Bitcoin Improvement Proposal 32, or BIP32, is a protocol that introduced Hierarchical Deterministic (HD) wallets into the world of cryptocurrency. HD wallets are an essential upgrade over traditional wallets because they allow for the creation of child keys from a single parent key, meaning users can generate multiple unique addresses from a single seed.
BIP32 was proposed by Pieter Wuille, a Bitcoin Core developer, and released in February 2012. This proposal aimed to improve the limitations of traditional non-deterministic wallets, which required a new backup for each new address.
BIP32 introduces two important concepts: key derivation and the hierarchical tree structure.
Together, these two features make backups much simpler because a backup of the master key (or seed) is sufficient to recover all derived keys and addresses.
Trezor hardware wallets use the BIP32 protocol as the backbone for the key management system. When a Trezor device is initialized, it generates a 12, 18, or 24-word recovery seed using BIP39. This seed becomes the master key for the BIP32 key derivation process.
Every time a user wants to create a new account or address in their Trezor wallet, BIP32 is used to derive new keys from the master seed. This means that users can handle multiple accounts and addresses, all linked to the original recovery seed.
The use of BIP32 offers significant benefits. Firstly, it greatly simplifies backup procedures, as users only need to secure their BIP39 recovery seed to ensure access to all their keys. Secondly, it enhances privacy by allowing users to generate new addresses for every transaction, making tracking more difficult. Lastly, the hierarchical structure allows users to organize their funds across different accounts and sub-accounts in a structured manner.
In conclusion, BIP32 has revolutionized the way wallets manage keys and addresses, making it easier for users to secure, recover, and organize their digital assets. By integrating BIP32, Trezor provides users with a safe, efficient, and user-friendly way to manage their cryptocurrencies.
BIP32 derivation path:
BIP44-like paths (discoverable):