Paper Wallets are cryptocurrency wallets that are just pieces of paper with seed phrases or private keys written on them for quick recovery. These papers help keep hot wallets offline and bring them for use only when required, giving them the functionality similar to cold wallets.
Definition
Paper Wallets are those crypto wallets which exist on a piece of paper. These wallets are created similar to hot wallets and then the seed phrase is written on a paper. Whenever the wallet is not in use, these softwares are uninstalled which takes the wallet offline.
Why Does Anyone Need a Paper Wallet?
There are many reasons why a paper wallet is in higher demand than a cold wallet.
First, this is a zero cost makeshift way to create a cold wallet from a hot wallet, much-affordable than buying a Ledger, Safepal or Trezor hardware wallet. It turns any free hot wallet like MetaMask into a more secure version.
Second, cold wallets are not available across many countries like China, where you could get arrested for buying a hard wallet. In those regions, a paper wallet is a lot safer and disposable if the user wants to do so.
Third, paper wallets are a lot more resistant to external environment factors like moisture, heat, magnetic fields, etc. They do not require any specialized support and can be restored without any OEM help.
Risks
Although paper wallets offer many benefits, they also carry a few risks.
First, they can be easily stolen. Even if someone clicks an image of the paper on which the wallet is created, the wallet owner could lose all the funds.
Second, a paper is a lot easier to misplace than a hardware wallet.
Finally, they are also susceptible to wear and ink erosion when kept stacked, which is the most common way to store paper.
Paper Wallets vs Cold Wallets
A paper wallet might behave like a cold wallet in some way. However, in practice, they are very different.
- A cold wallet actively secures your private keys by keeping them offline, preventing unauthorized access. Further, they have layers of cryptographic protection. A paper wallet, on the other hand, simply assumes that the wallet is offline when not in use.
- Despite the cost, cold wallets offer many more benefits, including access to top OEM resources if your wallet is physically damaged or drained.
Paper Wallets vs Hot Wallets
Paper Wallets are essentially Hot Wallets whose seed phrases are noted, and then the application is uninstalled. Due to these wallets being offline, it is believed that they will prevent any unauthorized access.
