How the paper wallet scam works

How the paper wallet scam works

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As is often indicated by various people in the crypto and blockchain world, people new to this world are advised to create their paper wallet, in English paper wallet, where to keep the private key of your blockchain address.


These paper wallets can be created either manually where you enter the various information such as the blockchain address, the private key, and a QR code of the same, or automatically through different online and offline platforms, which allow you to create a new wallet with new addresses and keys.


Obviously, these types of paper wallets do not have a protection system in themselves as anyone who gets hold of them can copy the private key code or take a picture of it and then later drain the content, which we will never know until after the funds have been embezzled.


Since even the criminals are aware of this problem related to paper wallets, they have started to develop a strategy to exploit and create fake paper wallets that apparently look real and original.

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Before seeing how the scam works, we need to understand how a paper wallet works and what it looks like to identify any anomalies in the paper wallet scam and recognize them with simple steps.

What does a paper wallet look like?

As we said at the beginning, a paper wallet can be created either manually or via dedicated sites, the so-called paper wallet generators (it is always advisable to download all the code locally (better on a virgin or virtual machine) to limit any external influences) and start the procedure for creating the wallet.


At this point, we will have created our paper wallet, which in most cases has this layout:

So on one side, we will have a public address where we can send the cryptocurrencies passively and from any source, on the other side, we will have the private key and also the QR code of the same, to do the import quickly and without manually writing the whole string.


Please note that these paper wallets must be kept safe so that they cannot be easily discovered by any criminals, otherwise, we will lose all their funds; now that we have understood what a paper wallet looks like, let's proceed to analyze the scam that criminals have set up, especially in Australia, such as reported by the police.

How does the paper wallet scam work?

Criminals who want to defraud unsuspecting passers-by and those who find these paper wallets usually left in fanny packs, bags, and more in crowded places such as parks, stations, and more, create a paper wallet that only appears to have the characteristics of a paper original wallet, but which, as we will show in our example, hide pitfalls.


The criminals generate a fake paper wallet, load some crypto inside it to attract the attention of whoever finds the fake paper wallet, and then replace the code and the private key inside with a link that refers to a platform to be able to unlock the relative private key by paying for a service that keeps it, but which we are going to give away our money to criminals.


In this example we created, we created a paper wallet and then replaced the private key QR code with an external site:

How to recognize a fake paper wallet?

Now that we have seen a fake paper wallet created by us, we now understand how to recognize a fake one by following a few steps.


First of all, it is quite difficult to find a paper wallet in a public place and super crowded places, as these paper wallets are usually hidden at home in secret places, or even in bank safety deposit boxes, so finding one in public already sets off the first alarm bell.


Second thing is that if we come across a paper wallet for some reason, the first thing to check is if there is a private key and if this unlocks some blockchain address, therefore no links or external connections.


Third thing, and to be very careful, even if the private key could work, you need to check the transactions on the blockchain in detail, as there are blockchains that allow the creation of smart contracts and therefore find ourselves in possession of a functioning private key but linked to an address that drains any incoming transactions (here our article on how the scam works).


Finally, if we come across a fake paper wallet, then in that case we should take it to the competent authorities to report the incident and warn other citizens of the attack that is taking place against them.

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