It is a backup system, which stores our funds outside of digital equipment.
They are generated locally and offline.
When it comes to security, paper wallets are second to none. This is thanks to its simple and straightforward protection system, which allows us to store access information to our funds in digital currency, outside of digital equipment.
The paper portfolio consists of only 2 elements: the public key, from which the public address is derived, and the private key, which is used when signing outbound transactions.
If we refer to the basic function of a paper wallet, by writing down the private key on a piece of paper – worth the redundancy – we would already have a wallet of this type. However, there are also alternatives that help to personalize a little more and make them more practical.
Cryptographic keychains use a computer concept called entropy, by which, through random movements of the mouse or pressing a certain number of keys, a series of numbers are generated that are entered into an algorithmic function. Resulting in a private key, from which the public key is derived and from this, in turn, the public management.
Now, if they were fixed, I never alluded to any kind of internet connection needed to generate the portfolio; this is because the process is entirely cryptographic. Which, in general, often raises the question of How does the portfolio connect to the blockchain? So basically the blockchain will only know of its existence at the time a transaction addressed to this wallet is registered or specifically to his public address.
First of all, several considerations need to be considered. First, it is advisable to perform this process in complete solitude. It is also important to be on target that in this tutorial we will use a process offline (Offline), to avoid using procedures that require an Internet connection, as this reduces security in the portfolio you are creating. Finally, once created, it is crucial to store it in a very safe place; since, if someone were to gain access to the private key, we would compromise all of the funds stored in the portfolio.
How to Create a Paper Purse
The first is to have a specialized application for this purpose that works that way offline. In this case we will use WalletGenerator, which, despite being able to generate paper wallets online, makes its source code repository available for download and use without the need for the Internet.
To download the file directly we can click here. It consists of a .zip file, which we need to unzip to our computer after downloading.
What we see in the image above are the files belonging to the source of WalletGenerator, this allows you to generate, locally, different types of portfolios: Single, Paper, Multiple and Mnemonic.
The Single Portfolio is the most rudimentary type, as we only generate public and private keys, and it is up to us to write them down somewhere. As for the paper wallet, it contains both the private and public key, but in a much friendlier print format. this one too can be generated using BIP38 portfolio encryption, Which allows you to set a password that is required when importing it to any digital keychain.
Another type of portfolio that can be generated with WalletGenerator is the multiple portfolio. In this mode a certain number of different purses are generated with their key pair, however, it is just as rudimentary as the Single Wallets. Another option is the Mnemonic portfolio, which generates a new pair of keys (private and public) based on a password specified by us, and not the entropy generated at the beginning.
Before continuing, we need to disconnect our computer from the internet and then we move on to the next step.
Now, with the internet disconnected, we will run the file Index, which will open automatically in our default browser.
Next, we need to generate some randomness — or entropy, which is the same thing — either by moving the cursor with the mouse or by placing a sentence in the box we see on the screen. On the right side, we will see how the bar is loaded. When it is fully loaded, our new paper wallet will be generated.
Already with this we have the portfolios ready, and I speak in the plural, since some of the different types of portfolios we saw are generated from the same entropy we generate.
As we continue, we immediately find the Single Portfolio, as can be seen in the top tab of the image. Here we will only have the public and private key, which we have to save.
If we go to the Paper Wallet tab, we will see how a print format is displayed.
The format seen in the image will be the one we will print, but first we will apply a layer of security through BIP38 encryption. This process will generate a new key pair that will be dependent on a password at the time of import. In other words, if we do not have the correct password, we cannot access the funds. In this sense, we will tick the box BIP38 encryption and then we will place the password we want to assign. Finally, we will click on Randomly generated, Which will generate a new pair of keys each time it is pressed.
All that remains then is to print the portfolio. But first, there are several aspects to consider. One is to try to make the print immediately. It is also recommended not to store the PDF file on our computer after printing; however, if you need to keep it stored while we get where to print it, it is recommended to store it on some removable device, away from any computer with an Internet connection. Finally, we should do the printing ourselves and avoiding the help of third parties at any cost.
To continue, we must select the option print, Which is displayed at the top right of the window.
After you have added this security bonus, all you have to do is print the wallet, fold it (as shown in the Single Portfolio section) and save it.
Paper wallets, not being managed by software, make it impossible to think that an outbound transaction can be signed. That’s why we need to import or sweep the private key into an application that works as a keychain or wallet, either on our computer or on our mobile phone.
After touching the point of importing or sweeping a private key, it’s worth noting the difference between the two concepts. The first alludes to the fact that the private key, as such, will be managed by a portfolio of software, that is, the private key will be imported or taken elsewhere, which ends up compromising the funds it protects. As for the sweep, the following happens: first, you need to pay a mining commission, because the funds will be transferred from our paper portfolio to our own software portfolio from where we are doing the sweep. Therefore, the old private key that was violated is rejected, as the funds it protected are no longer there.
To import or sweep there are many wallets that allow it, such as: Coinomi, Electrum, Atomic Wallet, Samourai Wallet.
Uses, advantages and disadvantages of a paper wallet
First, what we have in our hands is a common, current wallet, to which bitcoins can be sent through their public address, as with any other. However, the main use that is usually given to this type of wallet is to store digital currency for a long period of time; something equivalent to the practice of burying gold.
By finding the private key away from any digital media, the funds are kept more secure. But of course, keep in mind that we need to be extremely careful with this type of portfolio. If possible, it would be ideal to store it inside a safe and protect it from moisture or other conditions that could affect it.
A fairly practical use is give them as a gift card, Which is an interesting way to invite someone to venture into the cryptocurrency world. Something similar to when we receive gift cards or discount coupons from stores. Another curious use is that they can be included in an inheritance, and since it is possible to configure a password that places an extra layer of security on them, the physical wallet can then be delivered to the executor and the key or password to the executor. heirs (or vice versa). In this way, neither party will be able to have access to the BTC contained within it, without the approval or knowledge of the other.
The disadvantages stem from its own use, as it is not a portfolio created to use the funds it protects on a day-to-day basis. So, we would only see one point against it if we tried to use them incorrectly or if we are very careless and do not follow the recommendations to make them safe.
You can watch video tutorial of this guide on our YouTube channel:
Featured image by: Anton Gvozdikov / stock.adobe.com