Bitcoin is a technology-powered currency, so of course, it is natural to use an online wallet (whether browser-based or on a client program on your device) to store your coins.
But for a variety of reasons, it is also an idea to use a paper wallet to keep offline access to your funds. This is mainly for security; if your phone is stolen or your internet connection hacked you could lose everything. And if the host of your online wallet becomes compromised you could be robbed through no fault of your own.
Here are considerations for getting started with paper wallets.
What are paper wallets?
First, it’s good to know a little about how wallets work. This has to do with public keys, private keys, and addresses. The long story short is that if you have the public and private keys of a Bitcoin address, you have full control over them. So writing down these two strings of characters on paper and avoiding any online storage of these details, means that your wallet has essentially been taken offline into the real world, and the piece of paper with this info is like a store of this value. This is very convenient and secure.
How to make paper wallets?
There are various ways to make a paper wallet, some more complicated than others. On the simplest level, you can simply write down the public key and private key that is displayed in the electronic wallet. After which, you can delete the records from the site or program you are using. Many browser and OS based wallets allow you to print the keys directly.
However, this is not fully secure by a long shot. First of all, in these cases, you might be relying on a 3rd party who can see your private key and thus potentially steal your funds. Secondly, your internet connection may have been hacked and even the device you used to manage the account may have been compromised with malware.
As such, many people go with a more advanced paper wallet generation procedure. This involves creating a private key on a new device not connected to the internet and subsequently sending the funds to the derived address.
You will need to download a new copy of an OS to a USB, use a program to generate the keys on the newly installed OS, and then write down your keys or seed.
The odds of security being compromised during this procedure are extremely low, so this is a very suitable process for storing large amounts of Bitcoin.
Follow these steps to create your paper wallet
- A PC, MAC or laptop
- 2 USB sticks (at least 8 GB)
- Pen & Paper or CryptoSteel to store your seed
1. Download and install tails
Firstly, you’ll need to download Tails, a live Linux operating system which you can run from a USB stick or DVD. Tails was made famous after Edward Snowden announced it as one of his go-to tools. Follow the instructions on the tails website to get it installed; you’ll need 2 USB sticks for the process.
2. Unplug from the Internet and boot into Tails
You’ll need to make sure your Tails USB is plugged in and your computer is set to boot from USB. You can set this in your BIOS. Don’t forget to unplug all network cables.
3. Run Electrum
Once Tails has booted up, open up the Program menu and load the Electrum software, you’ll find it in the “Internet” category. Electrum is a Bitcoin client that comes bundled with Tails. You can safely ignore any warnings about “Persistence” as we’re just after the seed for our paper wallet.
4. Create your paper wallet!
Once you’ve generated your seed, write it down on a piece of paper (your new paper wallet) and triple check you have copied the 12 words correctly. Do not take a photograph of your seed or back it up online; it should never touch the Internet in any way!
5. Store your address
Store your receiving address by writing it to file and/or copying it to paper. Your public address can be stored on an internet enabled device, it’s security is far less critical than your seed. Once this is done, you’ve finished. You have a paper wallet to store your Bitcoin.
The security/convenience tradeoff
If you only have a few Bitcoins or need to have them ready to spend quickly, then a less secure wallet whether online or paper-based is an option. But if you plan on keeping a more significant sum for security or investing purposes, a more secure paper or hardware wallet is critical.