In the last blog, we learned about different types of addresses. From users’ perspectives, the main disadvantage of those addresses is that each address is independent, so you need to securely back up each address’s private key, which increases the risk of losing the addresses. HD wallets were created to solve this issue, as you can generate infinite addresses, but users are required to memorize only 12–24 words.
Hierarchical Deterministic Wallets are cryptography key generation and management systems in which we can generate any number of keys in a tree-like structure from a single phrase. The keys generated from the seed at any depth or index of the tree will always be the same; hence, the key generation process is deterministic.
Key Concepts:
- Seed Phrase: This is the mnemonic phrase generated from a secret. This is the base from which all the keys for HD wallets will be generated. If you lose this, all the wallets’ keys are lost.
- Master Private Key: Derived from the master seed using a one-way hash function (like HMAC-SHA512). The master private key is the root of the private key hierarchy.
- Master Chain Code: Derived from the master seed using a one-way hash function (like HMAC-SHA512) along with the master private key. The master chain code is used in the key generation process to introduce randomness and secure key derivation.
