Advanced Crypto Wallets Explained: Paper, Multi-Sig, Decoy and ID Wallets

Advanced Crypto Wallets for Special Uses

What Is a Paper Wallet in Crypto? 

A paper wallet is one of the simplest and most secure ways to store cryptocurrency offline. Instead of keeping your funds on an exchange or mobile app like the CoinFlip Wallet, a paper wallet generates your public address (used to receive crypto) and your private key (used to access and spend your crypto) on a printed sheet of paper, often displayed as QR codes for easy scanning (learn more about public/private keys here). Because it’s completely offline, a paper wallet is immune to online hacks or malware, making it a popular choice for long-term storage. 

However, security comes with responsibility: if the paper is lost, stolen, or damaged, and you don’t have a duplicate, you could permanently lose access to your crypto since private keys cannot be recovered. To stay safe, always generate paper wallets on a trusted device, print multiple copies, and keep them stored in secure, fireproof, and waterproof locations. Worth noting that certain types of paper and inks break down over time, so be sure to use “archival quality” materials.  

In areas where internet access is not good, like deep in the countryside or on a sea ship, a paper wallet can serve as a kind of cash. You can put a set amount of crypto in the wallet, print it on paper, and give the paper wallet to somebody else. They will effectively own whatever crypto is in the wallet and can transfer it to their main wallet when they get back to internet access.  

Making a paper wallet does not require advanced computer skills, all you have to do is turn your public and private keys into QR codes with a text-to-QR generator, then print it out. For security reasons, not all wallets allow you to see your private keys, CoinFlip wallet included. Instead, you can create a paper wallet through a dedicated paper wallet provider. Either way, make sure to test before loading it up with funds. 

CoinFlip ATMs can read and accept paper wallets, provided they’re in good enough condition for the machine to scan. Find a CoinFlip ATM near you to test it out! 

What Are “Hidden” Wallets and Decoys 

Adding a passphrase to a Bitcoin wallet provides an extra layer of protection beyond the standard recovery code or private key. Normally, anyone who gains access to your 12 or 24-word recovery code can restore your wallet and move your funds. By enabling a passphrase (sometimes called the “25th word”), you create an additional secret that must be entered along with the recovery code to unlock the wallet.  

This improves security in two ways: 

1. There are 2^256 different potential private key combinations with Bitcoin (1 followed by 77 zeros), so with current supercomputer technology it would take a billion years to hack a single Bitcoin wallet recovery code. But adding a passphrase on top of the recovery code increases potential combinations exponentially so that the advanced hypothetical computers of the future cannot hack their way into your funds, even in two billion years. 

2. Hidden or “Plausible Deniability” Wallets – a passphrase can generate multiple hidden wallets from the same recovery code. You could create a “decoy” wallet with a small balance and keep your real funds behind another passphrase, reducing the risk if you’re ever pressured to reveal your keys. 

In short, a passphrase acts both like an extra lock on your crypto wallet and as a secret trap door. It makes brute-force attacks and unauthorized access far less likely, but it also means that if you forget your passphrase, your funds are permanently inaccessible – even if you have your private keys. The CoinFlip Wallet and most other common wallet interfaces designed for the average investor remove advanced features like passphrases to reduce mistakes and errors. Lost passphrases are one of the most common reasons people lose funds. 

What Are Multi-Signature Wallets? 

Multi-signature (or “multi-sig”) wallets add an extra layer of security to your cryptocurrency by requiring approval from more than one private key before a transaction can be completed. In finance lingo, this means you can set an M-of-N policy (e.g., 2-of-3) so no single key can move funds. On Bitcoin, multi-sig uses scripts like P2SH or P2WSH; on Ethereum and spinoff chains like BNB and Polygon, “smart contract wallets” (that is, off-the-shelf wallets purpose built for multi-sig) enforce similar rules. Typical setups spread keys across trusted people or devices: a hardware wallet at home, one at work, and one held by a lawyer or business partner. This reduces single-point-of-failure risk, enables shared treasury management, and supports use cases like escrow, DAOs, and exchange cold storage.  

Best practices include independent devices for each signer, offline backups, and a clear recovery plan if a signer is lost.  

Trade-offs: higher complexity, potential higher fees on chains where multi-sig data is larger, and the need to coordinate signers. Most financial teams consider the drawbacks worth it for improved security, but most individual investors do not need the assurance.  

It’s important to note that certain financial products, like many Bitcoin ATMs, will not accept multi-sig wallets because they violate compliance rules that require the wallet used to transact be exclusively owned and controlled by the person performing the transaction. Because the CoinFlip wallet is designed to work with our ATM network, it does not support multi-signature functionality. However, institutional investors can reach out to CoinFlip Preferred to buy and sell through their own multi-sig wallets.  

How Do I Use a Crypto Wallet for Decentralized Identity?

Cryptocurrency wallets aren’t just for storing Bitcoin or Ethereum – they can also serve as powerful tools for decentralized identity (DID). A decentralized identity allows you to prove who you are online without relying on centralized authorities, like banks or big tech companies, to manage your personal information. Instead, your wallet holds verifiable credentials that you control, giving you more privacy and ownership of your data. 

Several blockchain networks are pioneering decentralized identity solutions. Ethereum supports standards like ERC-725 and ERC-735 for self-sovereign identity management. Polygon is actively building decentralized ID projects with partnerships such as Polygon ID, which enables users to authenticate themselves while keeping their data private. Cardano is also developing identity tools through Atala PRISM, which focuses on secure digital credentials for education, healthcare, and financial services. 

Using a crypto wallet as a decentralized identity tool can unlock practical use cases such as proving your age without sharing your full ID, logging into online platforms without passwords, or even verifying your credentials for cross-border financial services. Because your information is stored on a blockchain network secured by decentralization, you - not a third party - decide who can access your data. 

Decentralized identity is still an emerging field that’s not yet supported on the CoinFlip Wallet, but it represents one of the most exciting ways wallets can do more than just hold crypto. 

Ready to take control of your crypto? 

Regardless of the wallet type you use, CoinFlip can help you buy or sell Bitcoin and other cryptocurrencies instantly at thousands of CoinFlip ATMs worldwide, or manage your assets securely with the CoinFlip Wallet app, and it’s all backed by 24/7 customer support. 

Find a CoinFlip ATM near you or download the CoinFlip Wallet today to get started.