Investors have several options when it comes to holding bitcoin (BTC). You can choose to store your investment at the crypto exchange where you bought it, but you can of course also manage it yourself. Self custody gives you the opportunity to be your own bank and removes dependence on a third party. However, self-custody also carries many dangers, so it is important that investors are aware of this.
A Reddit user has been painfully exposed to a common vulnerability of so-called paper wallet. How exactly this story works and what you can learn from it is discussed in this article.
Bitcoin lesson for investors
On July 24, r/jdmcnair posted a message on the r/Bitcoin subreddit asking for an explanation of how a hacker could have stolen more than $3,000 worth of bitcoin from his paper wallet.
First of all, it is important to know exactly what a paper wallet entails. As the name suggests, it is a piece of paper on which the public and private keys are printed. It’s a way to store your bitcoins offline; also cold storage named.
However, it is crucial that the keys are generated in a secure manner. This is where the danger often lies.
The Redditor said that he used the so-called walletgenerator.net tool to generate the private keys of his wallet. Some other Reddit users already emphasized that this website has not built up a very good reputation over the years. In the past, the tool is said to have suffered from multiple vulnerabilities.
The CEO of blockchain security firm CertiK, Hugh Brooks, said people should think twice before using a wallet generator. Such tools would have served as easy prey for hackers for some time.
Brooks said that paper wallet generators already had serious vulnerabilities since 2019. He added that if anyone has generated wallets using walletgenerator.net it is likely that “the same keys have been given to different users.”
Hardware wallet is the solution
According to Brooks, hardware wallets offer the simple solution to this problem. A hardware wallet, like a paper wallet, is an offline way to store your bitcoin or altcoins. A hardware wallet is generally considered the most secure way to manage your crypto assets.