What is an HD wallet?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
An HD wallet derives as many keys as it needs from a single seed. Essentially every wallet in common use today works this way, which is why one word list is a complete backup. You can use a fresh address for every payment without ever re-backing-up.
Key points
- HD stands for hierarchical deterministic
- One seed phrase backs up everything
- Multiple chains and accounts from a single seed
- Disposable addresses need no extra backup
Definition
A wallet design that derives many keys hierarchically from one master seed by a fixed procedure, implemented through the combination of BIP32, BIP39 and BIP44.
Deterministic means the same seed always yields the same keys in the same order. Lose a device, enter the phrase on a new one, and the identical sequence of addresses reappears; the app then re-reads each balance from the chain to rebuild the picture.
In practice, tapping 'Create account 2' in MetaMask just increments the last number in the path. Create ten accounts and there is still exactly one phrase to write down. That convenience cuts both ways: a leaked phrase loses all ten at once.
One seed can also span chains. Coin type 0 yields Bitcoin keys and coin type 60 Ethereum keys from the same words, so a capable wallet restores both from one phrase. Which chains actually appear depends on what the app supports.
Watch out for
- · Separate accounts under one seed do not separate risk
- · To genuinely compartmentalise, use a wallet built from a different seed
- · A chain your app cannot display is not a chain where funds are lost