Security is particularly important when acquiring and storing bitcoin. It’s horrible when an investor buys cryptocurrencies for the long term, then gets hacked and the cryptos stolen. The correct selection of a wallet is particularly important, mostly for security reasons. One possible way to hedge this risk is a paper wallet. How to use a Bitcoin Paper Wallet?
Why do I need a Crypto Wallet?
Cryptocurrencies like Bitcoin can be purchased on various platforms. However, it requires a wallet to “store” cryptocurrencies. The term storage is somewhat misleading. Because a wallet only receives the private keys that give you access to the cryptocurrencies on the respective blockchain.
Wallets come in many different forms. They differ in factors such as ease of use, security and price. There are also wallets that can be used extremely for many cryptocurrencies and specialized wallets for a specific cryptocurrency.
What are the types of Crypto Wallets?
We distinguish different types of wallets depending on their form and applicability:
- Online wallets: An online wallet is mostly a wallet on crypto exchanges. These wallets are constantly connected to the internet. These wallets are managed by a third party. They are considered the most insecure wallets. However, security on crypto exchanges has increased massively in the past.
- Browser wallets: Browser wallets can be integrated into various internet browsers. They are mostly easy to use. However, they are also constantly connected to the Internet.
- Mobile wallets: These are wallets that can be used on mobile devices. They are mostly used for short-term coin holding and trading. There are more secure alternatives for long-term holding of cryptocurrencies.
- Desktop wallets: Desktop wallets are wallets that can run on the surface of a computer. They offer more security than online wallets. The applicability is often very different.
- Hardware wallets: A hardware wallet is a device that is similar in shape to a USB stick and stores the blockchain data offline. These wallets offer the highest security, but are usually a bit more expensive.
- Paper wallets
What is a Bitcoin Paper Wallet?
A paper wallet is basically a “wallet” that you create yourself with a piece of paper and a pen. You write your public address on the blockchain and the private key that gives you access to the blockchain on the piece of paper.
A paper wallet can often also be printed out. These paper wallets can also contain a QR code. A factor that makes the paper wallet even more secure is the protection of the private key with an additional password. Only by entering the password (which should be kept separately) can a person gain access to the cryptocurrencies.
Can you store Bitcoin with a Paper Wallet?
Yes. A paper wallet is very well suited to safely storing the private key to the Bitcoin blockchain. Paper wallets were used for the first time with Bitcoin. They are the simplest form of storing access data for cryptocurrencies such as Bitcoin.
What is the advantage of a Paper Wallet for storing Bitcoin?
A paper wallet for Bitcoin or other coins has the advantage that it does not have access to the internet. With this, hackers cannot steal your coins. In the past, there have been repeated hacker attacks and theft of large amounts of cryptocurrencies, especially on crypto exchanges. But even online wallets are not 100% safe from these attacks.
You can keep the paper wallet offline in a safe place. Due to the lack of access to the internet, the only risk is that you lose the wallet or that someone offline steals the wallet from you.
A paper wallet for Bitcoin is also worthwhile because it is free. Secure offline wallets like the Ledger Nano X come at a price. It is worth using a free paper wallet, especially for people who have just started investing in Bitcoin.
Why are Paper Wallets bad?
With the paper wallet comes great responsibility on the user. The paper wallet is just a piece of paper, but it needs to be kept very well. A loss could mean that you no longer have access to your bitcoins. There is a very good chance that a piece of paper will be misplaced. So it’s a good idea to have a backup.
You must also ensure that no other person has access to the paper. For other types of wallets, another entity such as an exchange can take on this responsibility for you. Desktop wallets are also harder to “misplace” than a piece of paper.
The more cryptocurrencies you own, the more you should think about looking for an alternative. Hardware wallets are very well suited for large sums and a variety of coins, since you only need one access to access many different private keys.
Who should use a Bitcoin Paper Wallet?
A paper wallet is particularly suitable for beginners. Storage on the exchanges is probably the most convenient alternative. But don’t forget the safety concerns. With the Paper Wallet you have full control when you own the Bitcoin for the first time.
The paper wallet is particularly suitable for people who have only invested in Bitcoin. So you don’t have to keep countless private keys and you can make your wallet very clear.
Overall, people should use paper wallets that can take good care of their information and possessions. A paper wallet requires considerate storage. It is also suitable for people who are very concerned about security and are very skeptical about storing their data online.
If you still have a small budget and do not want to invest a lot of money in a wallet, a paper wallet is recommended as a safe alternative to hardware wallets.
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