Cryptocurrencies are an exciting emerging market and Ethereum has a ton of potential.
But these new currencies come with their fair share of risks. In order to keep your Ether safe, an Ethereum paper wallet can be a good place to store your Ether.
But how do you create one, is it safe and what are the risks?
In this post, I'll show you why you might want to create a paper wallet. Then I'll give you the exact steps on how to do it securely. I'll also show you how to transfer your Ether in and out your newly minted paper wallet.
Remember, no storage method is 100% safe.
But if you understand the risks, take the proper precautions and diversify your storage methods, you greatly reduce your chances of losing your investment to the bad guys.
Storing your Ether on the exchanges is generally the worst place to store it because the exchanges are susceptible to hacking and the exchanges maintain control of your private keys…not you.
Therefore, cold storage is a must for anyone who is serious about keeping their money safe.
A paper wallet is one cold storage option.
[toc]What is an Ethereum Paper Wallet?
If you are totally new to cryptocurrencies, I'll quickly go over what a paper wallet is.
If you know this already, then skip on to the next section.
First, some terminology…
Ethereum is the network or the “software” and Ether is the cryptocurrency that is used for transactions on the network.
That might be a tad simplistic, but that's pretty much all you need to know.
A wallet, digital or physical, is simply an address on the Ethereum blockchain. A blockchain is a type of database.
You can think of an Ethereum wallet address like a website domain name. It's an address that tells you how to find a website on the internet.
So when you create a paper wallet, you are using a piece of software to do two things:
- Generate a private key, which is essentially the password to your wallet. This password allows you to spend the funds in your wallet and is very secure. Do not expose this key until you are ready to spend the money in your wallet.
- Generate a public key, which is a public address on the Ethereum blockchain. You will give this to people to send cryptocurrency to. It's like your mailing address where people send physical mail to.
You can also send Ethereum ERC20 tokens to your Ethereum paper wallet. I'll get into that more in a bit.
Now let's talk about the advantages of a paper wallet…
Why Create an Ethereum Paper Wallet?
This storage method is more for long term Ether investors, not ETH traders. But even as a trader, you can store a percentage of your Ether in a hardware or paper wallet, until you need it.
Here are some reasons why you might want to use a paper wallet to store your Ether or Ethereum-based token.
It Cannot be Hacked
Since a paper wallet is not connected to the internet, there is no way that someone can hack your paper wallet.
This assumes that you have followed the correct steps in creating your paper wallet.
I'll discuss that more, later in this guide.
Keep ERC20 Tokens Separated
If you want to separate your ERC20 tokens from your Ether holdings, then creating paper wallets is an easy way to do this. There is an added layer of protection, in that you can easily send your tokens to a paper wallet. But to transfer the token out of the wallet requires a small amount of Ether in the wallet to pay for the transaction.
This is the Ethereum “gas” or fee that is required to execute the transaction. So if there is no gas in the wallet, that is another step that someone has to go through to get the money out of the wallet.
Also, if a would-be thief does not know about ERC20 tokens, then they might only scan the wallet for Ether. If there is a zero Ether balance, then they may just leave the wallet and move on to the next one.
Storage Diversification
Keeping all of your Ether in one place is generally a bad idea. So if you can keep some of it in a bank safety deposit box, some in your safe house and some of it in a safe in your home, then you greatly reduce your risk all of your money being stolen, in the event that one of those places are compromised.
Paper wallets make it easy to do that.
Full Control of Private Keys
This is especially important with Ethereum.
Why?
Because of Airdrops.
Who knows if this will be a big thing in the future, but there are cryptocurrencies that are giving away some of their tokens to people who already own Ether.
This is called an Airdrop.
They do this because they want to raise awareness for their token. OmiseGO is an example of one of the big early Airdrops.
I don't think that you will make a ton of money with Airdrops, but you never know. There might be a token that becomes quite valuable one day.
Here are some ERC20 tokens that I have already received in one small wallet.
The important thing to understand is that these Airdrops only go to the owners of the private keys. If you keep your money on an exchange, the exchange owns the private keys.
So the exchange will usually get the Airdropped coins, not you.
That's even more reason to stay in control of your private keys!
You Don't Have to Move Large Amounts of Money
Another benefit to paper wallets is that you don't have to keep all of your money in one wallet. You can generate several wallets and spread your money out.
If you only use one cold wallet solution and have to replace it, for whatever reason, it can be scary to move all that money at once. If you mess something up, all could be gone in one fat-fingered keystroke.
Having multiple wallets means that you have the ability to only move a portion of your funds.
Of course, this also creates more work. But it can be a small price to pay for peace of mind.
Easier to Use
If you don't like dealing with a lot of device setups and online accounts then a paper wallet can be much easier to use than a hardware wallet device. It just depends on what you prefer to use.
Inexpensive
Once you have the basic tools, paper wallets are very cheap to make. So you don't have to spend another $100+ on a Trezor or Ledger to get a second or third wallet.
