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Now that the price is close to the all time high and the reports of stolen bitcoins seems to be increasing I would like to share with you this tutorial on how to create a paper wallet used for daily spending, not just long term storage.

Usually paper wallets or other types of cold storage are used to store large amounts of bitcoins during a long period of time. But they can also be used to safely handle small amounts in daily purchases in a comfortable and quick fashion. This is certainly much safer than leaving your bitcoins on a web wallet susceptible to hacking or even your own computer. Here’s how:

1. Generate a bunch of paper wallets. Use your preferred method and remember that it’s safer to do this on an offline computer or even better a Linux Live CD.

In this case I used www.bitaddress.org to generate a bunch of paper wallets. Here’s a photo.

2. Next we’ll be using a Bitcoin client that supports reading QR codes and allows importing private keys. For this example I’ll use android’s Mycellium which supports both functions.

3. As you can see on the photo above I’ve labeled each address with a number. We’ll start depositing our bitcoins in number one.

Now in order to make a purchase, you import the #1 private key to Mycellium, send the required amount of bitcoins to the merchant and send the rest to the address #2.

Repeat the process for each purchase.

Because the private key of these addresses only exists on a physical medium such as paper they cannot be stolen by any virus, malware or hacking attempt. Once we import a key, though, it becomes vulnerable and we must send the remaining amount to a different one.

Scanning QR codes makes this process really fast and it just takes a few seconds more than usual, albeit immensely increasing the security of your bitcoins.

• Here’s a photo of the paper wallet after making a first transaction. Photo.

[UPDATE]

As r/killerstorm points out in the comments you can improve the security if you don’t store all your bitcoins in a single address. Here’s a slightly different method:

Let’s say you have 2 BTC. Instead of depositing them all into the first address, you split them up and send 0.5 BTC to address #1, #2, #3 and #4.

Now, if you want to buy something that costs less than 0.5 BTC you just scan the first key and send the remainder to address #5 (or if not much remains, you can keep it on the phone with a risk).

If you want to buy something that costs more, for example 0.75 BTC, then you scan keys #1 and #2 and send the remainder to address #5.

That way, even if the phone is compromised you will never lose the full amount of your bitcoins. And by the way, scanning a private key is something really fast that doesn’t take more than a couple of seconds.

Bonus: If you buy one of these and print a hundred addresses or so, you can very easily keep track of your spendings and follow this method without running out of addresses.

Further tips and tricks:

• Do not throw away spent keys. You might want to use them to receive refunds.

• Do print multiple copies of the addresses as a form of backup.

• Use a different, dedicated cold storage address for large amounts and keep this only with a balance for daily spending. There’s no need to import dozens of bitcoins each time.

• Do spend time researching the best way to create a secure paper wallet. Once you do this, you can print out a whole bunch at once and don’t need to repeat it for some time. And even if you do it on the computer you use daily, it is probably more secure than a web wallet or even a client on your PC.

• Be safe, buckle up and enjoy the Bitcoin ride!

Cheers!