adding that key to the selection of other private keys in your software wallet. The coins that belong to the paper-wallet key will be simply included in the balance of the software wallet and assigned to that private key. The thing is that your paper wallet will still be valid even if you transfer the data to another location. So, if someone finds that piece of paper, they can also spend your BTC.
Similarly, sweeping is another way of importing your private key, but with an additional step — all bitcoins that belong to the private key of your paper wallet address are sent to a new address on your software client. Once the sweep transfer is done, the original private key is depleted of funds and the entire BTC amount will be part of a new private key in the software wallet. For security reasons, sweeping is always the recommended solution.
How to Send Bitcoin From a Paper Wallet to Another Wallet
Here’s a step-by-step guide on how to transfer your BTC:
- Get your piece of paper nearby, as you’ll need the information written on it. As I already said, your paper wallet consists of two long strings of random characters representing your private and public keys and a QR code.
You can either enter the data manually when connecting the paper and the software wallet or scan the code. The latter is certainly more practical as it leaves no room for typing mistakes. If your new software isn’t able to scan the QR, you can easily download a free QR scanner app.
- Optionally, you may need to check your wallet balance before initiating the transfer. It’s best to use the blockchain explorer at this stage before the transfer is activated.
- Now, it’s loading time. For this guide, I’ll use the Electrum desktop wallet, but you can go for a web, mobile, or desktop wallet of your choice. Whatever wallet you’ve chosen, it has to be set up by this stage.
- Open your Electrum wallet and head to Wallet. Then, select Private Keys and you’ll see the Import feature. If your Electrum is encrypted, you’ll be prompted with a password in a separate pop-up window. Electrum doesn’t enable QR scanning, but it will ask you how you’d transfer the required info. As I mentioned above, it’s best you scan the code using an external scanner and then paste it into the open panel. If this doesn’t feel comfortable, just enter the keys carefully.
- When done, confirm the transfer by pressing Import and wait for the success sign. Now you have your funds transferred but they’re imported only, not swept. If you want to clear all “footprints”, go to the Recieve tab on Electrum, right-click on the newly-created private key address, and select Send From.
Now, select a destination address where you can send the BTC. Insert the total balance of the paper wallet, minus the optimal miner’s fee. Consider that the Bitcoin blockchain imposes a transaction fee, which ranges depending on the current network load.
- Once you click Send, the private keys of your paper wallet will be literally “swept” out of all consisting bitcoins because of their new address that resides in your Electrum wallet. To be sure that your paper wallet is empty, visit the blockchain explorer again. Optionally, you can delete the imported paper wallet on Electrum once you confirm the zero balance or keep it for further reuse.
A Few Words Before You Go…
I must admit that our generation of crypto traders isn’t used to this storage model. Digital crypto-wallet solutions have become a key component for a successful trading outcome, offering models that enable direct market exposure and fast transactions.
Simply said, it’s not that the above-described process is difficult. The thing is that with a paper wallet, it’s very likely you miss a great market deal as the BTC price can skyrocket or plummet until you complete the paper-software transfer.
However, I wouldn’t say that Bitcoin paper wallets are extinct as they still can be of great use for HODLers who take no action on the crypto scene and use the assets’ volatility to earn some passive income or for those who believe that paper is safer than digital storage.