Storage units are one of the most crucial devices or software solutions in the crypto field. Due to crypto's anonymity and paperless nature, it is increasingly difficult or even impossible to retrieve lost funds. Thus, storing crypto in secure storage is essential for respective owners.
Naturally, numerous companies have offered unique iterations in the crypto wallets, creating three principal subtypes - hot wallets, cold storage wallets and paper wallets. While the first two options are trendy worldwide, paper wallets have become nearly obsolete. Was there a good reason for such a trend, or do paper wallets have a place in the crypto landscape? Let's discuss.
What Are Paper Wallets in Crypto?
Paper wallets were one of the earliest variants of crypto storage in the early days of the emergence of blockchain. In the early 2010s, paper wallets were introduced as a foolproof way to secure private and public keys. Paper wallets were meant to take the private keys offline and store them on a piece of paper entirely inaccessible to hackers or malicious attackers.
Thus, paper wallets were just that - a piece of paper containing written private key numbers or an encrypted barcode that smartphones or other devices could scan. Since security always had a heightened importance in crypto, early investors found paper wallets beneficial. Paper wallets made it possible to store the codes to cryptocurrency deposits, which were inaccessible to anyone but the owner. Thus, paper wallets rose globally in the early 2010s, creating a viable alternative to software wallet solutions in crypto.
How to Make A Bitcoin Paper Wallet
Making a paper wallet is quite simple, with one major exception. It merely requires printing out a piece of paper with your private and public keys attached. However, to ensure that your keys were transferred without a trace, users must access the key generator from an Ubuntu menu, a startup system on the Windows operating system.
This setup's trickiest part is ensuring that the generated keys are genuinely random and can't be formed by the hackers through simple probability work. Once the keys are printed, the Bitcoin paper wallet can open the respective account whenever necessary. However, it is highly recommended to reinforce the paper with lamination or store it in a paper wallet safe. After all, it is easy to drop, lose, or destroy a simple piece of paper. Some users even print out multiple paper wallets, increasing the risk of displacement or theft.
Why Were Paper Crypto Wallets Popular?
In the early 2010s, the cryptocurrency market was still in its infancy, with numerous market participants experimenting with industry norms. Hardware wallets haven't arrived yet significantly, making hot wallet solutions the go-to choice on the market. But the early days were tough in this context.
Many software wallet providers struggled to supply the security and convenience that Bitcoin owners demanded. Moreover, companies like Metamask and Coinbase Wallet didn't have enough reputability and experience to conquer the market. Thus, paper wallets were introduced to the market, featuring several neat benefits.
Cost-Effectiveness
Paper wallets are the cheapest options for controlling and managing crypto storage assets. Paper wallets acted like homemade credit or debit cards, letting users swipe or scan the paper document to disperse the private and public keys on any device connected to the Bitcoin network. There are no setup fees, monthly subscriptions, or other charges commonly associated with a digital wallet.
Accessibility and Ease of Use
Paper wallets can be created in minutes, with detailed guidelines helping you at every step. In the early 2010s, paper wallets introduced the convenience of bank cards to crypto owners, increasing the accessibility to crypto funds worldwide. All it took was to find a reliable key generator that would produce random numbers for you, and your paper wallet was ready to serve.
The Diminishing Value of Paper Wallets
While paper wallets were huge in the early period, the general public soon realised one simple truth - relying on a piece of paper is not a great idea. Soon, numerous problems associated with paper wallets became painfully apparent.
Paper Wallets Are Risky
Firstly, the idea of paper wallets was to provide a secure way to store private and public keys. However, paper wallets must contain genuinely random private keys to work well. It has become risky to rely on web-based key generators, as malicious parties might hack or retrieve their records. Secondly, the code must be updated frequently, which means that users should either have multiple paper wallets or change them at regular intervals. Both actions increase the chance of theft, loss or displacement.
Paper Wallets Are Physically Unreliable
Additionally, paper wallets are susceptible to damage. While lamination and other methods can keep it safe for a more extended period, it is still likely that many users will simply lose it. In the case of loss, users might be shut out of their accounts for good, with no possibility of recovery, since the wallet papers held the only version of private and public keys. Thus, any damage to the paper wallet could cause users to lose their funds for good.
Hardware wallets Have Made Paper Wallets Obsolete
Finally, the modern crypto world has introduced a much better alternative for cold storage with hardware wallets. Now, users can simply purchase a cold wallet device that is much more resilient, has private key backups and will not lead to losses if damaged. Hardware wallets have numerous security features like two-factor authentication, fingerprint scanners and other redundancies. This way, hardware wallets can't be accessed even if they fall into the hands of malicious individuals.
Thus, hardware wallets have entirely eradicated the need for their paper counterparts. The only advantage of the paper version is its cheapness. However, most users worldwide are okay with spending extra money to ensure security. After all, cutting costs on a wallet doesn't make sense if you risk losing everything inside of it!
Final Takeaways
Paper wallets were an essential part of the cryptocurrency development journey. Like any other fledgling industry, this fascinating invention became popular and swiftly faded once the market found a better alternative. While it doesn't make much sense to utilise them today, paper wallets were massive contributors to progressing the industry forward and introducing a concept of cold storage in crypto. Thus, paper wallets have claimed their rightful place in the history of cryptocurrencies.
