Ethereum (ETH) is regarded as the second most popular cryptocurrency after Bitcoin. While Bitcoin is the most popular blockchain project, Ethereum brought smart contracts into the blockchain. However, the safe storage of crypto assets is a persisting issue. Ethereum should not be stored in exchanges as they are susceptible to hacking and they maintain control of the private keys. Thus, it is all the more important to find a secure Ethereum wallet. Ether holders prefer to store their assets on Ethereum paper wallet, owing to the security it provides.
When a paper wallet is created two things need to be done-
- A private key needs to be generated, which is the password for your wallet. This key should not be exposed till the time you need to spend the funds in your wallet
- A public key also needs to be generated, which is the public address on the Ethereum blockchain. With this key ethers can be received in your wallet.
ERC20 tokens can also be sent to your Ethereum paper wallet.
Why Create an Ethereum Wallet?
Ethereum paper wallet is more suitable for long-term ETH investors rather than ETH traders. Some of the reasons a paper wallet should be used to store ETH are-:
- A paper wallet cannot be hacked as it is not connected to the internet. Although, it is important to remember to switch off the internet while generating the private keys and printing the paper wallet.
- If one wants to separate ERC20 tokens from Ethers, this can be achieved by creating a paper wallet. There is an added layer of protection with which tokens can be sent to a paper wallet. If the tokens are to be transferred out of the wallet a small amount of ETH is required. Ethereum ‘gas’ is the fee required to execute the transaction.
In case there is no gas in the wallet, it will be another step someone has to go through to get the money out of the wallet. If a would-be thief does not know about ERC20 tokens, they might only scan the wallet for Ether. If there is no balance in Ether, they might just leave the wallet.
- It is not advisable to keep all your ETH in one place. An Ethereum paper wallet will help in diversifying your holdings, and the risk of losing money is substantially reduced.
- Certain cryptocurrencies also give away some of their tokens to existing ETH owners during an airdrop. This is done to raise awareness for their token. For instance, OmiseGO is an example of one of the early Airdrops. The tokens only go to the owners of private keys. If your money is kept in an en exchange, the exchange will acquire the tokens as they hold your private keys. However, this will not be the case in a private wallet as you can exercise complete control over your private keys.
- With paper wallets, there is no need to keep all money in one wallet. Several paper wallets can be generated, and the money can be spread out.
How to create an Ethereum Paper Wallet?
1.First, install Linux and download the wallet generator from MyEtherWallet and click on the following link.
2.Click on this link to download the file.
3.Double Click on the zip file to unzip it and switch off the internet before printing.
Note: As an extra precautionary measure, disconnect your router and turn off the modem. Taking this step ensures no internet traffic is going to your computer. After this step double-click on the index.html file in the unzipped folder.
4. This opens a browser with an offline version of the MyEther wallet site. The site locally runs on the computer. At this step, create a password for the paper wallet. The password should be more than 10 characters. The password must be stored in a secure place as it will be required to access the wallet later. Once you have created your password, click on the Create New Wallet button. The next screen will tell you to download a file. Click on the Download button to get the file. This file is another way that you can use to get into this paper wallet, so keep it somewhere safe. It is an alternative to a private key, so treat it accordingly.
5. Once the file has been downloaded the “I understand. Continue.” button will become clickable.Click on it.
After this, the following screen appears. Click on ‘Print paper wallet’ to print the paper wallet.
The following screen appears-
An Ethereum paper wallet looks like this-
Paper wallets may seem less secure at first. However, paper wallets put the responsibility of security in the hands of the owner. Imagine if a popular exchange gets hacked. As the exchange stores the wallets of millions of users, there is a huge possibility that those people could lose all of their crypto assets as they trusted another party.
Many would say that this threat could be prevented by using hardware wallets, but the common user is still not certain of their private keys. A non-technical user of Ethereum cannot simply read the open source software of which these wallets are made. Consequently, they are not certain whether their keys are stored or transported in a secure manner. With increased benefits for newcomers as well as long term asset holders, paper wallets are a feasible option for a newbie as well as an established player.