How can a physical paper wallet store cryptocurrencies?
In reality, tokens or cryptocurrencies stored this way are not physically inside the paper wallet.
When you own bitcoin, you don’t actually own it physically: you only have the private key that allows you to access your funds. This private key is not stored on the blockchain, but by the bitcoin owner, either in their head or written down somewhere.
Each public address corresponds to a unique private key that must be used to move the tokens associated with your public address, so who owns the private key also owns the tokens that are associated with the public address.
Everyone can have different private keys, different public addresses and different wallets, but it is very important that the private key is stored in a safe place and kept secret since anyone who knows it can take possession of the associated tokens.
Usually, private keys are stored in software or hardware wallets, but when these connect to the Internet there’s the possibility that someone can sneak into the software and discover the private keys.
The real use of the Bitcoin paper wallet
For this reason, one of the safest ways to keep your wallet’s private keys is to store them offline, on a piece of paper, in a secure place (such as a safe).
This way, the only way to discover the private key would be to open the safe and take possession of the piece of paper on which it is written: there’s no exposure to online hackers, but there could always be experienced thieves…
How to receive Bitcoin
Obviously, it is possible to receive bitcoin from a public address even without having a wallet. All you have to do is store the private key and its public address on a piece of paper and provide only the public address to the sender.
It becomes a little more complicated when you want to use the tokens associated with the public address whose private key has been stored on a paper wallet.
In fact, to be able to use them, the private key is not enough. You must use a special software (a wallet) that allows you to create and authorize a transaction using the private key itself.
It is necessary to use a software or hardware wallet to import the private key and the public address stored on paper so that the wallet can create and authorize transactions related to the bitcoins that are associated with that public address.
How to generate a pair of keys to store on paper
There are special websites that generate them. One of the most used is BitAddress.org which is also one of the easiest to use: just follow the simple instructions to generate a pair of keys (one private and one public) that you then have to write on paper in order to create your own paper wallet.
A recommendation: when you generate a pair of keys it is better to be offline (not connected to the Internet). After opening the website, it is better to disable the Internet connection before generating the keys.
After you have written the keys on paper, you can then close the website and the browser, and only then reconnect the device to the Internet: this way you can be sure that no one has intercepted that data.
Without a private key, it is impossible to move the bitcoins associated with your public address. Therefore, you must always make sure that your private key is written down clearly and permanently and stored in a very safe way.