There is no end of options for storing Ethereum. Be it on mobile or desktop, you can find dedicated applications for safely holding on the your ETH tokens.
When we come to Cold storage, however, things boil down to just two options. There is the hardware wallet (the more complex, expensive option) and then there is the good old humble paper wallet.
In this article, we will debate the merits of a paper wallet vs a hardware wallet, and discuss how to set up an Ethereum paper wallet properly.
What is a Paper Wallet and Why do you need it?
In cryptocurrency, your account is basically just your private key. If you have it, you can access and spend your funds from any device or wallet. So when we talk about a paper wallet, all that we mean is a piece of paper on which you write down alphanumeric string that consists your private key.
The private key is also often stored in the form of a seed. A Seed is a twenty four word phrase of normal English words. Called a mnemonic phrase, it is intended to make it easier for you to write down and remember than a line of gibberish. Any wallet application can then use the information encoded within this phrase to retrieve the original private key, and consequently your funds.
In making a Paper wallet, we will be generating and recording this seed only.
Seems rather primitive, and unsafe, doesn’t it? Actually, it is one of the most secure ways of storing your cryptocurrency. You see, whether you use a mobile wallet, or a hardware device for storing your funds, the private key ends up being stored electronically. While that makes it easy use and carry out transactions with, it also renders it vulnerable to hacking attempts.
How to Create an Ethereum Paper Wallet
The best – and by far the easiest – way to create an Ethereum Paper Wallet is by using the MyEtherWallet (or MEW, as it is sometimes called) application.
First, navigate to myetherwallet.com by typing it directly into your address bar. Do not google the website name. Thieves will often buy ad space with a phishing site pretending to be MEW and attempt to steal your coins.
Be sure that you’re on the correct MyEtherWallet website. You can check the authenticity of the website by looking for the verified SSL certificate which displays like this:
For future visits, it might be a good idea to bookmark the site so that you do not end up on the wrong site. Also avoid clicking links to the site in received emails, twitter posts, Facebook messages, Slack, Discord etc. as they are usually intended for phishing your account details via bogus URLs.
Now that we know how to access MEW safely, let’s see how to make Ethereum paper wallet. Click on New Wallet on the top left corner.
Unlike a plain paper wallet, MEW encrypts your private key for additional security. This adds an extra layer of safety in case your private key is glimpsed by someone; without decrypting it, your funds cannot be accessed.
As such, you need to choose a reasonably strong password for encrypting your private key. Choose your password carefully. Things like birthdays and anniversaries are generally bad ideas, as anyone with even a basic knowledge of you and your life can crack them easily.
For best results, choose a long string of say, fifteen characters, including the entire range offered by your keyboard – special characters, alphabets (both upper case and lower case), and numbers.
Once you have selected a password, hit the create wallet button.
The application will now generate the private key for your new wallet, and create a keystore for it. The keystore is simply a digital file holding your private key.
It is highly advised to make multiple backups of this file as the application cannot retrieve it for you again. Also, make sure that all backups are stored in a secure location, as anyone with this file can easily access your funds and spend them.
Once you have read through the warnings and downloaded the keystore file, click on the ‘I understand. Continue’ button.
Just as the keystore was the digital key to your wallet, the Private Key is the ‘physical’ key to it. This is what you will be printing for obtaining your paper wallet, and using to restore the account should you ever feel the need to migrate your funds to other wallets.
The key is displayed for you to note down, if you want. It is recommended to store a backup or two of your private key is secure places. These secure places do not include simply copying and pasting to a text file; such an oversight will make your funds a sitting duck for an enterprising hacker.
Otherwise, you can always hit the Print Paper Wallet button to get the thing you came here for in the first place.
As you can see, this wallet has every important piece of information you need. On the left is your public address, both in text and QR code format.
Think of your public address as your bank account number – people can use it to wire funds to your account, but not withdraw or spend it. Therefore, the public address is something you can freely share and display to the public, without any fear of repercussions.
In the middle is some blank space for writing down small notes regarding your account – such as the amount you have stored into it, etc.
The right side holds your private key in QR code format, with the text of the key printed at the bottom of the card. These two fields are the most essential for your wallet, so you might want to conceal them with a black paper over those parts.
And that’s it. Your Ethereum Paper Wallet is ready to use!
Transactions with your Paper Wallet
Loading your wallet in the first place is pretty simple. Remember that public address we pointed out to you earlier? That’s the address you need to send your Ether to. To begin with, send only minuscule amounts, in order to test that everything is working perfectly. Once you are assured that the funds transferred are indeed making its way to your own wallet, you can transfer the bulk of your funds without fear.
Now a time may come when you wish to dip into your paper wallet for a transaction or two once again. It might be to simply move it another wallet – maybe the old one got torn or something – or it might be to bolster your hot wallet repository. Either way, sending your Ether coins locked in ‘cold storage’ of your paper wallet is easier than you think.
To send Ethereum from your wallet, visit myetherwallet.com again. Once there, click on “Send Ether & Tokens” at the top of the screen.
The following form will be shown to you.
Now it is only a matter of unlocking your wallet and generating a transaction. There are multiple ways to access your wallet. You can type in our private key, or the mnemonic phrase generated by some wallets. Alternatively, you can upload the keystore file you dowloaded earlier, for a more streamlined process.
You still need to enter the password though.
Note: You can also use this form to simply view your balance. This only requires your shareable public key, so you don’t need the keystore file for that.
Once authenticated, send your Ethereum just as you would from any other wallet. Enter how much you want to send, the public address you want to send it to, and the gas limit. You can view your account balance on the card at the right, with options to view or earlier transaction history as well.
When everything is in place, click on ‘Generate Transaction’.
Safely Storing Your Paper Wallet
You may be thinking ‘I have already made a paper wallet, so I’m done, Right?’
A paper wallet is just that; a piece of frail, flammable paper. A slight tear here, or a trifling spill there, and your wallet – with your precious tokens – could be ruined.
So what to do to ensure that your funds remain safe?
First, put it into an envelope, and seal it with numbered holographic security seals you can easily find on ebay or Amazon.
These stickers, while not tamper proof themselves, are nevertheless a good way to ensure that your wallet has not been accessed by anyone, as tampering with the sticker displays a ‘VOID’ pattern to alert you.
For additional safety, such as to prevent your pet from eating your wallet, or water damage, it might be a good idea to get hold of a ‘pill capsule’. These cylindrical storage capsules can hold a rolled up paper wallet quite easily and are airtight when screwed so you can forget about the wallet getting damaged by accidental wear and tear.
If you are even more paranoid, then you can out this capsule into a fire proof bag, like the one below.