When it comes to the security of your cryptocurrency never skimp! I have heard tons of horror stories in the last few years from people who put no time of thinking in to the security of their coins and ended up on the losing end because of it. How to hold your coins and keep them save can be a daunting task for most beginners in Bitcoin & cryptocurrency so I decided to highlight one of the most simple and secure solutions: The Paper Wallet! Follow The 'Stache as I break down exactly what a paper wallet is and how to set one up step-by-step.
What Is A Paper Wallet?
There are many different types of wallets you can keep your coins in and I won't go over each different way (see my What is a wallet article for that), but a paper wallet is one of the MOST secure ways to keep your Bitcoin or Litecoin. A paper wallet is exactly what it sounds like. It is literally a printed piece of paper with your private key and bitcoin address on it. This means that you can send Bitcoin to this paper wallet address that you generated offline (ill show you how below) and then store that paper somewhere safe... like a safe! There are a few downsides of course. You can only really do this with Bitcoin & Litecoin at the moment (at least the most TRUSTED ones) and you can't take out fractions of your deposit only move the entire amount from the paper wallet to where ever you want to move your Bitcoin. A paper wallet essentially acts like a "cold storage" wallet which means it is not connected to the internet in anyway.
Steps To Setup A Bitcoin Or Litecoin Paper Wallet
Head over to either bitaddress.org to make a Bitcoin only paper wallet or go to liteaddress.org to make your Litecoin only paper wallet. To repeat, each one of these wallets will ONLY hold the specific coin and if you send other coins there or try to send twice to the same paper wallet your coins will be lost!
- At the bottom of the page you will see a link that says "(zip)" right next to a GitHub repository link. This will download a .zip file of the website you are seeing so you can use the program OFFLINE. Using the program offline is the MOST secure way to generate a paper wallet. You CAN use this online and still connected to the internet, but I don't recommend it for security purposes.
- Once you have the .zip downloaded, disconnect from the internet by removing the cable from the back of your machine or turning WiFi completely off.
- Now that you are disconnected from the internet, find the .zip file you downloaded and open it to extract the files to a location on your computer. This will create a new folder and inside that folder you will find a file with a ".html" and the address of the website you just downloaded from. Clicking on this file will open the same website, but you are using the site OFFLINE which makes it more secure. This simple program is running directly from your computer and not from the internet.
- Now you can generate your random seed by moving your mouse around the screen a bunch which is what generates the seed. You need to do this until it reaches 100%.
- Once you hit 100% your new paper wallet will be generated. Here is what it will look like if you chose "single wallet" (which is what I recommend). The first QR code and corresponding numbers below it are your public address and this is the wallet address you would send your Bitcoin or Litecoin to. The second QR code and numbers are your "private key". This is the super secret key that you need to move your coins away from the paper wallet to a new location. This secret key should NEVER be shared with anyone.
- At this point I like to just hit the convenient print button and print out my paper wallet for safe keeping in my super secret 'stache spot where I keep all my important things. You can even print out multiple copies of the same wallet to keep them in different locations. No matter where you 'stache them make sure it is secure and don't share those private keys with anyone.
- Now that you have this new paper wallet all setup, you can deposit your Bitcoin or Litecoin to the wallet. This works just like sending cryptocurrency to any other location, but you should only send coins to it ONE TIME and that is it (don't send multiple transactions or they will get overridden). Go to the wallet or website where your Bitcoin or Litecoin are, copy or input the public address or "SHARE" key of your paper wallet and use that address to send your coins to.
- TADA! All done! Now your Bitcoin (or Litecoin) is now safe and transferred into your new paper wallet. Remember that if you lose this piece of paper you will lose the coins associated with it.
As you can see from the print out, there is no place that lets you know exactly HOW much is stored on your paper wallet. If you want to "check your balance" you can copy or enter in your "SHARE" or public key from your wallet into a blockchain explorer like blockchain.info to see exactly what you have in there.
When it comes time to either spend, sell, or move those coins from your paper wallet you must keep in mind that you CAN'T move or spend just a portion of the balance on the paper wallet. You 100% MUST move all the coins at once. If you don't do this, your coins will essentially be abandoned. Also, once you move coins from the paper wallet to a new location, never use that paper wallet again. Just generate a new one if you need to.
Look for a forth coming article that talks about how you import or sweep your coins from a paper to a hot wallet like my wallet of choice Exodus. This is a pretty unique feature of a paper wallet, but it is a little more advanced and I wanted to cover it in a separate article. I will update this thread when I post that up with a link!