What Is a Hierarchical Deterministic (HD) Wallet?
An HD wallet is a type of cryptocurrency wallet that uses a single master seed (a mnemonic phrase) to deterministically generate an entire tree structure of private and public keys. This means all future keys can be derived from the initial seed, making backups simple and allowing users to generate new addresses for every transaction without managing numerous individual private keys.
This is governed by the BIP32 standard.
Glossar
Mnemonic Phrase
Security ⎊ A mnemonic phrase, within cryptocurrency, options trading, and financial derivatives, represents a human-readable form of a cryptographic seed, crucial for wallet recovery and access to digital assets.
Cryptocurrency Wallet
Asset Access Point ⎊ A Cryptocurrency Wallet is a software or hardware interface that securely stores the private keys necessary to access and manage digital assets held on a blockchain network, enabling the authorization of transactions.
Hierarchical Deterministic
Architecture ⎊ This describes the systematic method for generating a sequence of cryptographic key pairs from a single, master seed phrase, ensuring a reproducible and structured derivation path for wallets.
Key Derivation
Key Generation ⎊ Key Derivation refers to the deterministic mathematical process used to generate a sequence of private and public key pairs from a single, initial source, most commonly a mnemonic seed phrase, following established standards like BIP-39.
HD Wallet
Key Recovery ⎊ An HD Wallet, or Hierarchical Deterministic Wallet, utilizes a single master seed phrase to generate an entire tree structure of cryptographic key pairs for multiple accounts and addresses in a systematic, reproducible manner.
Master Seed
Secrecy ⎊ This is the single, high-entropy value from which all private keys for wallets and smart contract interactions are deterministically generated.