With the rising number of investors investing in cryptocurrencies, it is extremely critical to have secure storage for crypto assets. The cryptoverse is emerging in technological advances, with one of them being first hardware-based hot wallet being launched by Sealblock. Exodus wallet and Trezor wallet are also favorite among crypto asset holders. With the advent of the paper wallet, the investors can use these wallets to store their valuable assets.
However, fear lurks in the investors due to several wallets hacks that plague the industry, for instance, that of John McAfee’s “unhackable” wallet. It is often overwhelming for a new investor to choose a suitable wallet. With the option for several wallets like hardware, software and paper wallets, the decision of where to store crypto assets can become a tough one.
However, a suitable cryptocurrency wallet can be chosen on the following basis-
Cost– It is necessary to check if the wallet is affordable and see if there are any drawbacks to using this wallet.
Security– One should always check the credibility of the company making the wallet.
Mobility– It’s crucial to check whether the wallet is easy to keep and accessible anytime and anywhere.
User-friendliness– Ensure that the wallet has friendly UI and supports storage of a range of altcoins.
Convenience– It is necessary to ensure that the wallet allows for fast purchases when needed.
Let us examine what a paper wallet is.
What is a Paper Wallet?
A paper wallet is an offline cold storage wallet for cryptocurrencies. Private and public keys get printed on the paper wallet which can be stored in a secure place. The key is printed in the form of a QR code, which can be scanned for all transactions. A Paper wallet gives complete control to the user.
It’s not the cryptocurrencies that get printed out on the paper as any other regular currency, but rather the information stored in a crypto wallet. The private key printed on the paper wallet allows people to transfer money and consequently provides access to spending funds.
1. Private Keys and Public Keys
Private keys and public keys work in two encryption systems namely symmetric and asymmetric.
In symmetric encryption, a single key is used for encryption and decryption.
Whereas, in asymmetric encryption, a pair of keys is used for better security. A sender encrypts the message with the public key, and the receiver then decrypts it with the private key.
Thus, public and private keys help to encrypt information which ensures that data is protected during transmission.
What is a Public Key?
- Public key uses asymmetric algorithms which convert messages into an unreadable format.
- A person having the public key can encrypt the message intended for a specific receiver.
- Only a receiver with the private key can decode the message.
- The key is available via the publicly accessible directory.
What is a Private Key?
- The private key is a secret key used to decrypt the message.
- A secret key is shared among communicators to enable the encryption and decryption of the message. In case the key is lost, the system becomes void.
- To overcome such a problem, PKI (public key infrastructure) came into force, where a key pair is used.
- PKI enables users to exchange information securely.
Key Size and Algorithms:
Algorithms like RSA, DSA, ECC (Elliptic Curve Cryptography), are used to create a public and private key in public key cryptography (asymmetric encryption). The bit-length of the public and the private key pair decide how easily a brute force attack can exploit the key. Due to security reason, the latest CA/Browser forum and IST advises using 2048-bit RSA key.
The private key can be hidden inside a tamper-resistant token and can be issued in the form of Bitcoins. It is necessary that those accepting it as a payment, trust the provider who loads them with the given number or proportion of Bitcoin. If the Bitcoin value needs to be redeemed, the token must be destroyed to access the private key.
Tips and Gifts
Once a key pair is created, the bitcoins can be stored on the paper wallet to be tipped or gifted. The recipient can then sweep the private key to their wallet.
2. Hot and Cold Storage
When cryptocurrencies are kept in a device directly connected to the internet, it is a form of hot storage. Different types of hot storage wallets include desktop wallets, mobile wallets and exchange wallets. These wallets provide ease to access funds and make it simpler to make payments at places accepting cryptocurrencies. They can be used for day-to-day spending.
Transactions are relatively easy when it comes to hot wallets, but they can be easily hacked. The widely-reported ransomware attacks and incidences of large exchanges getting hacked are a significant deterrent for newcomers.
The Bitfinex hack is one example of the several dangers of hot storage. A total of $72 million worth of BTC got stolen by hackers, leading to a 20% drop in its value within a day.
When cryptocurrencies are stored in a device which is entirely offline, it is a form of cold storage. Cold wallets are the best option for those seeking the most secure form of storage. Cold wallets are best suited for long-term asset holders who don’t require access to their crypto assets for months or even years. The different types of cold storage wallets include hardware wallets and paper wallets.
