When mainstream adoption? That question has been on hodlers’ minds ever since Bitcoin’s inception. The most common trope centers around buying a cup of coffee using Bitcoin.
In an effort to onboard new users, and to make it easier to buy a cappuccino with crypto, Ethereum developer Austin Griffith created the Burner Wallet in November of 2018.
The Burner Wallet is “an instant wallet,” explains ConsenSys founder Joe Lubin. “Sort of, a throwaway wallet for petty cash onto people’s phones, through a QR code.” By scanning the QR code, a user can create a simple web wallet that doesn’t require an app or a seed phrase.
As Griffith explains, the Burner Wallet is a simple, user-friendly way to handle daily transactions, without the complexity of a more secure system.
How the Burner Wallet works
The Burner Wallet uses a meta-transaction system to make the user experience as simple as possible, by removing technical processes from the user’s end. Much as MetaMask makes it easy to interact with dApps, through a Chrome extension, the burner wallet makes some security tradeoffs in exchange for an easily-spendable cryptocurrency.
Each Burner Wallet creates a short-term ‘ephemeral key,’ which “allows the user to sign transactions,” according to Griffith. “Creating a private key is like creating an account, and it’s free, private, and instant.” Users do not need to remember a seed phrase as the public/private key pair is automatically created and stored in the web browser.
Once created, the wallet uses ETH to purchase DAI, and convert it to xDai via POA Network’s TokenBridge.The xDai then funds a “Burn Token,” specially created for each event, which is used to purchase goods and services. All of these functions are automatic, and do not require any action from the user.
The Burner Wallet utilizes the xDai chain and token, which offers low transaction fees and fast transaction times. A side chain to Ethereum, xDai was developed through a partnership between POA Network and MakerDAO. As an additional advantage, the system also has a “low cognitive overhead”: there are no price conversions, as one DAI is equivalent to US $1.
According to Griffith, onboarding into the system is very simple.“[A] user is onboarded by scanning a bar code, and they instantly have a wallet on a webpage,” he says. “They use this wallet to purchase goods from pop-up stores.”
Once the user is done using the Burner Wallet, they should send the remaining xDai to a more secure wallet and burn their private key.
Cypherpunk Speakeasies and ETH Denver use case
To stress-test the Burner Wallet, Griffith showcased the product at ETH Denver, where attendees could use it pay food truck vendors with cryptocurrency.
Each week for the six weeks leading up to ETH Denver, Griffith hosted a series of Cypherpunk Speakeasies to introduce the point of sale (POS) platform to food vendors. At the speakeasies, attendees took a field trip to the local watering hole to buy beer with the burner wallet. The first round was on Griffith, to user-test the wallet.
Once ETH Denver rolled around, the Burner Wallet served as the POS platform for 11 food trucks tasked with feeding thousands of attendees.
Onboarding food trucks was simple, as they all used their own devices. The food trucks registered on the BuffiDAI website – to accept the “Burn Token” or BuffiDAI for the event – and created their own wallets with ease.
Over the two days, a total of $38,432.56 was spent on 4,405 meals. Using the Burner Wallet, the transaction fee for each purchase was about US $0.000046. The total transaction costs for the meals totaled US $0.20.
As traditional credit card fees run around 2%, the Burner Wallet POS saved the food truck vendors about US $770 in fees.
Though the Burner Wallet proved fruitful at ETH Denver, Griffith and the team spotted a few potential attack vectors at the event.
The first, a “faucet hack” took place when an ETH Denver attendee drained $5 in xDai allocated for transaction fees. (Shame!)
The second was a “smash n’ grab hack” where a bartender left the POS system lying on the bar, and an attendee was able to move the Burn Tokens to their own phone without detection.
To further secure the system, Griffith says he aims to integrate Wyre to serve as a “secure and compliant bridge between fiat currencies and cryptocurrency.” Griffith would also like to explore the development of local coins for “pop-up events,” such as meetups. Beyond event Burn Tokens, he’s also looking into Burn Tokens for dApps.
The author invests in Bitcoin and Ethereum, both of which are mentioned in this article.