Strange as it may sound, paper wallets are a popular and effective way for safely storing digital currencies like Bitcoin and Dogecoin. Paper wallets allow cryptocurrencies to be stored offline (known as cold storage) in a physical document that can be secured like cash. A paper wallet is created by printing a newly generated public and private key onto paper. Coins can subsequently be transferred to the printed wallet’s public address. Public keys are like a standard bank account number, while private keys are required to “unlock” and spend the balance on the public key. As long as all security recommendations are followed it is one of the safest ways to store coins.
Caution with generating wallets
The only way to guarantee maximum protection by a paper wallet is by avoiding any chance that the private key is exposed in the generation process. The generation happens on a computer, which means that private keys could be compromised by spyware. The first advice would therefore be to only produce paper wallets on a computer not connected to the internet, although this does not stop any malware already running on the system. Booting from a live disc can prevent malware from running. Obviously, private keys should never be scanned or saved to a computer hard drive.
A live-boot CD can be used instead of a hard drive Operation System install to keep print jobs from being stored in the system cache. Printers can have their own internal storage, so the most safest way to print would be to use one without any memory. The printer should never have access to the internet or a computer that is connected to the internet. Lastly, the printed private key should never be revealed to anyone. It might seem like a lot to consider, but once done the paper wallet can easily be kept safe without any dependence on a third party.
The generated keys do not have to be validated first before using them, this is why it is possible to generate them offline. The reason for this is that there are 2 to the power of 256 possible private keys. In a truly random process, the chances of a duplicate key are negligible. The public keys can be mathematically calculated from the private keys (this does not work the other way around).
Lastly, when redeeming a paper wallet it is important to redeem the full balance. Not doing this puts the remaining balance at risk of being lost forever. If only a part is used, the remaining funds will be moved as well to a “change” address. It is not like a normal “live” wallet which allows spending any portion of the present balance. To keep the coins safe, the remaining coins should be transferred to a new paper wallet. If you keep this in mind and follow the previous steps, this will leave you with unhackable paper wallet which will keep your coins safe until you need them.