A paper wallet is used to secure bitcoins offline by printing the private key of a Bitcoin account on a piece of paper and storing it away in a safe place. It is considered as one of the safest ways to store wallet information. The owner has accessibility to the wallet but the private key information cannot be retrieved by hackers or other computer and online malware. As a paper wallet provides complete control over the ownership of bitcoin funds, it is up to the owner to store the printed wallet in a safe place away from thieves and natural damage causes like fire, bugs and moisture.
An offline paper wallet can be created from one of several open source client side key generators available on the Internet. Since the key generating programs are open source, it is easy to ensure that the generation is indeed happening on the user’s computer and not recorded or relayed to any other server. Usually, varying degrees of randomness can be introduced into the numbers with mouse movements or other visual tools, after disconnecting from the Internet.Ensuring the private key has never had communication on the Internet, the private key generated is noted down or printed onto a piece of paper. The public address associated with the private key is used to receive bitcoins and the private key is used to send money. No third party owns or controls the bitcoins which makes a paper wallet free from dependence on the security features of online wallets.
Since a paper wallet can be stolen like cash or gold, it is important to store the paper wallet in a secure location like a safety deposit box. Online exchanges that want to ensure maximum security of user funds also store private information offline in safety vaults protected by armed guards.
Steps to generate a paper wallet
Step 1. Go to Bitaddress.org. You will be presented with a screen like this.
Step 2 : Move the mouse around and add random numbers and characters. Keep moving the mouse or typing till the randomness counter goes to zero. Disconnect from the Internet before you begin this step.
Step 3: The screen displays the information that goes into your wallet. On the left side is the public address and its corresponding QR code with the SHARE label. On the right is the private key with its corresponding QR code with the SECRET label. Click on the paper wallet tab above the QR codes.
Step 4 : You can put in the number of addresses to be generated and specify if you want the art to be displayed.
BIP38 Encrypt is adding an extra layer of security to your wallet information, to prevent someone from touching your bitcoins should they find the paper wallet with the private key exposed. This requires a passphrase to be entered but since many web services do not support the keys as of now, it is better to focus on physically safeguarding the paper wallet.
Your paper wallet is ready to print. Ensure the printer is not connected to a network and does not have the feature of making a soft copy of the printout. Put it away in a tight case in a safe away from thieves, bugs, sunlight and moisture.
Each private key can be used to get back its corresponding public address, but not the other way round. To find the public address of your private key, click on the Wallet Details tab on the top and enter your private key. Besides the public key, you can also obtain your private key in the most popular encoding formats (WIF, WIFC, HEX, B64, MINI).
What is a Brain wallet?
A brain wallet is one where the private key of a Bitcoin account is preserved by the user in his or her memory.
Web wallets can be hacked, paper wallets can be stolen, desktop and mobile wallets are likely to be destroyed due to hardware crashes or damage. These reasons have led some to use brain wallets to keep their private keys safe.This is done by preserving the private key in the user’s memory with the aid of a memory tool like a passphrase for quick recall when the bitcoin funds need to be accessed. The public key is displayed to accept coins but the private key is not preserved as a hard copy anywhere.
A long phrase or sentence of significance to the user is chosen, and extra numbers and characters are added at positions that do not mean much to a hacker but can be precisely recalled by the user. It is important that the phrase is not a string of names of family members or celebrities, birthdays, common sayings and expressions, song lyrics or favourite movie names. More common the passphrase, easier it is for the hackers to crack it with guessing by brute force.
The passphrase, for example, could be “ I’’m learning,, @bout bitcooins 923….enjoying it….H427H”
With the passphrase having been committed to memory accurately, including the extra characters, the public address and the private key are generated by using one of the several online services available for this purpose. These services convert the passphrase to a 256-bit private key using cryptographic algorithms like SHA-256 and display the public address associated with the private key.
Popular brain wallet generation services are
The SHA 256 hash of the above passphrase, which is also the private key (in the hexadecimal system or hex) looks like this: 36109257e2b0de6a96213164a04fa520bd2b0ed1a66e9c700b8bbe54361eabb9
The private key is: 5JE6bKbcNeuqjS1v1TL8qRjV3nnDb8AwC1bekMsxcg7pRRAwJNy
The public address associated with the above private key is: 1DMwxjgXRKVx7trZrJnL3q7kXHWvPdEKNY
The user can now share the public address to accept bitcoins. To send bitcoins to another address, the user must recompute the private key using the exact passphrase. These services also display the corresponding QR code that can be displayed to accept bitcoins.
It is very important to remember these notes when putting bitcoins into an address preserved as a brain wallet:
Passwords that are good enough to participate in online discussions, banking and retrieving email are just not strong enough to overcome hacking attempts by computers powerful enough to mine bitcoins. Though this seems similar to recalling ATM PIN numbers at the time of punching them in,it is extremely important that the passphrase chosen is sufficiently complicated to undermine hacking attempts but not too confusing for the user to recall.
Memory loss and other mental illnesses and death will result in the permanent loss of bitcoins.