How Does a Paper Wallet Work?


If you’re a new cryptocurrency investor, you may have heard people talking about creating paper wallets to store their cryptocurrencies. Like many other things in the crypto world, paper wallets can be a bit hard to wrap your head around – how can I store Ripple XRP or other cryptocurrencies on a piece of paper? If you’re looking to create a paper wallet for storing your cryptocurrency, follow this guide to get you started with storing Ripple XRP, Stellar XLM, or any ERC20 tokens such as EOS or Tron TRX.


Distributed Ledger Technology

To understand a paper wallet, it helps to have some basic knowledge of the distributed ledger technology used by cryptocurrencies. To put it simply, a distributed ledger is a database that is synchronized between multiple computers. The Ripple distributed ledger contains all of the information about every Ripple wallet. The XRP coins you hold aren’t actually distinct items, they’re just numbers recorded in the ledger; they’re never on your computer, phone, Ledger Nano S, or paper.


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Instead of a central database, a distributed ledger is synchronized over multiple hosts.


Every Ripple wallet is made up of a public address and a secret key. These are basically the “username” and “password” of your Ripple wallet. You can share your public address for people to send XRP to, but only people who have the “password” (the secret key) are able to access the funds. When you create a computer or paper wallet, it doesn’t hold XRP, it holds the secret key to a Ripple wallet on the ledger . Whenever you want to make a transaction, your device sends a message to the distributed ledger telling it where your funds are and where you want to send them. Your secret key is used in this message to prove to the ledger that you are authorized to send payments from that account.


Creating Wallets

Whenever you create a wallet, the program you use is actually just randomly picking one of the 2256 (or 1.2×1077 – that’s a 1 followed by 77 zeros) possible accounts on the Ripple ledger and giving you the “username” and “password”. If that doesn’t sound safe to you, don’t worry; there are about as many possible Ripple wallets as there are atoms in the observable universe. The chance that two people would randomly generate the same wallet, even if they were making trillions per second for thousands of years, is still billions and billions of times less likely than you getting hit by a stray meteorite. If the generator you use is programmed correctly, nobody will generate the same wallet address as you.

So, when you create a paper wallet, you are just printing out the public and secret key for a freshly generated Ripple wallet. You can then send XRP to the public address on your paper wallet to safely store it without the secret key ever being needed. When you want to access the XRP, you need to use computer wallet software and import the paper wallet by entering secret key.


Ripple Paper Wallet
This is a Ripple paper wallet generated online. A paper wallet will always contain a public address and secret key.


Paper wallets have a big advantage over computer or phone wallets if they’re created correctly. Paper wallets are what is known as “cold storage”, meaning that the secret key is never exposed to the internet and you can be certain that you have the only copy of it. Even if all of your devices were hacked, the coins stored in your paper wallets would be completely safe. The only way to access them is to know the secret key, which is completely offline, as it is only recorded on the piece of paper. Coins stored in “hot wallets”, such as computer or phone wallets, could easily be stolen if a hacker had access to your devices.

Overall, paper wallets are a great way to keep your cryptocurrencies safe as the “password” needed to access them is kept completely offline, removing the possibility of any cyber attacks. If you want to learn how to make your own paper wallet, you can follow this guide. If you haven’t invested in cryptocurrencies yet, you can follow this guide to get you started.


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