Just fire up your printer and print out more wallets.
Easy In-Person Transfer
If you like how cash can be transferred from person-to-person, then a paper wallet might be for you. You can just print out a paper wallet to pay for something.
Presumably this would be for a higher ticket item. People will look at you weird if you try to buy a coffee with an Ether paper wallet.
The person you are paying can just scan the paper wallet into their app, verify the transaction and you are done. If it is a fairly big translation, then you don't have to carry around a briefcase full of cash handcuffed to your wrist.
Anyone who has watched any spy movie knows that you should target that guy.
Paper Wallet Risks
But a paper wallet is not all sunshine and roses. There are certainly risks involved with this storage method.
Paper Damage
If you are actually printing your paper wallets on paper, with an inkjet printer, then stop right now.
Seriously.
Otherwise, your paper wallet is vulnerable to water, fading and any 5-year old child. In the tools section below, I'll show you how to create a paper wallet that is much, much more durable.
But even then…fire, and a sharp pair of scissors are big threats to even the most robust paper wallets.
So be sure to store them in a safe place.
Transferring From a Paper Wallet
Putting money into a paper wallet is easy. When you want to withdraw your money from a paper wallet, you have to take an extra step and use an app or a site like MyEtherWallet to spend the money in a wallet.
You also have to “sweep” all of the money out of that wallet, for security reasons. I'll get to that later in this guide. The money you don't spend has to be moved to another cold storage wallet, to keep it safe.
So there are some extra steps that come with spending money from a paper wallet.
But this can also be seen as a extra layer of protection.
It's a Bearer Bond
When you create a paper wallet, you are essentially creating a bearer bond. Whoever has possession of the paper is the owner of the money in that wallet.
Since the private key to the wallet is printed on the wallet, anyone can transfer the money out of the wallet into their account. Keep your paper wallets in your possession, hide the private key from plain view and only give them to people you absolutely trust.
You will learn how to hide the private key, later in this guide.
Look-Alike Websites
One way that the baddies can take your money is by creating their own websites that look like legitimate paper wallet generators. When you create a wallet on one of these sites, they can see your private keys and will have access to your funds.
They can send you a link to these bogus sites in and email or put it on a website. People think that they are going to the legit site, when they are actually going to a cloned site.
That's why it's so important to use the method that I outline below.
Software Hacking
Yes, a paper wallet cannot be hacked online. But if you create the wallet with software that is hacked, then the software can potentially transmit your private keys back to a hacker. Also, if you have malware on your computer, it could track your actions and send that information to a hacker too.
I'll talk more about how to avoid these scenarios in later sections, but just be aware that this is a threat.
Hardware Hacking
The printer that you use to create your paper wallets is a potential vulnerability too. If the printer is too “smart” then it can store your previous printouts in its memory, which can be downloaded.
This guy was able to hack 150,000 printers remotely. He did it to raise awareness about printer security. But the bad guys aren't going to be that nice.
Your documents can also be intercepted when you transmit to wireless printers. So while wireless printing is super convenient, you should not use it for printing paper wallets.
The Tools You Need to Create a Secure Paper Wallet
Here are the tools that you need to create a secure Ethereum paper wallet.
1. Synthetic Paper
Rule #1: Contrary to the name, you should not actually use paper.
One spilled beer and all of your money is toast.
If you want to store your money as securely as possible, then synthetic paper is the only real option. It is tear proof (by hand) and waterproof (if you use a laser printer).
There are a few synthetic paper options out there, but here are the two that I recommend.
The first one is Teslin. You will hear about it on many cryptocurrency forums and it is supposed to be the very best synthetic paper available.
I'm sure it's great and all, but I personally think that's overkill for a cryptocurrency paper wallet.
It's also pretty expensive.
One reason is that it is so durable and costly is that it is really thick, 10 mil to be exact. For reference, the average sheet of paper is 2.5-3.5 mil thick. At a little over $1 per sheet, it is cheap, compared to other cold storage solutions. But the cost can add up.
Another option is TerraSlate. It can be about half the price of Teslin, depending on how much you buy. It comes in different thicknesses, but the 4 mil version is a good option, in my opinion.
I've tried to tear one sheet of TerraSlate paper with my bare hands. I'm obviously not the strongest person in the world, but I could not rip it.
These suckers are strong!
Whichever one you choose, be sure to choose the version that works with laser printers.
Here's why…
2. A “Dumb” Laser Printer
Rule #2: Don't use a “fancy” or inkjet printer.
Inkjet printers use a liquid-based ink, which means that they will probably fade. Even so-called waterproof inks may not stand the test of time.
Don't take that chance.
Laser printers on the other hand, essentially melt plastic on paper.
This is completely waterproof.
So the combination of synthetic paper and waterproof ink will give you the most durable paper wallet possible.
“Fancy” printers are also security liabilities. The signal to wireless printers can be intercepted by anyone who knows how to decode these things.
