There are so many different types of wallets. Desktop wallets, mobile wallets, multi wallets, cold wallet, and paper wallets. Let me give you an easy explanation of what a paper wallet is to give you some clarity.
A paper wallet is a piece of paper that contains your private key or secret phrase. To prove that you own a specific address/coins, you need your private key or secret phrase. In other words, you can use it to spend your coins.
Paper wallets are the oldest way in the crypto space to store your coins offline. Nowadays, cold wallets are more popular than paper wallets. The reason is that cold wallets have way more benefits. There are currently two common ways to generate a private key.
#1 Use a tool
Liteaddress.org is a website where you could generate a private key for a Litecoin address. There are other tools for other projects that you could use.
Scammers can build such tools to scam people. Always review the tools first before you start using them. There is also another way if you don’t trust your browser. You can download the Litecoin private key generator on your computer. Afterward, you can generate a private key offline. Download the files and open the index.html file (For the Liteaddress.org tool).
Afterward, write down the private key and the associated Litecoin address. You can receive Litecoins through that address. The same concept works for many other cryptocurrencies.
To spend your coins, you need a wallet where you can insert the private key. You can use any wallet that allows you to import a private key, for instance, the Litecoin core wallet.
#2 Use your wallet
You can use the Litecoin core wallet or other wallets to generate an address. What they do is they generate a private key and based on the private key an address. They only show the address to the user because that’s what he needs to receive funds. The wallet takes care of the private key and uses it if users want to spend funds.
But, to back up the wallet, you need the private key. Most wallets let you do that by right-clicking on a specific address. If you can, you can also open the console and write ‘dumpprivkey *address*’.
IMPORTANT: Don’t let anyone watch you when you do that. If he knows the private key, he can get access to your funds.
You can also import that private key. Either through a wallet import function or the console through ‘importprivkey *key*’.
IMPORTANT: It could take some time for your wallet until the import process is finished. The reason for this is because your wallet has to go through the whole blockchain. it has to check if this address ever received or send funds.
Paper wallets carry a lot of risks but have some unique advantages. Let’s have a look at them.
Advantages of paper wallets
The only thing you need to set up a paper wallet is a paper and a pen. Both components don’t cost that much.
#2 Easy to set up
There is not much skill required. You only need to know how to write. Write legibly or you can’t read it in the future.
Disadvantages of paper wallets
Depending on the paper, it can take sooner or longer until you can’t read what you have written on the paper.
#2 Paper can burn
Paper can burn. It is recommended to store a paper wallet in a fire-resistant safe.
#3 You need to use a second security option
You have to combine a paper wallet with for instance a bank vault. You can’t leave it alone because there are too many risks that can occur. For instance, another person can throw the paper in the trash, it can be destroyed by a pet, etc.
#4 Frequent check-ups
You need to check frequently if the private key is still readable. If it becomes too blurry, you need to write it down on a new paper.
Paper wallets can be great for a second backup type if you need one. Nowadays, it is recommended to use a cold wallet. A cold wallet has even more benefits than a paper wallet.