A physical document containing your private key or seed phrase.
A paper wallet is a physical storage system that holds cryptocurrency private keys. Since cryptocurrencies are virtual assets, a wallet doesn’t store them in the paper wallet, per se. Instead, a paper wallet provides a mechanism to safely store unique keys to your virtual wealth. Keys are written or printed on a piece of paper; hence the term paper wallet.
The keys can be stored in their alphanumeric raw form, or they can be printed as a QR code. Note that cryptocurrencies such as Bitcoin have public and private keys. A public key, for example, works like a public email address and can be publicly shared to allow others to deposit, but not access, BTC in your account. A private key, on the other hand, works like a sensitive password and gives its holder the ability to access and transfer the coins.
Although they’re very secure when kept in safe hiding, paper wallets have dropped in popularity due to advances in cryptocurrency storage technology. Setting up a paper wallet involves the use of a reputable paper wallet generator. However, avoid generating a paper wallet from any electronic source as far as possible. This is because by generating a paper wallet, even if it’s just a printing file, you may leave a digital footprint for hackers to exploit.
Instead, the safest way to create a paper wallet is to simply write down your recovery seed phrase or private key from your screen or device, double check it, and then hide it somewhere secure. This applies to both software and hardware wallets.
Wallet generators provide random but unique public and private keys. Despite their shared offline features, like cold storage devices that operate offline, paper wallets present multiple risks.
For example, the paper may be misplaced or damaged. The quality of the paper and ink used by the printer may negatively impact the readability of the keys, especially when stored for long periods. The paper wallet can also be damaged by the elements, like water, fire or moisture in the air. Additionally, problems may arise if the wallet-generating software gets an update and fails to recognize the old paper wallet’s format.
Interestingly, there are also “steel wallets” (made of strong rust-resistant metals like aluminium and titanium) available that are fire-resistant and should last a very long time.