Yes, that is not highly likely, but do you really want to take that chance?
Use a hardwired USB laser printer to prevent this.
Printers with a lot of internal memory are also potential targets for thieves. This internal memory is great if a print job fails in the middle because the printer can simply reprint the job from its memory.
However, this also means that someone could possibly download your previous print job and create a duplicate of your paper wallet. Therefore, the fewer bells and whistles on your laser printer the better.
Good news! That also means that won't have to pay a ton of money for a new printer.
Something like this printer is a good option, but do your own research before you buy.
Finally, for good measure, unplug your printer from the power and your computer, after you are done using it. This is to ensure that nobody can get access to it, online or in-person.
Paranoid? Maybe.
But safe?
Totally.
3. A Paper Wallet Generator
Next, you will need a paper wallet generator. This is usually done via a website.
It will generate the public and private keys for your wallet and give you a physical wallet design to print out. Some designs are cool, some not so much.
There are a few different options out there. But here's the most important thing that you have to keep in mind.
The biggest risk with using a wallet generator is that it may transmit your private keys back to a hacker.
So you have to trust the source of the website that you use to create a paper wallet. You should also generate your wallets offline.
More on how to do that in the step-by-step guide below.
But the best paper wallet generator right now is MyEtherWallet. You can download the website to use offline here.
If you aren't sure about a website, do your own research and find out what other people are using and why.
4. A QR Code Scanner For Your Computer
You will also need a QR code scanner for your desktop or laptop computer. This will make it much easier to scan the QR codes on your wallets.
Of course, this is assuming that your computer has a built-in camera. If it doesn't, then consider getting a USB connected camera or scanning device.
If you type in the key manually and you make one mistake, all of your money could be gone. That is why it is so important to scan QR codes.
Just be sure that the QR code scanner you use does not transmit any of your scans back to a central server. This could expose your private keys by accident.
Here are few options to get you started:
- Mac: QR Journal
- Windows: CodeTwo Scanner and Creator
- Linux: ZBar Bar Code Reader
5. A Copy of Linux Running From a USB Drive or Virtual Machine (Optional, But Highly Recommended)
If you want to be extra secure, then you should only create your paper wallets from a brand new installation of an operating system. Since that may not be realistic for most people to do on their main computer, the next best thing is to put a fresh copy of Linux on a USB drive and run MyEtherWallet from there.
There are several flavors of Linux out there, but Ubuntu is one of the most popular and well supported.
The complete guide on how to install Ubuntu Linux on a USB drive can be found here. It works for Windows, Ubuntu and macOS.
Once you have Linux installed on that drive, you can just plug it in and you will be able to use Linux for printing out your paper wallets.
As an alternative, you can also install a virtual machine like VMWare and install Linux on the virtual machine.
Using Linux to print your paper wallets may seem like an unnecessary step. But an ounce of prevention now, can save you from a mountain of hurt later.
This is especially true if you are running Windows, which is the least secure operating system.
I highly recommend using Linux to print paper wallets. So in this guide, I'm going to be using this method.
6. Tamper Evident Stickers (Totally Optional)
You might also want to purchase tamper-evident stickers to put on your paper wallets. This doesn't offer any physical security, but it can make it easier to tell if someone has peeked at your private key.
Notice how the paper wallet above is folded to protect the private key. The stickers simply help to keep it hidden.
Note: the paper wallet design above is no longer available, but I will teach you how to use another design.
One of the worst things that can happen with a paper wallet is that you lock it away somewhere safe, only to discover later that there is no money in it. So if you can see that someone has tampered with the wallet beforehand, you can at least try to track down the culprit right away.
The Step-By-Step Process for Creating Your First Ethereum Paper Wallet
Now that you understand the basics about paper wallets and the tools you need to create one, it's time to get to work. Here are the steps that you have to follow to create your first wallet.
Note: Some of these steps may seem like paranoid precautions. But remember that the Ether you store in these wallets could be worth a lot of money one day.
Act accordingly.
Step 1: Setup Linux
The first thing you have to do is to install Linux. I'm going to use a virtual machine in this example, but you can also use the USB method mentioned earlier in this guide.
Either way, get Linux installed and download the latest updates. Then make sure that you can print to your laser printer, from Linux. If you cannot print, then download the latest drivers for your printer.
Do not download anything else!
No games or any other nonsense that you have on your primary computer. The more things you have installed in Linux, the higher the probability that you will download something that can steal your Ether.
Step 2: Download the Wallet Generator
Next, you need to download the offline wallet generator from MyEtherWallet. Do this from inside Linux.
First, click on this link.
Then click on this link to download the file.
Now double click the zip file to unzip it. Once you have successfully created this folder, you are ready to move on to the next step.
Step 2: Start Printing
Before you start printing, be sure to disconnect your computer from the internet. Turn off your internet from inside Linux by unchecking the Enable Networking option from t