A paper ECDSA private key (often incorrectly referred to as a "paper wallet") is a mechanism for storing bitcoins offline as a physical document that can be secured like cash or anything else of real-world value. They are generally created by printing a brand new ECDSA private key onto paper, usually along with a bitcoin address derived from the key, and then sending bitcoins from a wallet to that address for safekeeping. Storing bitcoins this way is generally considered a bad idea.
Tips and gifts
By creating a keypair, one can store bitcoins on a physical medium to be left as a tip or a gift. The recipient then sweeps the private key to their own wallet.
A trusted provider can hide the private key inside a tamper-resistant token, and issue them as a form of bitcoins. This requires those who accept it as payment to trust that when the provider produced the tokens, they loaded them with the correct amount of bitcoins, and that they have not been tampered with since then. To redeem the bitcoin value, the token must be destroyed to access the private key. Often a bitcoin address is embedded on the outside visible, but there is no guarantee (without destroying the token) that this matches the private key inside, or, even if it does, that the private key is not replicated on multiple tokens or saved by the producer.
As a wallet
Sometimes people try to use ECDSA private keys as a wallet. However, a single ECDSA keypair can only produce one bitcoin address. Because of this, one is forced to choose between hazardous options:
- Use the key only once to receive, and only once to send the full amount. This requires the user to know the full amount he wants to store in advance, and often leads to the next situation:
- Create multiple keys. By using more than one key, the user can receive more than once using a different address each time, including using new addresses for change. This is very complicated, and makes it easy to accidentally reuse addresses, produce the wrong change/fee combination, lose some keys, spend hours searching for the right key, etc. Not even skilled bitcoin experts are comfortable managing their own keys manually like this.
- Reuse the address. This has severe privacy and security implications. For more information, see the article on address reuse.
Since there is no safe way to use these for a wallet, it is generally considered inadvisable.
An ECDSA private key can be represented in several formats, but typically the Wallet Import Format (WIF) is used, since keys represented that way are very short (51 characters) and thus easy to re-enter when importing or "sweeping" it for withdrawal.
Creation of a paper wallet
Generation of secure keys
Care must be taken to securely generate keys since an attacker can steal stored bitcoins if it is exposed, transmitted, or generated with insufficient entropy.
Web-based key generators
- Keys should be produced on a computer not connected to the Internet.
- Be aware that malware often allows a remote third party to view your screen and see your keystrokes, and these can compromise the integrity of your key. Also consider that antivirus software cannot completely rule out the possibility of malware. However, booting from a live disc prevents most malware from running.
- The private keys should never be saved to a computer hard drive or sent via email or other network connections. You should also never scan/type your key into your computer, except at the moment you are redeeming it.
- If possible, the private key should be kept hidden, for example by using BIP38 encryption, and/or by folding the paper to hide the private key so that a photograph or photocopy of it will not reveal or replicate the private key.
- A web-based generator should not be used.
- A generator should use an appropriate source of random numbers (entropy). This means that the generated keys aren't predictable. If the addresses come from a predictable or partially-predictable patterns like pseudorandom numbers , someone else who can predict the pattern can steal the balance. Randomness should NEVER be human generated, as the human brain is incapable of secure entropy.
- Remember that unlike wallets, a single ECDSA private key is only good to receive a single payment, and must be redeemed in its entirety.
Some advanced printers have internal storage (even hard drives) that preserve copies of printouts. This is a risk if someone gets access to your printer, or if you dispose of your printer. There is also the possibility that a smart enough printer can be hacked. (Consider StuxNet which was able to rewrite the firmware of non-computer devices indirectly connected to the Internet) If this concerns you, use a "dumb" printer, and never let your printer have access to the Internet or to an Internet-connected computer.
Redeeming Keys and Withdrawing Funds
ECDSA private keys are very different from wallets such as Bitcoin Core in that it is not possible to transfer (withdraw) a portion of a key's bitcoins. The only way to withdraw funds is to import or "sweep" the entire received amount to a new address, typically a wallet or online exchange. Once the transfer has been confirmed, the key should not be reused.
There are various methods for copying the private key data to other wallets.
- bitcoind supports an "importprivkey" RPC method for this purpose.
- Bitcoin-Qt's debug console can also be used in a similar way (see also How to import private keys in Bitcoin Core 0.7+).
- BlockChain.info and Armory can also import them directly into wallets.
Note that importing a private key that may be compromised can result in the entire wallet becoming insecure. For this reason, sweeping is generally recommended over importing.
- Blockchain.info tutorial on how to generate a paper wallet.