When it comes to investing in Bitcoin (BTC), the first thing people look for is a secure storage system—in this case, a good BTC wallet.
Choosing a good Bitcoin wallet can get a little tricky sometimes. First, there are a lot of options to choose from. Second, each wallet type will often have different pros and cons depending on what type of trader you are.
Generally speaking, cold wallets—offline crypto storage systems—are more secure since they’re less prone to hackers. There are two types of cold wallets: hardware wallets and paper wallets. Hardware wallets are often better, but they can get a little expensive. This leads people to paper wallets, a storage system that’s often cheap (and, sometimes, free).
What is a paper wallet?
A paper wallet is a literal piece of paper that holds your public address (in the form of a QR code) and your private keys. In a way, you can think of it as a combination of both a physical and digital wallet—your money is digital, but it’s being held in something physical.
If you’re looking to create your own paper wallet, there are a ton of wallet generators online to help get you started. Some crypto ATMs will even have the option to print one out for you. The site or ATM will then create your wallet with its corresponding QR codes and keys. As soon as it’s created, the data you used is wiped from the website/ATM—making sure that your private keys aren’t saved internally.
Before you create one, make sure to do a malware check on your computer—just in case. Additionally, to prevent any further malware interference, you can also unplug your computer’s internet access while your wallet is being created and then clear your history right after.
After creating a paper wallet, you can now send BTC to that wallet, which is the easiest part of using a paper wallet. Exchanges and marketplaces nowadays will allow you to buy BTC with PayPal, gift cards, bank transfers, or various other payment methods. Once you get your hands on BTC, you can send it to your paper wallet from the online wallet that the exchange provides you.
Paper wallets are ideal for people who hold onto their coins for a long period of time. However, before you lose or damage your paper wallet, it’s advisable to “sweep” or transfer your funds out as soon as you can.
Should you use a paper wallet?
Although storing your crypto on a piece of paper may sound unconventional, there are a few benefits to keeping them on a paper wallet:
Since paper wallets remain offline, you’re less susceptible to hackers. This is the main advantage of using a cold wallet. Since they overlap into the physical domain and aren’t always connected to the Internet, the only way you could lose access to your money would be through your own carelessness—either losing or damaging the piece of paper. By taking the necessary precautions to ensure the safety of your paper wallet, you could keep your money from ever getting into the wrong hands.
Additionally, with paper wallets, you won’t have to worry about hardware or software failures—it’s a piece of paper. Despite the money not literally being stored on that piece of paper, it still contains the important private information that you’ll need to access your money.
With all that being said, we also have to note the disadvantages of using a paper wallet.
First, we mentioned that the paper wallet crosses over into the physical world and although we’ve mentioned its benefits, there are risks to that. The wallet stores very sensitive information, so if someone were to find your paper wallet, your money could be stolen. Additionally, you could lose or damage your paper wallet.
Second, the format of the paper wallet could cause problems. The cryptocurrency space is one that’s continuously evolving, meaning that you could be using an outdated format and newer software won’t be able to read it.
Lastly, paper wallets aren’t really recommended for beginners. It can be a little too technical and complicated—which is enough to intimidate anyone.
The disadvantages of using a paper wallet mostly boil down to user error, meaning that as long as you take care of it, you should be fine.
The future of paper wallets
Back in the earlier days of crypto, paper wallets were regarded as one of the most secure ways to store your Bitcoin. However, as the space developed, more secure storage solutions were created. Paper wallets may not be the best way to store your BTC, but they’re certainly not the worst.
Its disadvantages shouldn’t scare you away from exploring them and seeing how they could work in your trading system—just remember to do extensive research before diving in. In the cryptocurrency space, knowledge is power. So the more knowledge you have on the matter, the less likely you are to fall victim to the bad actors out there.