If you want to buy Bitcoin you should also think about keeping it safe. There are numerous examples of hacked wallets. Often a little carelessness is enough to lose your Bitcoin. Numerous exchanges have also been hacked, on which cryptocurrencies worth several million dollars were stolen. For this reason, investors should always store their Bitcoin themselves, for example with a paper wallet.
Blockchain technology is one of the most secure methods of online transactions. Because access to the values stored on it is allowed only to people who own a private key. The blockchain itself can’t be hacked and whenever you read about stolen Bitcoin it’s usually about the loss of private keys. When storing bitcoins on an exchange, you usually hand over responsibility to a third-party provider, which then saves the associated private keys.
What Is a Bitcoin Wallet?
‘Not your keys, not your coins!’ Bitcoin proverb
That’s why investors should always store their private keys themselves and never disclose them to third parties. A wallet is required to access the associated blockchain. It represents an interface to the blockchain and enables Bitcoin to be sent and received. A wallet can either be used online (hot wallet) or in physical form (cold wallet). The latter option is more secure, as cold wallets don’t require an Internet connection.
Ledger Wallet is an example of a secure hardware wallet. It complies with a high-security standard and works in a similar way to a USB stick.
However, a simple paper wallet is even more secure, as it only saves the access data on paper. Since only the private keys are required to re-establish access to the blockchain, keeping them on paper is usually sufficient.
Key Advantages of Paper Wallet:
- Inexpensive and easy to create;
- Cold storage (doesn’t require an Internet connection);
- High security;
- Easy to transport;
- Can be replicated;
- Can be stored in several locations.
How Does a Paper Wallet Work?
Basically, a paper wallet is a form of storing private keys. Since they don’t require an Internet connection they are completely safe from hacks. They can also be created free of charge and can be infinitely replicated. This means that several copies can be made and the risk of loss is considerably reduced.
If you then want to access your Bitcoin, all you need is a secure desktop wallet to import your private keys there. Sending BTC directly from a paper wallet is therefore not possible. You can also protect your paper wallet with a BIP38 password to increase security. This means that only people with the associated password can access it (you should therefore never lose it or give it away).
The paper wallet is the ideal solution if you want to store your Bitcoin for a long time. However, you should make sure that it’s kept safe. It’s also important to ensure its longevity and make multiple copies. In the event of fire or water damage, a paper wallet is quickly lost. It’s also a good idea to store a copy in a bank locker or in your private safe.
What do you guys think about paper wallets? Feel free to share your opinion in the comments. Have a great weekend!