San Francisco-based bitcoin wallet and exchange service Coinbase holds up 97% of its coin reserves in hardware and paper wallets. However, cold storage wallets are still susceptible to external damage and theft. Moreover, they are not ideal for quick and daily transactions. For a beginner, it can be a difficult task to set up a cold storage wallet.
Cold storage significantly minimizes risk if used properly. Given the amount of attention that cryptocurrency has received over the last few years, it has piqued the interest of attackers.
Importance of private keys and restoration methods
The private key is the single most crucial piece of information. Losing it is like losing all your money. It is advisable to store your paper wallet in multiple secure locations.
A safe is usually favorable for storing them. However, small home safe deposit boxes are an easy target for home invaders.
In the future, it is possible that self-encrypting, decentralized “cloud” based storage can be an option. Although its reliability needs to be tested, it could alleviate concerns over storing private keys digitally. However, it is possible to encrypt the data and store it online. A suitable option can be to store the encrypted version of a private key on the web.
3. Paper Wallet vs Hardware Wallet
Hardware wallets do not have full-featured wallet software. It is not possible to download a cryptocurrency’s full blockchain on a hardware wallet. They also have a low storage capacity. These wallets also can’t hold many assets, attributed to lack of storage space.
A hardware wallet supports only a limited range of cryptocurrencies. If a user buys a hardware wallet but wants to use an unsupported cryptocurrency, they must wait for the developers to add support for it.
However, with Paper wallets, storage is not an issue, since only the key pair needs to be stored on it. As a user can generate several paper wallets. With paper wallets, transferring cryptos is as simple as handling a slip of paper to another person.
4. Risks of using Paper Wallets
While paper wallets drastically decrease the threat of compromise from the hackers, they carry their own set of risks, which include-
Fragility- The wallet is just a piece of paper. It can be easily damaged or can get worn out over time.
Human Errors-The location of the paper can be easily forgotten, and it could be accidentally torn.
Type of Printer Used– Non-laser printers may cause the ink to run off if the paper gets wet. Thus it is necessary to use a high-quality printer.
Coercion– Being vocal about your crypto assets is not a wise idea. It can make the holder a vulnerable target for predators.
5. How to Create a Paper Wallet?
Paper wallets are created using a program which randomly generates a private and public key. The keys are unique and the program generating them is open source. These keys are generated offline. This eliminates the risk of online threats.
Follow these steps to create a paper wallet-
Before starting, ensure your computer is entirely free from any malicious software.
- Open Walletgenerator.net
- Download the Zip File
- After opening the zip file, open the “index.html” file, after ensuring that the internet is off. This ensures that the wallet is hack proof.
- Keep moving the cursor over the highlighted text . Continue with the process until the counter goes to “0”.
- As the counter reaches 0, the wallet will be generated.
- Print the page ( Ensure that wifi is off.)
Delete the saved web page, and you can now reconnect to the internet.
6. How to use a Paper Wallet?
(i) How to load paper wallet with a cryptocurrency?
Taking the example of a Bitcoin paper wallet
- Use the Bitcoin address QR code for transferring Bitcoin from your software wallet to the particular address.
- After scanning the QR code transfer the Bitcoins to the address.
- You can add the number of Bitcoins loaded where “Bitcoin amount” is written and keep that safe.
The user can generate several copies of the printed wallet and keep it as a backup.
(ii)How to take out Bitcoins From Your Paper Wallet To Spend?
- Scan the bitcoin address from your software wallet to wherever you intend to send your bitcoins.
- Scan the private key on the right side of the paper wallet using your Bitcoin software wallet.
- Click send
7. Different Types of Cryptocurrency Wallets
There are several types of wallets that provide different ways to store and access your digital currency. These include-
Software wallets can be further classified into a desktop, mobile and online.
- Wallets which can be downloaded and installed on a PC or laptop.
- These wallets are accessible only from the computer in which they are downloaded.
- They offer one of the highest levels of security.
Few examples of Desktop Wallets are:
- Exodus is a relatively new wallet and is presently available only on the desktop.
- Its interface allows storage and trading of Bitcoin, Ether, Litecoins, Dogecoins and Dash
- It has an inbuilt shapeshift exchange which allows trading of altcoins for Bitcoin and vice versa without the need to leave the wallet.
- Open source Bitcoin desktop wallet.
- Its main features include multiple wallets interface, GPU-resistant wallet, encryption, key importing, key sweeping among others.
