With a barcode scanner ... Seems less user-friendly than just keeping the data on your computer in the first place (or simply storing it on a USB flash drive or whatever).
...which is where hackers and malware can get it, the part you're trying to avoid.
...or go ahead and use a USB flash drive, this would work just fine.
OK, but how does one go about backing up a paper wallet? I wonder how much people actually store it in a safe or place that is guaranteed to be safe in case of fire, flood, theft, hurricane, meteor crash, etc.
Back it up by copying it. Like, photocopy it. Something Grandma can understand.
Keylogger: they'd need the actual wallet as well, not just the password. And if Bitcoin-specific malware is a risk, then generating a paper wallet ain't safe either.
Consider the following: typical malware is more likely to try to intercept your keystrokes and your bitcoin wallet, than it is to try and intercept your print jobs.
If I produce paper wallets, I format a new hard drive, install a new OS, do my printing, and then wipe the drive. (I realize that's overkill and impractical for most users, but is a necessary level of security for e.g. Casascius Coins)
Meanwhile, I hear this concern, and am pushing for improvements to overcome that. One thing I came up with is a two-part encrypted private key generator. You encrypt your passphrase into an "intermediate" code, and then with that, someone/something else can produce paper wallets encrypted with
your passphrase, without ever knowing the passphrase or being able to redeem the funds! The intermediate code cannot feasibly be turned back into the original passphrase. I have proposed this as BIP 0038, and have published a working proof of concept for Windows. I am hoping others like the implementation and consider it worthy to put in Bitcoin clients themselves.
3. With paper wallets it's easy to divide your stash into 10 parts, and if you have an accident or discover you're hacked and getting stolen from, the amount you risk losing is cut by ten.
Do you mean printing 10 different paper wallets / private keys?
Isn't that just as easy (except less mess with physical pieces of paper) with digital wallets?
Sure yeah, go get 10 USB flash drives and make 10 digital wallets. It would work much the same. Bitcoin-qt makes it a pain in the ass to maintain more than one digital wallet, but I'm sure it won't be this way forever.
4. If you die, probably no one will look for or find your backup and know how to decrypt it. But your paper wallet, if it looks valuable and is somewhere where it will be found by family, it will probably be well taken care of, and they will have far less difficulty finding out how many BTC you had and what it's worth. Even if you have 10 BTC, you'll probably be dead a long time, long enough for that to have a chance of appreciating to some serious value worth not losing.
True. Well there are workarounds for that but I guess they're more complicated than leaving a piece of paper (although I do feel that the paper variant is less safe).
Yep, I've thought the same thing you have. This is why BIP 0038... two-factor password-protected paper wallets. My utility also has a rudimentary but functioning implementation of secret-sharing, to allow for up to 8 factors, and you pick how many factors are needed to decrypt (as few as 2, as many as all)... this isn't part of the BIP and will probably need work to be called "world class", but it definitely works. Perhaps if we see BIP 0038 widely adopted, it can be expanded to include this functionality so redemption is commonplace instead of requiring an obscure utility to decrypt.
5. Paper wallets are good for giving bitcoins to people who know nothing about bitcoin client software.
Eventually they're gonna need
some form of client to actually spend the coins or cash out (could also be an online wallet of some sort), right?
No. They could call up FastCash4Bitcoins and say "I've got one of these here paper wallets, if I read you the code, will you send me the cash". I don't know that they'd be interested in doing that for small amounts, but if it's a large amount I can't imagine them saying no.
Anyway, I don't want to fanatically preach against paper wallets or anything, and I guess there is an audience for it. However if you know what you're doing, I'm really convinced that digital wallets are easier, safer, and more flexible. Let's say I just hope anyone who is serious about keeping their coins safe, will consider the actual pros and cons of either method to choose what's best for them.
I agree - paper wallets are convenient when you have a barcode scanner, and less convenient when you don't. USB drives have much the same benefits - to each their own in terms of what tradeoffs they want. What matters is that the coins are offline.
