Good morning Bitcoinland.
Things seem to have settled down a little today as we're consolidating into a sideways pennant in the mid-$5xxx range... currently $5419USD/$7532CAD (Bitcoinaverage).
Let's see if we go up or down from here. My feeling is that we had capitulation, shook out the weaklings and short-termers and will start our rise to glory.
It may take some time though.
How does a bitcoin back up work with a paper wallet, in case you lose or destroy your paperwallet?
Not too many people using paper wallets these days, but likely can have a lot of practicality in the way that you are using them, jimbo.
"Paper" is just another word for cold storage. It may be in the form of ink on paper, flash memory storage, characters engraved on a steel plate or anything that can be used to record a private key and a public key.
Lots of people still use it. You don't think the Winklevoss twins or Tim Draper keep their bitcoins on a Trezor or Ledger device or expose them to hackers by keeping them in wallet application programs do you? Of course they use "paper" wallets. Same with the cold storage reserves of the major online exchanges, and I would assume the banks and government agencies.
If addresses are generated on devices (both PC
and printer) that will not be connected to the internet, these addresses are safe from hackers and can be considered paper wallets.
The most convenient form is printed on paper and has easy-to-scan QR codes. The problem with this is that if it falls into the wrong hands your coins can be moved to another address to which you have no access. I use this as a form of "cool" storage for coins I keep at home or for travel.
The best way to maintain security is keep multiple copies in multiple off-site locations. They obviously need to be in a form that are inaccessible to anyone who finds them.
The obvious choice is encryption but there are other ways. I read somewhere that the Winklevii split each key into several pieces, encrypted each and scattered them around their country in many locations.
Ultimately, you must remember or record some kind of key, be it an actual Bitcoin public/private key pair, a hardware wallet seed phrase, an encryption key, or some other password. There's no getting around that.
It's wise to not put all your eggs in one basket. Split your coins into many addresses. When bitcoins are worth $100k each, sweeping a wallet containing multiple coins becomes a bigger security risk. Many small wallets containing small fractions of bitcoins makes a lot more sense.
I prefer multiple encrypted flash memory devices in multiple off-site locations.