Difference between revisions of "Paper wallet"
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| − | A '''paper wallet''' is the name given to a method of storing bitcoin which involves printing a | + | A '''paper wallet''' is the name given to a method of storing bitcoin which involves printing a paired [[Private Keys|Bitcoin private key]] and [[address]] onto paper and depositing funds into a [[Bitcoin Transactions#P2PHK|P2PKH]] script using the address. Funds can be accessed by accessing the physical paper and entering the private key into a wallet. This is usually achieved by scanning a QR code of the private key in [[Wallet import format]] (WIF). |
== Redeeming bitcoins and withdrawing funds == | == Redeeming bitcoins and withdrawing funds == | ||
Revision as of 02:38, 4 February 2020
A paper wallet is the name given to a method of storing bitcoin which involves printing a paired Bitcoin private key and address onto paper and depositing funds into a P2PKH script using the address. Funds can be accessed by accessing the physical paper and entering the private key into a wallet. This is usually achieved by scanning a QR code of the private key in Wallet import format (WIF).
Redeeming bitcoins and withdrawing funds
The best way to redeem the bitcoins from a private key is to use the "sweep" feature of certain wallet software. This sends the entire balance of the paper wallet to a deterministic wallet.
Alternatively, the private key could be imported and the entire balance sent to an address in the wallet.
There are various wallets for doing this:
- ElectrumSV and Simply Cash support sweeping private keys.
Downsides/Risks
Paper wallets are generally regarded as a secure method of long-term storage of funds; however there are downsides to using this method.
Printing
Paper wallets require using a printer to transfer them to paper. Most printers have internal storage where the image of the wallet could be saved allowing an attacker with access to the printer to see the private key and steal the stored bitcoins. Shared printers such as in schools, offices or internet cafes are also usually centrally logged. If the printer is accessed over WiFi then any radio wave listener could also obtain the private keys and steal the money.
Address reuse
Paper wallets have just one bitcoin address, leading to address reuse.
Poor user experience
Dealing with raw private keys can be unintuitive and may lead to loss of funds if not managed properly. It is recommended that users of paper wallets understand how they function before using them as long-term funds storage.
Low error correction
The private keys are typically printed in small fonts. Sometimes characters may be mistaken for another letter. One single wrong character will invalidate the key. Private keys in WIF format have a checksum but there are a lack of tools for regular users to correct mistakes.
While QR codes have a checksum and robust error correction, they can be damaged by water, crumpling or folding of the paper.
Bitcoin ATMs and paper wallets
Many bitcoin ATMs use a paper-wallet-like system for delivering bitcoins if the customer doesn't have a bitcoin wallet. The ATMs can print out a private key/address pair onto paper which contain the customer's bitcoins. Ideally the customer would sweep the bitcoins into their own wallet as soon as they can.