What is BIP32?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
BIP32 defines how to derive an unlimited tree of private keys from a single seed. It is what made fresh-address-per-payment practical while keeping the backup down to one value. Virtually every wallet in use today is built on it.
Key points
- Derives an unbounded tree of keys from one seed
- Reduces the backup to a single value
- An extended public key can generate addresses without the secret
- Without hardened derivation, one leak can cascade
Definition
Bitcoin Improvement Proposal 32, the foundational specification for hierarchical deterministic wallets, defining how parent keys derive child keys from a master seed.
Before BIP32, each new address meant a new independent key, and every one had to be backed up. A hundred addresses meant a hundred keys to protect, and any key created after the last backup was unrecoverable. BIP32 replaced that with a tree derived deterministically from one seed.
There are two derivation modes. Normal derivation lets a parent public key produce child public keys, so a point-of-sale system or a donation page can hold only an extended public key (xpub) and generate deposit addresses with no secret on the server. The catch: leak one child private key alongside the parent public key and the parent private key can be reconstructed.
Hardened derivation closes that hole, and the apostrophe in a path (the ' in m/44'/0') marks it. Hardened children cannot be derived without the parent private key, so a compromised child does not propagate upward. Standard designs use hardened derivation for every level down to the account.
Watch out for
- · Publishing an xpub exposes the entire transaction history of that branch to anyone
- · In a non-hardened branch, one leaked child key endangers every sibling
- · Lose the seed and the whole tree goes with it