A paper wallet is a physical document listing public keys, a string of characters used to identify cryptocurrency funds on a network, and private keys which function like a password to access those funds.
Paper wallets hold private keys and are typically stored in a secret location by the owner, offering utmost security as there is no digital footprint. Because the funds are kept offline, paper wallets cannot be hacked through the internet. Paper wallets are therefore a form of “cold wallet” or offline wallet.
How to Use a Paper Wallet
A private key allows access to your wallet and also facilitates transactions from that wallet address. This means that a wallet can receive cryptocurrencies without its associated private key but it is impossible to send cryptocurrencies without providing the private key.
Although considered secure, the associated risks of a paper wallet are clear. Factors such as damage over storage for long periods, print quality, paper quality, and the possibility of misplacing the document altogether all pose a risk of losing your virtual assets completely.
Bitcoin ATMs use paper wallets as an alternative to issuing your bitcoin transactions if wallet information is not provided. The ATM prints out a private key/public address pair or a QR code that may then be scanned or imported into a specific wallet at a later time.