Jul 16, 2019
What is a ‘paper wallet?’ Do I need one?
Posted by Philip Raymond in categories: bitcoin, cryptocurrencies, economics
This post is structured as a question-&-answer. That’s because it was originally an answer at Quora, a Q&A site at which I am a Bitcoin columnist.
What is a ‘Paper Wallet’
A paper wallet is the ultimate offline wallet. It simply means that the private address to your crypto wallet is printed on paper — either as a string of characters, a QR code, or a series of seed recovery words.
If you destroy any electronic copy of your original wallet (e.g. the private keys that give you access to your wealth), then hiding this piece of paper is very similar to hiding a bar of gold. The only way that someone can steal it or know the amount it represents is to get their eyes and hands on something physical. They would need to know that you tucked it into your mattress or behind a secret panel of your cellar wall.
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All bitcoin wallets are all digital—even a paper wallet, whether a character string or a QR code. Conversely, an exchange may use “physical” wallets to host client assets, individual application wallets, or they may simply keep records of client assets that are stored, collectively, in their own master wallet. To complicate matters, Bitcoin is never really “stored” by you or an exchange service. It is stored on a public blockchain, where assets and transaction history can be traced through time by anyone. Therefore, all forms of user access are “digital”. What the reader really wants to know is “Which form of access control is better? — custodial or personal?”
Type 1: Custodial Wallets are Managed by a Trusted Party They hold your assets. You view a statement balance—just like a bank account.
