How Does a Hierarchical Deterministic (HD) Wallet Improve Key Management?

An HD wallet uses a single seed phrase (mnemonic) to generate a master key, from which all subsequent private and public keys are deterministically derived. This structure allows a user to back up their entire wallet with just one seed phrase, greatly simplifying the backup process.

It also enables the creation of new addresses for every transaction, enhancing privacy. The hierarchical structure organizes keys in a logical, tree-like manner.