Hierarchical Deterministic Wallets [PART 1]
This is the first part of our discussion on HD wallets. In Part 2, we will cover the transition from Seed to Master Key, and in Part 3, we will explore Child Key Derivation.
Imagine you have two choices for a wallet:
- A wallet with MANY private keys, requiring MANUAL backups.
- A wallet with ONE "magical" key that generates all addresses, needing just ONE backup.
Which one would you choose? 🤔
The second option is what’s known as a Hierarchical Deterministic (HD) Wallet (BIP-32):
- Instead of managing multiple keys, HD wallets use a single mnemonic phrase (12 or 24 words) to derive all keys.
- This means one backup for everything!
So, how does this magic work? 🧙♂️
It starts with a mnemonic phrase, which turns into a seed using PBKDF2. From there, a Master Key is created, generating infinite addresses.
More details 👇
Learn more about Bitcoin’s technical concepts at Decoding Bitcoin.
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