What is Hierarchical Deterministic (HD) Wallet?

In short. it is the most commonly used wallet structure that allows a single wallet app to support multiple blockchains, and ensures that if you use the same mnemonic phrase, you will always get back the same set of addresses. Convenient for backup and restore, and compatible across apps.

TD:DR

Understanding HD Wallet Standards (BIP32 → BIP39 → BIP44)

1. BIP-0032: Hierarchical Deterministic (HD)

What is an HD Wallet?

A Hierarchical Deterministic (HD) wallet generates a tree of keys and addresses from a single master seed.

  • Before BIP32, wallets had to back up every single address private key.

  • With BIP32, a single master key can generate unlimited child keys.

Key Concepts

  • Master Key: The root private/public key pair from which all others are derived.

  • Derivation: The process of generating child keys from parent keys.

  • Hardened Derivation: A more secure derivation method (marked with ') that prevents vulnerabilities if a child private key is exposed.

Example Derivation (Simplified)

m # Master (root) key └── 0 # Child key └── 0 # Grandchild key

👉 BIP32 gave wallets the ability to generate infinite addresses deterministically from one backup.

2. BIP-0039: Mnemonic Seed Phrases

Problem

BIP32 required backing up a long, random binary seed, which wasn’t user-friendly.

Solution

BIP39 introduced mnemonic seed phrases (the 12-24 words you see in modern wallets).

  • Mnemonic Phrase: Human-readable words representing entropy.

  • Seed: The mnemonic + optional passphrase are run through PBKDF2 (key stretching) to generate the actual binary seed.

  • Compatibility: Any BIP39 wallet can recreate the same BIP32 master key from the same phrase.

Example

Mnemonic (12 words):

soap original often abandon raw base sail drastic rookie bleak bless glance

👉 BIP32 gave wallets the ability to generate infinite addresses deterministically from one backup.

3. BIP-0044: Derivation Paths

Multi-Account Wallet Standard

BIP-0044 defines a standard way of organizing and generating cryptocurrency wallets from a single seed phrase via the use of derivation paths

It builds on earlier proposals:

  • BIP-0032: Hierarchical Deterministic (HD) wallets

  • BIP-0039: Mnemonic seed phrases

Together, these proposals allow users to:

  1. Generate one master seed phrase.

  2. Derive multiple accounts, coins, and addresses from it.

  3. Stay compatible across different wallets and platforms.

Solution

BIP44 defines a standard derivation path structure:

m / purpose' / coin_type' / account' / change / address_index

Breakdown

  • m → Master node (from seed phrase)

  • purpose' → Always 44' for BIP44

  • coin_type' → Identifies the blockchain (BTC, ETH, etc.)

  • account' → Different accounts (0, 1, 2…)

  • change → 0 = external (receiving), 1 = internal (change)

  • address_index → Sequential address number

By 'combining' the path with your master key to generate a new address.

m / 44' / 0' / 0' / 0 / 0   # First Bitcoin receiving address
m / 44' / 0' / 0' / 0 / 1   # Second Bitcoin receiving address
m / 44' / 60' / 0' / 0 / 0   # First Ethereum receiving address
m / 44' / 60' / 0' / 0 / 1   # Second Ethereum receiving address
m / 44' / 60' / 0' / 0 / 2   # Third BSC receiving address
m / 44' / 9006' / 0' / 0 / 2   # Third BSC receiving address

In most cases, when you create a new account in a wallet such as MetaMask, it simply means the address_index has been increased by 1.

CoinWallet allows you to flexibly amend the derivation path across all the blockchains it support.

Let's dive into the most important item here, which is coin_type

SLIP-0044: Coin / Network Codes

BIP44 uses coin_type' to distinguish blockchains. The mapping is defined in SLIP44 (a registry maintained by SatoshiLabs).

Common Coin Types

  • 0' → Bitcoin (BTC)

  • 60' → Ethereum (ETH)

  • 3' → Dogecoin (DOGE)

  • 195' → TRON (TRX)

  • 501' → Solana (SOL)

Full list: SLIP-0044 Registry

However, for all EVM-compatible networks, most wallet apps use m/44'/60'/0'/0/0 instead of their respective codes registered under SLIP-0044, which is why you often see the same address across all EVM-comtible networks.

In Trust Wallet and most other wallets, all EVM addresses use the same derivation path (m/44’/60’/0’/0/0).

Putting It All Together

  1. BIP32: Defines how to derive child keys (HD wallets).

  2. BIP39: Defines how to generate a user-friendly mnemonic phrase → seed.

  3. BIP44: Defines a standard path structure for multi-account, multi-coin wallets.

  4. SLIP44: Defines coin/network codes used inside BIP44 paths.

PreviousWhy do I need to approve token?NextProduct Roadmap

Last updated

Was this helpful?