A burner wallet is separate (temporary) from your main wallet (Vault), mostly used for minting NFTs or interacting with a dApp that is not audited.
You create a burner wallet just like any other wallet but for a specific purpose, such as minting NFTs or interacting with an unaudited project.
By auditing, I mean the codes of that project, which have not been verified by a security firm yet.
A burner wallet could be a hot or cold wallet where you keep only a minimal amount to pay the gas fees for minting or interacting with any smart contract.
Why Do You Need a Burner Wallet?
You can use a burner wallet in two cases.
In the case of NFTs:
Plenty of new NFT projects are being launched every day.
Most of these projects do not have code audits of their minting process. In such cases, any hacker can write a code giving them access to your crypto wallet while minting an NFT.
It can further lead to draining your current NFTs and crypto-assets. By using a burner wallet, you are mitigating such risks.
In the case of crypto assets:
Recently, a new NFT marketplace called X2Y2 was launched, offering a spectacular return on staking (close to 6000%). Although the project has good fundamentals, the codes of the project have not been audited.
A large number of people are already flocking to grab the opportunity to stake X2Y2 token for their mouth-watering staking return.
Since most of them are using their permanent wallets, they are risking their every investment.
One way to mitigate these risks is by using a burner wallet.
In a worst-case scenario, If this project ends up doing a rug-pull, only the assets you hold in your burner wallet will be at risk.
These are some scenarios where you can use a burner wallet (temporary wallet) to safeguard your crypto and NFT investments.
What Are the Advantages of Using Burner Wallet?
Burner wallets that are also hot wallets (ex: Phantom or Metamask without Ledger hardware wallet) help in the faster minting of NFTs.
Burner wallets can be used on mobile phones, which makes them easier to work.
At this moment, unfortunately, not a lot of mobile wallets like MetaMask or Phantom work with a hardware wallet.
Dos and Don’ts of a Burner Wallet
Always remember your burner wallet is temporary and should not be used with or as your permanent wallet address.
It is a good idea to continue shuffling your burner wallet once in a while for maximum security.
If you are not into minting NFTs, you can always use a hardware wallet along with your burner wallet.
You can set an ENS address for your burner wallet, but it is not advisable since the idea is to change your burner wallet after a few interactions with a smart contract or regularly.
Burner wallet can also be used when sending or receiving one-off payments to avoid exposing your main wallet address. Note that any smart user could still follow the breadcrumbs to find your main wallet address.
Wallets that relatively reliable that could be used as Burner Wallets
MetaMask wallet – Ethereum and other Layer 2 solutions
Phantom wallet: Solana, Solflare
Keplr Wallet – Atom ecosystem
Even in bear marekt rally, it is most important to keep your asset safely.
Without safe asset management, you cannot face the next crypto spring season again.
Do not believe or rely on your neighbors and acquaintance. You are the only person to keep your asset safe.