Burner Wallet
A burner wallet is a temporary or single-use cryptocurrency account used for specific transactions.
What Is a Burner Wallet?
A crypto burner wallet, also known as a “disposable wallet,” is a temporary cryptocurrency account. Users often create disposable wallets to perform specific transactions, such as interacting with potentially risky blockchain protocols or dApps. Therefore, a burner account can be discarded once it has served its purpose.
Unlike regular crypto wallets, disposable wallets don’t have any markers or digital trails that can link them back to the owner. Additionally, they are only used to store just enough crypto amounts necessary to fulfill their intended purpose.
How Do Disposable Wallets Work?
Hierarchical deterministic (HD) wallets can generate virtually near-infinite accounts from a single secret recovery phrase (SRP). This means that you can easily set up multiple burner accounts without worrying about storing new SRP for each disposable wallet. What’s more, each burner wallet has its own set of keys.
Importantly, these wallets allow you to segregate your assets into different accounts – the main wallet and the burner account. You use the primary wallet to hold most of your cryptocurrency assets. On the other hand, the burner wallet handles potentially high-risk blockchain interactions, such as minting new tokens, participating in airdrops, or interacting with new and untested blockchain platforms.
Why Use a Burner Account?
Some of the reasons an individual may use a disposable wallet include:
- Safeguarding against malicious smart contracts – Scams involving faulty or malicious smart contracts, which could potentially prevent users from withdrawing their funds, are becoming more common. A burner wallet provides an extra layer of protection, preventing your primary wallet from being drained in the case of a faulty contract.
- Privacy – Disposable wallets ensure your privacy when interacting with blockchain applications or other users. It allows you to sign crypto transactions without leaving behind long-term digital footprints that can be easily tracked.
- Safe browsing – When interacting with a new or unverified dApp or crypto project, or minting NFTs, using disposable accounts can help keep your primary assets secure.
Check out this Ledger Academy article for a more comprehensive guide on how burner wallets work, and how to create them using Ledger devices.