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Ask CryptoVantage: What’s a “Burner” Wallet? Do You Need One?
The phrase “burner phone” is pretty well-known as being a reference to a phone that isn’t your main phone. Burner phones are used for a variety of things, though the main connotation attached to a burner phone is a negative one. This is because they are generally used for nefarious purposes such as selling illicit items, cheating on a loved one, and more.
A crypto burner wallet on the other hand, is not necessarily something being used for a nefarious purpose, though it can be. Cryptocurrency is not as anonymous as the media makes it out to be, and so burner wallets are becoming more popular. In this article we will explore what a burner wallet is, how it can be used, and why it could be useful for you.
What is a Burner Wallet?
A burner wallet in short, is a wallet that isn’t permanent. Burner wallets are not meant to be where you store your life savings of BTC or ETH. Rather, burner wallets are meant to be convenient ways to access and spend your crypto. Any wallet can be a burner wallet, it doesn’t need to be a specific type of wallet. While burner wallet platforms have popped up, there is no need to use them. Though, with the price of ETH gas fees, it may be useful to use the ETH specific ones.
If you want a burner wallet, you can simply create a new wallet the same way you always have. You then send funds to the burner, use it however you intended, and can then just forget about it. You don’t even need to write down the recovery phrase if you don’t want to do so. The wallet is unlikely to be in use long enough for you to ever need to recover it, and since it’s meant to be a burner, you shouldn’t have a reason to need to recover it anyways.
How and Why Burner Wallets Can Be Used
Typically, burner wallets are used in situations where you don’t want to expose your true holdings, when you want to spend funds quickly, or when you don’t trust the decentralized application (Dapp) you are interacting with.
It has become a somewhat recommended practice to use a burner wallet when participating in non-fungible token (NFT) minting. This is in case the platform is a scam and there is some sort of code within the smart contract that allows access to your funds/permissions. By using a burner wallet, you only put the amount you added (likely the exact amount needed for the minting), and therefore only risk that amount.
If you are going somewhere that accepts cryptocurrency payments, such as El Salvador, or a crypto event that allows vendors to accept ETH, it is a good idea to create a burner wallet. You then fund your burner wallet with whatever you are willing or planning to spend. By using a burner wallet, you help mitigate the risk of your holdings being compromised as you only have a set amount held.
You’re more likely to use a burner wallet on a mobile device than a laptop, as there are far more situations where you can use your phone to pay for something than a laptop. By setting a burner wallet up on your phone, with a simple spending password, you can spend crypto at an event easily. You feel secure because you aren’t using your main wallet, while vendors get a larger piece of the purchase than if you paid using a traditional payment method.
Burner wallets are likely to become more common as crypto becomes adopted into the mainstream. As it stands now, there aren’t too many situations where you really need one.
