A bitcoin paper wallet is simply a chaloke bitcoin wallet and private key printed together. As the name suggests, paper wallets are usually made out of paper, although technically they could also be made of plastic or any other substance on which information can be durably printed.
Some paper wallet services have a nifty design that you can cut, fold and seal, making them a lightweight and relatively secure form of storing bitcoin offline. You send your bitcoin to the public address displayed on the wallet, and then store it in a secure place. They are not within the reach of hackers, and your bitcoin are never trusted to a third party. As long as the paper wallet is secure, your holdings are secure.
But, therein lies the relative lack of security. Someone could find your hiding place, take your printout, spend all the bitcoin associated with those keys, and return the paper, so you would never know. So, a tightly-sealed plastic bag would help. How do you protect a paper wallet from fire? That definitely would be “cold storage,” he he. Also, paper itself is not the most durable of substances.
Apart from the obvious risks of fire or water damage, the ink could fade with time, making the keys unreadable. Even with paper wallets, you can check your balance at any time using blockchain. And most online wallets allow you to import your paper wallet data. Mycelium offers an original and even more secure way to generate paper wallets, with a USB dongle that you plug directly into your printer. The device generates a paper wallet that automatically gets printed out, without ever having touched your computer.