Part 1 and part 2 showed you how to make a secure Bitcoin Paper Wallet. In part 3 you learned how to add Bitcoin to the wallet. In this tutorial, you will learn how to withdraw funds from the paper wallet. You can spend your Bitcoin or change them into dollars. There is also a final tutorial in Part 5. Sending Bitcoin To Coinbase From Blockchain.
How To Use Your Bitcoin Paper Wallet
Changing the funds in your Bitcoin Paper Wallet into US dollars is a two-step process. Coinbase and Kraken do not support direct sweeping of funds from a paper wallet. You have to take an intermediary step and empty the paper wallet into an online account.
You can transfer the funds from there to an exchange like Coinbase. Once in the exchange, you can change your Bitcoin into US dollars. You can also convert them into other supported cryptocurrencies.
There are many online wallets you can import your Bitcoin into. We are using Blockchain here as it is the most popular online wallet and easy to use. Blockchain is more of a digital wallet platform than a straight up online wallet.
Blockchain is what they like to call a ‘non-custodial wallet.’ They cannot access your funds or see your balance. You are the owner and they can’t stop you from accessing your wallet. There is no need to download or install anything. You complete your transactions online. They also have client-side encryption that encrypts your wallet on your mobile device.
Our recommendation is that you do not use any app on your phone to access your cryptocurrency.
There are security risks using an online wallet
As we always preach, you should not leave a significant amount of crypto in an online wallet. We also suggest you do not leave it on your regular computer or mobile device. The bulk of it should go into cold storage offline. You can leave a smaller amount in your online wallet for trading if that is something you do.
You unlock the Blockchain wallet with a password. They do not store or have access to your password. If you lose it, they cannot reset it. They do have a backup procedure. You set up a backup phrase so you can still get access to your funds if you lose your password.
You should never reveal the backup phrase to anyone and always store it in a safe place. We prefer offline in a safe deposit box at a bank.
Free And Easy
It is free to sign up for Blockchain but there are fees for transactions depending on the size.
The Blockchain website recognizes your paper wallet keys as one of two things. Watchable and spendable. Your public key can only be watchable. To spend the Bitcoin in the wallet you need to add the private key. The site recognizes if your private key has funds attached when you enter it. It will ask you to transfer (sweep) the wallet into your Blockchain wallet. You should do this and make sure the paper wallet is empty before destroying it.
There are two terms you should know and what the differences are.
Importing or sweeping your Bitcoin Paper Wallet
Importing (not recommended)
If you import a paper wallet it means you import the private key into a Blockchain account. It becomes an Imported Bitcoin Address. This address is not backed up by a security recovery phrase like transferred funds are.
The Bitcoin are not stored in a new online Blockchain wallet with a new private key. It still has the same private key as the paper wallet they are in.
You can spend the Bitcoin from within Blockchain. And also still spend them through another online service using the same private key. If someone steals your paper wallet and the private key, they can spend the Bitcoin in the wallet.
If you destroy the paper wallet after importing it you can still spend the Bitcoin but from within Blockchain instead. This can save the funds if you did not have the paper wallet private key backed up.
Once you finish your transactions, you can make a new paper wallet and send your remaining Bitcoin to it. This is always a good security measure. That way Blockchain no longer has your private key stored. You can delete the old private key once it is empty.
Sweeping (always recommended)
This involves sweeping all the Bitcoin in your paper wallet into your online wallet. This is the preferred method for security and peace of mind.
Your old paper wallet will be empty. You can check it here: Blockchain.
You are sending Bitcoin to a new private key in your online wallet.
Unlike importing, this is a transaction. Albeit one to yourself. You will have to pay a miner’s fee.
After sweeping, you can complete your transactions using your new online wallet. Then send your remaining Bitcoin to a new paper wallet for cold storage. That way Blockchain does not have a private key holding your Bitcoin. You are once again securing your Bitcoin offline.
HOW TO EMPTY YOUR BITCOIN PAPER WALLET
1. To open a Blockchain account go here.
2. Enter your email address. Create a strong password. Make sure it has at least 14 uppercase and lowercase letters. Include special characters and numbers. More than 14 is even better.
3. Click continue and you will end up on this screen.
4. Click on Settings, General in the left-hand sidebar. This will display your wallet ID. When you log back in this will be your username. Save this in your password manager along with the password you used to signup. Never share your wallet ID with anyone.
5. Remember to verify your email address by hitting YES, THIS IS MY EMAIL button in the email they send you.
6. Sign out or Blockchain and then sign back in using your wallet ID and your password.
7. Go to Settings, Preferences in the sidebar. Make sure you verified your email address. You should also use your phone number for two-factor identification. Once enabled you will need to verify who you are using a code they send you before you can log in.
8. Go to Settings, Security in the sidebar. You need to set the wallet recovery phrase. If you lose your password or Blockchain goes down, you can still recover your funds.
*Beware of importing your private key and not sweeping it into your Blockchain wallet. You will not be able to recover your funds using the security phrase if you do.
9. Click on Backup Phrase and a new box will pop up. Click on Print Recovery Sheet and a PDF file will download. You must never store your recovery phrase on a computer or online. Print out the recovery sheet and store it somewhere secure like a safe deposit box at the bank.
10. Click Next Step and the first four words will appear. Write them down in order on the recovery sheet you printed out. Click on Next 4 words and keep on going until you have all 12 written on your recovery sheet.
11. Click Final Step and then verify the words they ask for from the recovery sheet. Click Finish and a box will appear saying that you have backed up your recovery phrase. Close it.
12. Go to Settings, Addresses and Click Import Bitcoin Address. You will notice I have two wallets. I set the second wallet up (Paper Wallet Ex.) for this tutorial. You can use the default one or make your own one if you want.
13. The Import Existing Bitcoin Address box will appear. This is where you enter the private key from your paper wallet so you can sweep it and completely empty it. You can cut and paste it or scan the QR code by clicking on the small box on the right. Click Import.
14. The Transfer Funds From Imported Address box will appear and it displays that the key is valid. Note that the public key associated with the private key is the same one from the paper wallet. The balance is $0.00182176 BTC. The same amount sent from Coinbase in part 3. Click Transfer.
15. The Transfer box will pop up. Check everything is correct. My default wallet is Paper Wallet Ex. so that will be in the To box. You will also notice that there are yet more fees to pay for the transfer. Last time it was for the transfer from Coinbase to the paper wallet. This time it is for the transfer from the paper wallet to the Blockchain live wallet. Click Transfer.
16. A box asking if you want to archive the address pops up. If you want to, click on Archive and it will disappear.
*The paper wallet is now empty but always double-check it.
17. Go to settings, addresses in the side-bar. Once the transfer completes check that the Bitcoin are now in the online wallet.
You will notice that the balance is only 0.0012997 BTC. This is because of the transaction fee.
Transfer Function For Sweeping Imported Keys
If you did not sweep your paper wallet and only imported the private key (not advisable) you can still sweep it into your Blockchain wallet.
Use the Transfer function.
1. Click on More Options next to the imported wallet key and a box will appear with several choices.
2. Choose the amount and which online wallet to sweep your paper wallet into and click Transfer again.
There will be a fee for this because you are taking it out of one wallet and putting it into a new one.
3. Once the transfer completes check that the Bitcoin are now in the online wallet you chose. Check the old paper wallet is empty. If it is you can destroy it.
Go to Part 5. Sending Bitcoin To Coinbase From Blockchain. Find out how to transfer Bitcoin from your Blockchain online wallet to an exchange.
If you want to secure your paper wallet read Security Top 10 Paper Wallet Tips For Beginners.