Coinbase, a hosted wallet service for Bitcoin, is now letting advanced users create and print paper wallets directly from their accounts.
Paper wallets offer a hard-copy, physical way to secure bitcoins offline in a way that’s safe from hackers and other internet-based threats. However, Bitcoin holders need to ensure they keep their paper wallets in a safe place that’s not accessible to anyone they don’t trust.
A paper wallet stores both the owner’s Bitcoin address and private key. The owner can continue to receive funds from anyone online via the public address, but no one other than the person with access to the printed, private key can withdraw funds.
While Coinbase says it will keep track of the paper wallets that customers create so they can conveniently continue to track their balances online. it does not keep any record of a customer’s private key.
“When done properly, paper wallets are one of the safest ways possible to store Bitcoins,” notes the Bitcoin Wiki.
Bitcoiners discussing the new Coinbase feature, however, questioned whether the paper wallet generated would be as secure as it ought to be.
“So the wallet is generated server side and the key also sent to a 3rd-party service to generate the QR code (https://chart.googleapis.com/chart),” wrote redditor redditme234. “There no guarantee that either service is not logging the private keys and pretty much defeats the purpose of cold storage.”
“There’s no guarantee, so you have to ask which services will you trust,” agreed redditor Meekro. “CoinBase is backed by the biggest and most trustworthy names in Silicon Valley, so it’s probably better than some guy’s ‘client side’ javascript.”
“Cold storage” refers to any means of storing bitcoins offline, whether by using a paper wallet, physical Bitcoin, USB drive or other type of physical storage device.