- Wallets which can be downloaded on Mobile.
- They can be used easily, like at retail stores.
- Mobile Wallets are smaller and simpler than desktop wallets.
Examples of Mobile Wallets
- Jaxx is a multi-currency (Ether, Ether Classic, Dash, DAO, Litecoin, REP, Zcash, Rootstock, Bitcoin) wallet and user interface.
- It is available for a variety of platforms and devices (Windows, Linux, Chrome, Firefox, OSX, Android mobile & tablet, iOS mobile & tablet) and connects with websites through Firefox and Chrome extensions.
- Jaxx facilitates wallet conversion between Bitcoin, Ether and DAO tokens via Shapeshift and the import of Ethereum paper wallets.
- The Mycelium mobile wallet allows iPhone and Android users to send and receive bitcoins and keep complete control over their bitcoins.
- It offers enterprise-level security to most other apps and features like encrypted backups, a local trading marketplace and an integrated QR-code scanner.
- Makes sending Bitcoins as simple a sending emails.
- Offers a standalone client, i.e. there is no server to use when sending or receiving Bitcoins.
- Users are in full control of their funds at all times.
- Online wallets run on the cloud and are accessible from any computing device in any location.
- They are the most prone to hacking and thefts as a third party controls the private keys.
An example of Online Wallet is
- Green Address is a user- friendly Bitcoin wallet and is an excellent choice for beginners.
- Its features include two-factor authentications for enhanced security.
- Hardware wallets store user’s private keys on a hardware device like a USB.
- The offline storage of hardware wallets ensures high security.
- Users can plug their device into an internet-enabled computer or device, enter the pin and transfer the currency.
Few examples of Hardware Wallets are-
- Trezor is a hardware Bitcoin wallet ideal for storing a large amount of Bitcoin.
- Open source and transparent.
- Easy to use and has an intuitive interface. It is Windows, Linux and OS X friendly.
- The best option for inactive investors, savers and people wanting to keep a large amount of Bitcoins highly secure.
A multi-signature requires multiple keys to operate. Such a wallet creates more security and saves you from human error. One or more people can use it.
For Example. BitGo, one of the premier multi-sig wallet service providers in the world issues three private keys. The company holds one key, the user holds the other key and the third one is a backup key. Any transaction in a BitGO wallet requires a minimum of 2/3 keys to operate. It can be challenging for the hacker to acquire two keys.
Examples of Multi-Signature Wallets
- Bitpay created Copay, and it is one of the best digital wallets in the market.
- Incorporates features for both entry-level users and geeky features for experienced players.
- Accessible through a user-friendly interface on mobile or desktop online.
- Ledger Wallet Nano is a new multi-signature wallet for Bitcoin users which aims to eliminate attack vectors by incorporating a second security layer.
- It provides multi-currency support.
- In the event of recovering a wallet, the whole process can be done from the device, i.e. there is no need to connect it to a computer.
- It is roughly a small flash drive measuring 39 x 13 x 4mm (1.53 x 0.51 x 0.16in) and weighing merely 5.9g.
Bitcoin Paper Wallet
With a lot of investors keen on Bitcoin, it is a wise decision to reap benefits and simultaneously have a viable and secure storage option for Bitcoins.
Let us see how to make a Bitcoin paper wallet.
Items required to make Bitcoin Paper Wallet
- A pair of Scissors
- A smartphone with QR code reader
- A software Bitcoin wallet with bitcoins in it
- Internet access
- A Laser Printer
- Open bitaddress.org on your browser
- Save the page on your desktop
- Locate the page on your desktop
- Disconnect the Internet after locating it on your desktop.
- Open the downloaded HTML file.
- Hover your mouse here and there to generate a degree of randomness.
- Continue the process until the percentage number completes to 100%.
- The following screen appears.
- Click on “Paper Wallet”.
- This generates three private keys with three addresses.
- Click Print to obtain your Paper Wallet
- After printing, cut the required portion and keep it safe.
Ethereum (ETH) Paper Wallet
Ether is not only a cryptocurrency but also a platform for decentralised apps. Recently, the startup R3 with the help of 11 banks worked to troubleshoot a system that worked with blockchain for trading.
In 2016, a malicious user, the DAO hacker laundered more than $50 million worth of Ether. Thus, the hard fork of Ethereum took place. Ethereum blockchain hosts most of the ICOs today While most cryptocurrencies have a cap on the total number of coins that can be mined, Ethereum doesn’t have one.
