Deterministic Wallet

Software for storing cryptocurrency that offers decreased risk of losing funds because of its ability to generate unlimited addresses from a single starting point, or "seed."

You have many options for which cryptocurrency wallets to use to store your hard earned funds. One option is a deterministic wallet. What is it?

When you have a seed, a deterministic wallet will go deriving keys from that single starting point. 

By using a deterministic wallet and your seed, you can easily back up and restore a wallet without needing any other information. Sometimes you can even allow the creation of public addresses without the knowledge of the private key. 

These days, your seed is usually serialized into human-readable words, and thus the BIP 0032 standard for Hierarchical Deterministic Wallets has been used since 2019.

Another benefit is that you can create a single backup of the seed in a format you can read and maybe even memorize -- and it will last without worry of a backup becoming stale.

Certain types of deterministic wallet allow for the complete separation of private and public key creation for greater security and convenience.

You may even be able to set up the Master Public Key (MPK) of a particular deterministic wallet. This allows the server to create as many public keys as is necessary for receiving funds while an attack on your master public key will not allow an attacker to spend from the wallet.

This added benefit can help users of Electrum and Armory to enable completely offline storage and spending, where an offline computer knows the private key and an online one knows only the MPK.

The main benefit of deterministic wallets used in hardware wallets is that they keep the generated private keys offline and do not expose them to the computer even when you might go ahead and choose to send or spend your coins.

If this matches your needs, be sure to check if your wallet provider is using deterministic wallets.

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