There are several ways to store Bitcoins:
- Paper wallets - a sheet of paper that contains your private keys and Bitcoin addresses
- Software wallets – a free wallet you can get on your PC, Mobile and other electronic devices
- Hardware wallets - a USB type wallet that you can carry around with you such as the Ledger Nano S
- Hosted (exchange) wallets – however, please keep in mind there is a counter-party risk
- On a bearer item - essentially works like paper wallets except the private key is embedded in an object that must be torn open e.g. Denarium Physical Bitcoins
What exactly are “Paper Wallets?”
A paper wallet is a physical document (like a piece of paper) that has the information needed to generate Bitcoin private keys (remember, you have two keys. A public one that allows you to receive coins from others, and a private one that lets you send coins).
You can think of “paper wallets” as a way to store your coins offline.
On the other hand, keeping your keys stored in an online wallet or on your PC means that there is a chance that if your not careful your wallet could be compromised if a hacker got hold of your password and 2FA code.
Benefits and Drawbacks of "Paper Wallets"
Therefore, some people prefer to use paper wallets, as they only require physical security. This is one of the most significant merits of using offline (“cold storage”) methods to secure your coins, as it is easier for most people to keep their valuables physically safe.
Another benefit of using paper wallets is that you can invest in Bitcoin then store it in a safe place, where you won’t spend it. The proverbial “bury your money in your backyard” can be done with paper wallets to save and invest for, e.g., your children’s university fees.
The downside of using paper wallets is that ink and paper can degrade or be damaged. Additionally, if you lose the paper wallet, the coins stored in that wallet will be lost forever (or stolen by someone who finds it). In a way, it’s not much different from cash, other than that it can store a lot more value. However, a handy $30 Warehouse laminator will keep your paper wallet safe!
Paper wallets are generally not recommended for daily use; online wallets are more convenient and secure enough to use on a day to day basis. There is specific hardware designed to securely store Bitcoin, like the Ledger Nano S. You can find out more about the Ledger Nano S here.
How to Get Your Own Paper Wallet (Requires Tech Savviness)
Here’s how to create a secure Paper Wallet for Bitcoin (if you prefer a Video Guide click here):
- Use a brand-new USB flash drive (ensures that it is “clean” from malware). Make sure it can store at least 4 gigabytes.
- Download the offline version of BitAddress and put it on another clean USB flash drive.
- Install the Ubuntu Operating System
- Download LiLi and follow the steps to create a live Ubuntu OS on your USB flash drive (make sure “Format Key in FAT32” is ticked)
- Disconnect your PC from the internet
- Boot from USB drive to run the Ubuntu Live Operating System (you’ll have to re-order your boot priority from the BIOS). You can enter the BIOS page on most PCs by pressing Del, F1, F2 or F12 when you first turn on your PC.
- Once you’ve got Ubuntu running, set up your printer.
- Go to System Settings > Printers > Add > Add Your Printer > Print a test page (see image below)
- Open the BitAddress offline version from our second USB.
- Create your paper wallet by following the instructions on the BitAddress page.
- Click the Paper Wallet tab and click “Generate.”
- Print out your paper wallet.
Security Risks to avoid!
Remember, your coins are of high value so keep your paper wallet safe! Don’t let anyone see your wallet.
Please do a full virus scan to avoid spyware monitoring your activity. It’s best to use a clean operating system. For extra security, print the paper wallet from a printer that isn’t connected to a network.
You can buy Bitcoin here, make sure you are verified first!