With such unique features, the security of an Ether wallet is necessary to maintain. Let us examine how to make an Ethereum Paper Wallet –
- Go to MyEtherWallet.com
- Click on the help tab
- After Clicking on the Help tab, click on the fifth option of ‘how do I run MyEtherWallet.com offline/locally?’
- Open the highlighted Link
- Download the Zip File. Ensure the internet is off and open the index file.
- Create a new password and generate a wallet, Make a backup of your wallet file and then click on “I understand.”
- This will generate a private key
- Print your wallet by clicking on the “Print Button”.
Ripple Paper Wallet
Ripple was one of the top-performing cryptocurrencies in 2017, up by a staggering 35,500% for the year. Unlike Bitcoin and Ethereum, Ripple cannot be mined. A total of 100 million XRP can be created, and they already exist, but not all are in circulation yet. Over the next few years, 1 billion XRP will be available per month for distribution. Thus, the circulating supply would increase dramatically.
With Bitcoin’s transactions taking around 10 minutes and Ethereum transactions taking a minimum of two minutes to process, Ripple intends to become the instantaneous form of money transfer. The transaction time of Ripple is 4 seconds. Moreover, Ripple’s network can handle larger transaction volumes than other cryptocurrencies. Major financial companies including American Express, Santander, and MoneyGram International, are currently testing out Ripple’s technology.
Ripple has a reasonably lower transaction fee, which is less than a penny as compared to Bitcoin and Ethereum. Presently the transaction fee for Bitcoin is $1.15 and $0.30 for Ethereum.
With such a vast potential and use-cases, Ripple is rapidly climbing the success ladder. It is imperative that it has a fast and secure storage mechanism.
How to make a Ripple Paper Wallet ?
Let us examine how to make a Ripple Paper Wallet –
- Search ‘Bithomp’ on your browser.
- A page like the one below will open when you click on the highlighted link
- Select Account generator from the options available
- A page with the Ripple Address and Key will open
- When you click on generate, random keys will be generated
- Take a print out of these and keep them safe.
Second Method for Creating Ripple Paper Wallet
- Type Ripple Paper wallet and click on the following link.
- The following page opens
- Switch off the internet
- Generate new keys
- Print the Paper wallet and keep it safe.
DogeCoin Paper Wallet
DogeCoin has helped in raising an amount of more than 3000 USD which was utilised in funding the bobsled team of Jamaica for them to go to Sochi Winter Olympics. Currently, Dogecoin can be stored in either multi-currency supported wallets or a paper wallet.
Let us examine how to make a Dogecoin paper wallet
- Open dogecoinpaperwallet.net
- Click on Calibrate Printer and the following dialogue box will open.
- Open a new tab and type ubuntu live cd.
- Go to the bottom most right corner and download the GitHub file.
- Download the zip file.
- After opening the zip file, click on index.
- The following page will open.
- Click on Print Front.
- Click on Random-generate new keys.
- Then Click on Print Back.
After giving the print commands the dogecoin paper wallet would be generated.
Cardano Paper Wallet
Cardano is the first blockchain platform to evolve out of scientific philosophy and a research-first driven approach. The platform has a layered architecture similar to TCP/IP which allows for easier updates via soft forks in the future. The two different layers are namely Cardano Settlement Layer (CSL) and Cardano Computational Layer (CCL).
Daedalus is the only wallet where you can send, receive and store ADA. ADA cryptocurrency is mineable, and block allocation employs a proof-of-stake algorithm called Ouroboros. Therefore, it is much more efficient and less power hungry.
Let us examine how to make a Cardano Paper Wallet.
- Launch Daedalus and click on create a paper wallet certificate.
- Click on Save PDF for printing.
- Save the PDF then the following screen will appear.
- Check the options from the checklist and click on continue.
- The following screen will then appear.
- Click on the checkbox and set password recovery phrase.
- Click Continue for the following screen to appear.
- Finally, click on “Finish” to generate your paper wallet.
With the current trends in the crypto market, it is inevitable that the crypto holdings will continue to grow in value. Although security may come for a price, it is much better to shell out some money rather than losing huge sums of it.
Here is a comparison of the most popular cryptocurrency wallets–
Finding an all-in-one package wallet is tough. It is inevitable that hackers will continue to devise new ways to hack wallets. With rapid advances in technology and a wide array of options, crypto assets can be stored safely despite such attempts.