As you may know, there are plenty of ways to store Bitcoin: hardware wallets, software wallets, and paper wallets. Hardware wallets to choose from include Trezor, Ledger, Digital Bitbox, and more. There’s an inexhaustible list of software wallets ranging from Copay to Jaxx and from Blockchain to Coinbase. Paper wallets are a bit different, because they’re simply pieces of paper, and many look like this.
The number of Bitcoin wallet options to pick from might be a bit intimidating to newbies. And while mobile and online banking are becoming more popular, fully digital payment solutions like Bitcoin and other cryptocurrencies are rather intimidating to normal people. To lessen the learning curve, beginners should use paper wallets instead of the hardware and software wallets that experienced Bitcoin users frequent.
But why exactly should we recommend paper wallets to beginners?
Comfort of Use
Although one could assume that having a hardware or software wallet is a necessary part of the Bitcoin experience, paper wallets are more welcoming to individuals who have been handling fiat cash and credit cards for most of their lives. The similarity that a paper Bitcoin wallet has to fiat cash gives people a certain comfort that other wallets simply can’t provide. And, once people get used to handling paper wallets and become acclimated to the Bitcoin environment, they will feel more ready to graduate on to software and hardware wallets.
Understanding the Bitcoin Protocol
A common misconception that Bitcoin beginners often have is that once they open a wallet, their wallet is always connected to the Bitcoin network where they can take part in transactions. This stems largely from a non-technical person’s lack of knowledge of computer networking, but it can be resolved with paper wallets. The fact that paper wallets are low-tech helps newcomers distinguish their wallets from the network. They help beginners accept the fact that their wallets are theirs to own and are not owned by another party like Coinbase. When making their first transaction, they then learn that the network is only relevant to then for sending and receiving money, not storing it.
Paper wallets may seem less secure at first, since humans are often the weakest factors in secure systems, but paper wallets put the responsibility of security rightfully in the hands of the owner. Imagine if a popular exchange like Coinbase got hacked. Because Coinbase stores the wallets of millions of users, there is a possibility that those people could lose all of their coins simply by putting their trust in another party. Many would say that this threat could be prevented by using wallets like Copay and Blockchain, but the common user is still not certain of how their private keys are being used. A non-technical user of Bitcoin cannot read the open source software with which these wallets are made, thus they are not certain whether their keys are stored or transported in a secure manner.
Although they have security implications closely related to credit cards, paper wallets are the best option because they let the owner take their own measures to secure their private keys. Their wallet information isn’t subject to computer-related mistakes like accidental deletion or hacking. In addition, paper wallets still allow for password-protected private keys, so thieves can’t process transactions without authorization from the owner.
A Grain of Salt
Paper wallets are a somewhat simple approach to making Bitcoin a bit easier for the masses. That’s not to say that they should be the end-all, be-all of Bitcoin wallets: paper wallets are still subject to tears, water damage, and other real-world accidents. And, their true security strictly depends on how their are treated. But, they should not be overlooked. Paper wallets offer excellent experiences to beginners in Bitcoin and are fair tools for teaching the Bitcoin protocol.
Thank you very much for reading!