Securing Bitcoin: How to Use a Paper Wallet
If you’re planning to hold bitcoins long term, one of the easiest, best ways to store them is in paper wallets, somewhere safe, such as a safe for instance, that you have control over. More technological methods such as the Trezor hardware wallet and others have come about, and we are hoping to acquire one of those for review purposes soon. But the paper wallet serves a lot of important purposes in Bitcoin.
Perhaps its most novel purpose is shattering the idea that computers are necessarily required to transact in bitcoins. Indeed, if dealing with an actually trusted party, receiving bitcoins via private key on a paper wallet is as secure as any other way of receiving them. The key word there is trusted party. If two parties have access to a private key, that private key can be swept into another wallet very easily. Thus, if the party was a stranger or an untrusted party, they could as easily sweep the coins into another wallet directly after or minutes before handing over a paper wallet, providing the receiver with nothing but a slip of paper. Smart phones are the actual best way to transact coins in person, but paper wallets still have a good purpose in storing bitcoins.
A paper wallet amounts to a paper storage of a Bitcoin private key. For the Bitcoin novice, a private key is part of a pair. The “public key” is normally referred to as a Bitcoin address. A private key’s real value is whatever it is associated with in the blockchain.
Thus a private key can be imported into any Bitcoin client. For this reason, creating a paper wallet can be something as simple as creating a list of private keys and storing them in a fire safe or somewhere on quality paper. Getting the private keys in the Bitcoin client involves opening the console and using the command “dumpprivkey” along with the address you have funded. So, to achieve the simple way of creating a paper wallet, all you must do is generate a Bitcoin address, preferably with another client or Vanitygen or some means (more on Vanitygen later), send some coins to that address, and then dump the private key of that address once you have generated it. Once you’ve created the new paper wallet and printed and stored it somewhere safe, you’ll want to delete any wallet files from your computer.
But a more interesting, easier method of generating paper wallets also exists. Using bitaddress.org, you can generate paper wallets and other types of Bitcoin addresses. You don’t have to trust the server; instead you can download the files and run them offline on your home computer. Once you’ve created a set of paper wallets, you print them, and send coins to the ones you intend to use.
Once you’ve generated a paper wallet, it becomes a matter of physically securing it the same way you would any other valuable. The more bitcoins you send to a paper wallet, the more physical security you want to consider. A fire safe is a must for things like bitcoin paper wallets and other valuables. Later on, when you want the coins for use, you simply import the private keys into your wallet.
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